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together with a reconciliation of the register 2 tape prepared by
Mr. Kelson.
The reconciliation of the register 2 tape showed that Mr.
Kelson determined that the gross sales reported on the register 2
bar tape was $1,580.90. He then determined that the Code V (5)
transactions recorded on the tape totaled $628.65. Code V
transactions are the bar sales recorded on the register 2 tape
that are carried over onto the register 1 tape in the dining
area. Mr. Kelson deducted the $628.65 from gross sales of
$1,580.90, leaving a balance of $952.25. This step in Mr.
Kelson’s reconciliation process eliminated any double-ups between
the dining room and bar area tapes. Mr. Kelson then deducted
“comps” of $12 and overrings of $14, resulting in net sales of
$926.25, the amount entered by Ms. Groom as the net sales
recorded on register 2. This procedure was followed by Ms. Groom
during her entire audit of petitioner’s taxable year ended May
31, 1995.
Petitioner contends that it carefully maintained adequate
books and records for several years to determine its income. The
only records the petitioner was unable to produce for examination
are the records for the applicable period. Petitioner, through
Messrs. Chiate and Ozenne, then fabricated a scenario
orchestrated to prove that the determined unreported income of
$120,371 can be explained away by showing that the entries on the
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