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records. “Evidence of the theft of a taxpayer’s records alone is
insufficient to excuse substantiation.” Sumner v. Commissioner,
T.C. Memo. 1982-561. Further, we find the testimony of
petitioner and his daughter relating to the cash payroll self-
serving and unreliable. Petitioner offered no credible evidence
to specify the number of employees who received cash
compensation, the length of time that these employees worked for
the corporation, or the hourly wage or salary that these
employees received.
Petitioner concedes that the corporation failed to record
into its books numerous checks that it received from its
customers as payment for services. Mr. Agresto was not informed
of the funds diverted from the corporation. When Mr. Agresto
asked petitioner for a list of employees who received cash wages,
petitioner refused. In the stipulated factual basis for plea
relating to petitioner’s criminal case, petitioner admitted that
during each of the years in issue he and Ms. McNamara used the
diverted corporate receipts for personal expenses. In that
stipulation, petitioner also admitted that during each of the
years in issue the proceeds of the fictitious corporate expense
checks were used for personal expenses, including gambling and
horse racing expenses. At his change of plea hearing, petitioner
acknowledged that he had read the stipulation and stated that the
stipulation was correct. We find that the evidence clearly and
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