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affd. 692 F.2d 28 (6th Cir. 1982); Rivera v. Commissioner, T.C.
Memo. 1979-343; Perez v. Commissioner, supra; H.J. Feinberg & Co.
v. Commissioner, a Memorandum Opinion of this Court dated Sept.
20, 1950; see Franklin v. Commissioner, supra at n.4.
There appears to be a genuine basis for petitioner’s claim
that his business had substantial costs of goods sold that could
have offset the unreported gross receipts and eliminated
underpayment of taxes. Thus, respondent must show by clear and
convincing evidence that petitioner’s unreported gross receipts
exceeded his costs of goods sold. Respondent did not do so.
Williams used the sources and applications method to
reconstruct petitioner’s income. Williams testified that
petitioner cooperated by providing reasonable information about
his living expenses. However, respondent did not offer that data
into evidence. We infer from respondent’s failure to offer that
data into evidence that petitioner’s living expenses do not
support respondent’s determination. Singleton v. Commissioner,
65 T.C. 1123, 1144 (1976) (the Commissioner’s failure to call a
certain witness gives rise to the inference that any proof, if
offered, would have been unfavorable), affd. 606 F.2d 50 (3d Cir.
1979); Wichita Terminal Elevator Co. v. Commissioner, 6 T.C.
1158, 1165 (1946), affd. 162 F.2d 513 (10th Cir. 1947); Apothaker
v. Commissioner, T.C. Memo. 1985-445 (the Court may infer from
the Commissioner’s failure to offer into evidence the taxpayer’s
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