Wayne Payne and Dorene J. Payne - Page 15

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          journals and records of the checks cashed at the Money Exchange.            
          Petitioners argue that the sales journal was inaccurate and                 
          disorganized because jobs that were contracted for in one year              
          may have been completed and paid for in the next year.3  The                
          record does not reflect whether the amounts purportedly received            
          in 1995 were included in the amount of income petitioners                   
          stipulated they received in 1995.                                           
               Respondent calculates petitioners underreported 1994 income            
          as follows:  Gross sales of $1,125,319.84 as reported in HRDC’s             
          sales journal, plus three accepted bids not listed totaling                 
          $12,825, plus extras of $45,060.50 performed by Mr. Payne, for              
          total gross sales of $1,183,205.34 ($215,039.34 more than was               
          reported on HRDC’s 1994 return).  HRDC’s journals are a part of             
          the record.  The sales journal, which respondent used to                    
          reconstruct HRDC’s income for 1994, very clearly and legibly                
          lists the amounts charged for each job HRDC performed in 1994.              
          The accounts receivable journal, which petitioners claim more               
          clearly reflects HRDC’s income, by contrast, is disorganized,               
          illegible in places, and, according to Mrs. Payne’s testimony,              
          incomplete.  Petitioners did not clarify the entries in the                 
          accounts receivable journal.  Petitioners have not attempted to             

               3This argument leads us to conclude that HRDC used the cash            
          method of accounting for tax purposes for 1993, 1994, and 1995.             

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