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book in support of the summary profit-and-loss statement. Even
by the end of the trial, the only record that either brother
produced to prove any item of the partnership’s income and
expenses for the 1998 tax year remained that same profit-and-loss
statement. Lok claims, and we believe, that he paid Chinese
taxes on the partnership income, but Yung didn’t submit any
Chinese tax returns--or any other records for that matter--into
evidence.
We do find that the primary reason there is so little in the
way of documentation is that all the records were destroyed in
1999. The Chong brothers--particularly Lok, since he was the
onsite manager of Gourmet Down Under--should have tried to
salvage or reconstruct what records he could. See, e.g., Cox v.
Commissioner, T.C. Memo. 1980-244. This sort of “reasonable
reconstruction” is always a good practice, and it is required for
expenses (like the travel expenses that the partnership claimed)
subject to section 274's limitations. Sec. 1.274-5T(c)(5),
Temporary Income Tax Regs., 50 Fed. Reg. 46022 (Nov. 6, 1985);
see Seckel v. Commissioner, T.C. Memo. 1974-170. We have not
seen any evidence of any such reconstruction by either Yung or
Lok; we therefore are unable to apply such a defense to this
case. The lack of records--compounded by the absence of any
testimony by Lok about any specific items of income or loss--
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