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Petitioner's testimony was credible and consistent both on direct
and cross-examination. Petitioner credibly testified about the
manner in which petitioners kept and provided records to their
return preparers. Ng, respondent’s sole witness, did not
contradict petitioner’s testimony that Manwah was economically
below average. We conclude that application of the Dun &
Bradstreet data to Manwah was inappropriate.
Ng testified that he analyzed markups for selected items sold
by Manwah in 1998 and concluded that the average markup was 25 to
28 percent. However, Ng did not indicate which items he analyzed
or how he selected them. Petitioner testified that markup
percentages varied by product. For example, he testified that the
markup for dry goods was greater than that for produce. Ng’s
testimony was too general to establish that Manwah’s markups were
incorrect.
Respondent contends that Ng’s annualized gross receipts
estimates for Manwah show that petitioners’ gross receipts for the
years in issue are incorrect. We disagree. Ng’s estimates are not
in the record.
Citing Wichita Terminal Elevator Co. v. Commissioner, 6 T.C.
1158 (1946), affd. 162 F.2d 513 (10th Cir. 1947), respondent
contends that we should infer from petitioners’ failure to call any
employee of Asian Services as a witness that the employee’s
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