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calculated petitioner’s personal expenses for his 1996 and 1997
expenditures using petitioner’s receipts. Petitioner did not
provide receipts for his 1998 personal expenses, and respondent
calculated the 1998 expenditures by averaging the 1996 and 1997
expenditures. Using the cash expenditures method, respondent
reconstructed petitioner’s business income as follows:
Year Reported Income Reported Expenses Unreported Income
1996 $83,353 $116,163 $32,810
1997 37,804 70,875 33,071
1998 39,064 75,456 36,392
Petitioner contends that the unreported income represents
nontaxable loans or gifts he received from his mother and his
aunt.
This case, upon petitioner’s requests, was continued twice.
The second continuance was granted on petitioner’s
representations that he could obtain from Merrill Lynch and Dean
Witter “cashier’s checks that were handed to me from my mother to
pay * * * [my] bills.” He alleged that he had the account
numbers of his mother’s accounts at both firms, and that he could
track the funds from those accounts into his hands. According to
petitioner, the withdrawals were “in cashier’s checks at the time
of withdrawal made out to * * * [petitioner’s mortgage company]”.
At trial 16 months later, petitioner testified that he
“didn’t have her [his mother’s] account numbers * * * until after
she’s [sic] passed away”. His mother died approximately 5 months
prior to the trial, and well after his earlier representations
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