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report that income for that year. (This seems to be inconsistent
with petitioners’ $5,781 concession.) Petitioners further argue
that, for 1994, the discrepancies between the amounts reported on
the Forms 1099 and the amounts listed on the corresponding
invoices were simply due to timing considerations.
We are somewhat puzzled by some of the assertions by both
sides. Firstly, petitioners were cash basis taxpayers. The
Schedules C for both years show that the plumbing business was on
the cash basis. Respondent’s reconstruction of income and
Michael’s self-employment tax are cash-basis determinations.
Accordingly, Michael was required to report gross income from the
plumbing business when it was received, not when the work was
completed. Sec. 451(a). Sandra testified, however, that she
computed gross income for the years in issue by adding together
the invoices for the work Michael had done each month, and then
adding together the monthly totals. In addition, the parties
stipulated, in relevant part, as follows:
Attached as Exhibit 39-J are copies of adding machine tapes
which petitioner Sandra Downing provided with the invoices
she identified to respondent’s revenue agent as gross
receipts reported on the 1995 Schedule C for Michael Downing
Plumbing Company.
Thus, it appears that Sandra calculated gross receipts from the
plumbing business as if Michael were an accrual basis taxpayer.
If this is so, then the adding machine tape totals for the years
in issue were not the proper amounts to report on the Schedules C
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