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Petitioners did not establish that the underpayments on
their 1996 and 1997 returns were attributable to the death of Mr.
Hunt, to any loss or destruction of the records of their
expenses, or to any failure to replace records by Mr. Lopez.
Although Mr. Lopez testified that the failure in substantiating
the expenses in the audit of the 1992 return was due in part to
Mr. Hunt’s death, he also testified that this failure was also
due to Mr. Assaad’s lack of cooperation. Mr. Lopez testified
that, as far as he knew, petitioners got the records back. Also,
the testimony of Mr. Waters and Mr. Assaad suggests that records
of the various expenses in the Atherton project do exist and that
Mr. Assaad made no genuine attempt to obtain those records and to
present those records into evidence. Mr. Waters testified that
Pacific kept records of the expenses in the Atherton project and
that Mr. Assaad had, or obtained, those records when he sued the
bank and Mr. Waters personally in a lawsuit related to the
Atherton project. Further, Mr. Assaad testified that Mr. Trudell
was in possession of the construction expense records, including
computer records, for the Atherton project. He further testified
that he did not contact Mr. Trudell until 1 week before trial
“Because there wasn’t any need for me to contact him. I just
forgot about the whole thing.”
Petitioners’ underpayment of taxes for 1996 and 1997 was
also attributable to their substantial overstatement of their
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