Harvey L. Hoover - Page 26

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          their gross income.  When a taxpayer fails to keep the required             
          books and records, section 446 authorizes the Commissioner to               
          “reconstruct income in accordance with a method which clearly               
          reflects the full amount of income received.”  Petzoldt v.                  
          Commissioner, 92 T.C. 661, 687 (1989); accord DiLeo v.                      
          Commissioner, 96 T.C. 858, 867 (1991), affd. 959 F.2d 16 (2d Cir.           
          1992); Parks v. Commissioner, 94 T.C. 654, 658 (1990).                      
               Using the specific items method, respondent reconstructed              
          petitioner’s gross income for 1990, 1991, and 1992 from bank                
          records and third-party payor records.  Respondent’s method                 
          accurately reflects petitioner’s gross income because the method            
          calculated petitioner’s income using proceeds that he received              
          from his farming business.  Even though some of the canceled                
          checks and invoices list Tadd Hoover or Michael Hoover as the               
          payee, we agree with the Court of Appeals for the Seventh Circuit           
          that these proceeds were actually petitioner’s gross income16 and           
          that petitioner “instructed creditors to write checks made out to           
          his sons, but kept all the proceeds for himself.”  United States            
          v. Hoover, 175 F.3d at 567.                                                 

               16 Tadd Hoover testified that the checks that he received              
          from the family business were not his.  Tadd Hoover further                 
          testified that he “would sign the back of * * * [the checks] and            
          let dad do whatever he wanted with them.”  The parties stipulated           
          that the testimony of Tadd Hoover from petitioner’s criminal                
          proceeding is incorporated as though given during the course of             
          the trial of the U.S. Tax Court cases.                                      

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