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and/or excessive. Rule 142(a); Welch v. Helvering, 290 U.S. 111,
115 (1933).
At trial, petitioner proved, and respondent admitted, that
the income adjustments proposed in respondent’s notices of
deficiency for all 4 of the years at issue were derived from two
financial statements prepared by petitioner in 1987 and 1989.
For 1987, respondent determined that petitioner had unreported
Schedule C income equal to the “Employment Income” listed on the
1987 financial statement. For 1988, 1989, and 1990, respondent
added the “Employment Income” listed on the 1989 financial
statement to the net profit or loss reported on petitioner’s
Schedules C for 1988, 1989, and 1990 to arrive at the income
adjustments for 1988-1990.
During trial, respondent’s counsel abandoned the income
adjustments as originally determined in the notices of deficiency
and offered as stipulated exhibits what purported to be bank
deposits analyses for the years at issue.12 Based on the bank
deposits analyses, respondent conceded the income adjustments for
1988 and 1990 in their entirety and substantially reduced the
income adjustments for 1987 and 1989.
12In his opening statement, respondent’s counsel stated that
the bank deposits analyses were prepared because respondent’s
Appeals Office recognized that the income adjustments contained
in the notice of deficiency that were based on the 1987 and 1989
financial statements were “not a strong position for the
Service.”
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