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neither reported on Mr. Kong’s Federal income tax returns nor
disclosed to his return preparer. Robin Augustyn, the bookkeeper
and office manager of Style Setters, confirmed that Mr. Kong
provided hangers and bags in addition to performing sewing
services. Ms. Augustyn testified, however, that the checks in
the record were not issued as payment for bags and hangers.
Further, petitioners offered no records, documents, or other
evidence to substantiate their claim that these checks represent
payments for hangers and bags.
Finally, it “is well established that the failure of a party
to introduce evidence within his possession and which, if true,
would be favorable to him, gives rise to the presumption that if
produced it would be unfavorable.” Wichita Terminal Elevator Co.
v. Commissioner, 6 T.C. 1158, 1165 (1946), affd. 162 F.2d 513
(10th Cir. 1947). Mr. Kong served as president of Sam Kong
Fashions and controlled the business. He was also the sole
shareholder for at least 8 months in 1994 and for the entire year
in 1995. Mr. Kong was present during the trial but chose not to
testify. Because Mr. Kong did not testify at trial, we infer
that his testimony would not have been helpful to Sam Kong
Fashions’s claim that it did not underreport its gross receipts.
See Petzoldt v. Commissioner, 92 T.C. 661, 685-686 (1989); Rivera
v. Commissioner, T.C. Memo. 1979-343.
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