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expense records, the cash journal, asset records, and personal
and business bank records. Agent Keinle concluded that
petitioner’s income for each year in issue could not be
accurately determined from his records, and she decided to
reconstruct petitioner’s income for each year using the net worth
method.
During her examination, Agent Keinle interviewed petitioner
on at least five occasions. Relying upon information that
petitioner provided during these interviews, information
contained in his records, and information obtained from third
parties, she computed his net worth and unreported income as
follows (For convenience, amounts are rounded to the nearest
dollar.):
Year ending 12/31/92 12/31/93 12/31/94 12/31/95
Total assets $164,346 $240,370 $308,216 $378,660
Total liabilities (16,120) (52,367) (85,077) (114,270)
Net worth 148,226 188,003 223,139 264,389
Beginning net worth --- (148,226) (188,003) (223,139)
Net worth increase --- 39,777 35,136 41,251
Adjustments --- (21,765) (12,970) (6,299)
Corrected AGI --- 18,011 22,166 34,951
AGI per original return --- (7,964) (4,408) (2,841)
Unreported income --- 25,975 26,574 37,792
The assets included in the above computations are as
follows:
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