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reconstruction to be substantially correct and to be a more
accurate reflection of petitioner’s income than what was reported
on his return. See Petzoldt v. Commissioner, 92 T.C. at 687;
Meneguzzo v. Commissioner, 43 T.C. 824 (1965). Although the
amount of income exceeds that which was reported on the two Forms
1099-MISC appearing in the record, at least one of the forms has
been shown to be inaccurate. Furthermore, the forms were issued
by only two sources; it is reasonable to conclude that petitioner
had other income generated from his business activities during
1998, either directly from his operation of OU or indirectly
through his corporation, NAFTA. There is no evidence in the
record establishing the amount of income that petitioner derived
from NAFTA. Finally, according to the information reported by
petitioner on his 1998 return, petitioner had a negative taxable
income of $102,145. Petitioner has not explained how he would
have been able to pay the disproportionately large amount of
expenses shown on his return in comparison to the gross income
that he reported, while at the same time maintaining a standard of
living for himself and for his two daughters, whom he claimed as
dependents.
We sustain respondent’s determination concerning petitioner’s
unreported income, as adjusted for respondent’s concession that
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