# United States Tax **Court**

T.C. Memo. 2024

- 1

JESSE ALVARADO AND ESTATE OF MARIA DE LOURDES

VELASQUEZ, DECEASED

, JESSE ALVARADO, SPECIAL

ADMINISTRATOR

, Petitioner s

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

__________

Docket No. 15059

- 18. Filed January 3 , 2024.

__________

Jesse Alvarado and Estate of Maria de Lourdes Velasquez, Deceased

, Jesse Alvarado, Special Administrator, pro se se

.

Paulmikell A. Fabian and Sarah A. Herson

, for respondent.

MEMORANDUM FINDINGS OF FACT A ND OPINION

C OPELAND

, Judge : The Commissioner of Internal Revenue

(Commissioner) determined that Petitioners, Jesse Alvarado and Maria

de Lourdes Velasquez, have federal income tax deficiencies of $892,461

and $746,337 for 2011 and 2012 (years in issue), respectively. 1 These

deficiencies stem primarily from alleged unreported gross receipts and

overstated cost s of goods sold at Mr. Alvarado’s used car sales business.

The Commissioner further determined late

- filing additions to tax under

section 6651(a)(1) 2 of $222,014 and $186,514 for 2011 and 2012

,

1 Ms. Velasquez passed away in August 2021 after this case went to trial.

Because all the relevant events occurred while she was alive, we continue to refer to

Mr. Alvarado and Ms. Velasquez together as “Petitioners.”

2 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C. (I.R.C. or Code) , in effect at all relevant times, regulation



### Served 01/03/242

[* 2 ] respectively . For Mr. Alvarado only, the Commissioner determined

civil fraud penalt ies under section 6663 of $669,346 and $559,753 for

2011 and 2012 , respectively . In the event that the fraud penalties for

Mr. Alvarado are not upheld for either or both years in issue , the

Commissioner has determined as an alternative accuracy

- related

penalt ies

. S ee I.R.C. § 6662(a) . The Commissioner conveyed his

deficiency and penalty determinations in two separate notices of

deficiency, one with a salutation address ing only Mr. Alvarado and one

with a salut ation address ing only Ms. Velasquez. 3 Both notices were

dated April 27, 2018.

After concessions by the parties (detailed below), 4 the issues for

decision are as follows:

1. Whether Petitioners had unreported gross receipts of

$1,223,387 and $24,294 for 2011 and 2012, respectively;

2. Whether Petitioners overreported cost s of goods sold by

$514,583 and $1,200,242 for 2011 and 2012, respectively ;

3. Whether Petitioners overreported various expenses on

Schedule s C, Profit or Loss from Business (Sole

Proprietorship), in the aggregate amounts of $37,052 and

$103,705 for 2011 and 2012, respectively ;

4. Whether Petitioners are liable for the section 6651(a)(1)

late

- filing addition s to tax for one or both of the years in

issue; and

references are to the Code of Federal Regulations , Title 26 (Treas. Reg.), in effect at all

relevant times, and Rule references are to the Tax Court Rules of Practice and

Procedure. Some dollar amounts are rounded.

3 While it is clear from the context of the notice of deficiency containing the

civil fraud penalties and alternative accuracy

- related penalties that it was intended

only for Mr. Alvarado, his notice was sent by certified mail to “Jesse Alvarado and

Maria de Lourdes Velasquez a.k.a. Marylou Velasquez” and contained a continuation

sheet and worksheets titled in both Petitioners’ na mes. Similarly, the notice of

deficiency intended only for Ms. Velasquez

, which determined late

- filing additions to

tax but no penalties

, was sent by certified mail to “Jesse Alvarado & Maria de Lourdes

Velasquez a.k.a. Marylou Velasquez” with worksheets titled in both their names.

4 Before trial the parties agreed that Ms. Velasquez qualifies under section

6015(b) for “innocent spouse” relief from joint and several liability for the tax

deficiencies at issue and the section 6651(a)(1) additions to tax.3

5. Whether Mr. Alvarado is liable for the section 6663 civil

fraud penalt ies or, alternatively, the section 6662 accuracy

related penalt ies for one or both of the years in issue.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. By this

reference we incorporate the parties’ First Stipulation of Facts and the

accompanying Supplements and Exhibits. Mr. Alvarado and Ms.

Velasquez resided in California when they timely filed their Petition.

I. South Bay Autos and Alvarado Tax Service

Mr. Alvarado worked as a commercial lender at Comerica Bank

for approximately 25 years before opening a used car sales business,

South Bay Autos (South Bay), which he operated as a sole proprietorship

from 2008 to 2014. Mr. Alvarado rented premises in Hawthorne,

California

, to sell used cars and (as a side business) to prepare tax

returns. He held a preparer tax identification number (PTIN) from the

Internal Revenue Service (IRS) from 2009 through at least 2012, and he

prepared several dozen tax returns during the years in issue under the

business name Alvarado Tax Se rvice. His tax return clients were

primarily South Bay customers, whom he charged in the range of $60

– $200 for the additional service.

Mr. Alvarado’s business model at South Bay relied heavily on

credit, both for his own inventory purchases and for his customers ’ . Mr.

Alvarado bought much of his inventory at used car auctions using loan

proceeds from Dealer Services Corp

. (DSC). DSC merged with another

company sometime in 2013 to form NextGear Capital (NextGear). Mr.

Alvarado would need to pay back these purchase loans within 45 days

or otherwise face high interest charges from DSC (and, later, NextGear).

Mr. Alvarado therefore wanted to sell his inventory quickly; yet

his potential customers from the Hawthorne area often had limited

income. To address this problem , Mr. Alvarado contracted with Topaz

Financial Services (Topaz), and later with Premier Auto Credit

(Premier), to provide credit to his customers. In a typical sale, Mr.

Alvarado and the customer would sign a sales contract, with the

customer making a sma ll downpayment; then Mr. Alvarado would

assign the contract to Topaz (or later to Premier) i n exchange for

advance payment as further detailed below. The customer would make

all subsequent payments directly to the financer. [* 3 ]4

[* 4 ] For his part, Mr. Alvarado took the used car sale contracts

periodically (and typically in batches) to the financers, who would pay

him the face value of the contracts less (1) a reserve amount, which Mr.

Alvarado would receive only once the customer fully paid the loan

balance, and (2) the outstanding value of any previous contracts that

had become uncollectible in the meantime. The financers deducted the

latter amount pursuant to Mr. Alvarado’s agreement to fully guarantee

each customer’s loan. This business model eventually became

fi nancially unsustainable, and Mr. Alvarado closed South Bay in or

around 2014, after drawing on his pensions and personal savings.

II. Tax Returns

Mr. Alvarado prepared and filed his and Ms. Velasquez’s joint

federal income tax returns for tax years 2009 through 2012, all of which

were filed late. The 2011 return was due on April 17, 2012, but was not

filed until February 4, 2013. The 2012 return was due on April 15, 2013,

but was not filed until June 27, 2014. Mr. Alvarado and Ms. Velasquez

neither filed for nor received an extension of time to file their returns for

either of the years in issue.

The 2011 and 2012 joint returns did not separately identify

income from Alvarado Tax Service, although such income was minimal.

Those returns likewise did not report the income Petitioners earned

from subleasing real estate for a few months in 2012. Other than these

small amounts, Petitioners’ only taxable income (and the only income

reported on their returns) came from South Bay used car sales.

Mr. Alvarado attached Schedule s C to the 2011 and 2012 joint

returns, reporting various categories of income and expenses for South

Bay, along with calculation s of cost s of goods sold. On both Schedules C,

all original entries (excluding the results of arithmetic operations on

some entries) end in “0” or “5

. ” The 2011 Schedule C reported net profit

of $13,900, while the 2012 Schedule C reported net profit of $30,035.

After application of personal deductions, personal exemptions, the

earned income tax credit, and/or the child tax credi t (but no withholding

or estimated tax payments), Petitioners claimed a refund due of $4,405

for 2011 and $281 for 2012.

III. IRS Examination

Petitioners’ 2011 joint income tax return was selected by the IRS

for audit in or around 2014. Marianna Kaplan (RA Kaplan), the IRS5

[* 5 ] revenue agent who primarily conducted the 2011 examination, was

subsequently assigned to audit Petitioners’ 2012 joint return as well.

Petitioners failed to reply to RA Kaplan’s initial letter requesting

a meeting. After RA Kaplan sent a followup letter demanding a meeting

on a particular date as well as production of relevant documents,

Petitioners (or their representative at the time) called to reschedule the

meeting twice. When RA Kaplan finally met Mr. Alvarado at South

Bay’s business premises, he did not have any of the requested

documents available for her. He kept no books or records for the

business other than “car jackets,” wh ich RA Kaplan examined at a

subsequent visit. Each car jacket was a folder containing dozens of

documents relating to Mr. Alvarado’s sale of a particular car, such as

copies of the sale contract and financing agreement; some also contained

evidence of his original inventory purchase. Mr. Alvarado kept the car

jackets in boxes, roughly separated by year of purchase but not

otherwise organized. Each jacket indicated the car’s date of sale to a

customer and its vehicle identification number (VIN), a unique 17

- character identifier assigned to any on

- road vehicle sold in the United

States. RA Kaplan found 265 car jackets for cars sold in 2011 and 300

for 2012.

Mr. Alvarado represented to RA Kaplan that he used the car

jackets to compute his income as reported on Petitioners’ tax returns.

RA Kaplan accordingly used the car jackets to sum the purchase prices

of cars sold by South Bay during the years in issue. Using this method,

RA Kaplan calculated gross sales of $2,764,693 in 2011 and $2,765,744

in 2012. These amounts exceeded the gross receipts reported on

Petitioners’ returns: $1,815,410 for 2011 and $2,538,525 for 2012.

Since many of the car jackets also contained invoices for South

Bay’s original purchases of the cars, and since Mr. Alvarado provided no

other documents or records relating to his purchases, RA Kaplan also

tallied the invoices. However, she excluded all invoices with purchase

dates before 2011 because Mr. Alvarado kept no inventory records, and

she could not determine whether he had already deducted the cost of

these pre

- 2011 cars for the years he bought them. RA Kaplan’s review

of the invoices yielded c ost s of goods sold calculation s of $156,165 for

2011 and $434,930 for 2012. These amounts were considerably lower

than those reported on Petitioners’ returns: $1,515,510 for 2011 and

$2,146,780 for 2012.6

[* 6 ] To investigate these discrepancies, RA Kaplan summoned

complete deposit and expenditure records (including images of canceled

checks) for Mr. Alvarado’s accounts with Comerica Bank and Bank of

America during the years in issue. RA Kaplan tallied these de posits and

debits, excluding deposits that appeared to be nontaxable (such as

refunds) and excluding debits that appeared to be nondeductible (such

as restaurant meals and clothing purchases). RA Kaplan also excluded

debits that appeared to be for car inv entory purchases unless the VIN

matched that of a car which, according to the car jackets, was sold in

2011 or 2012. RA Kaplan conducted this bank accounts analysis without

help or input from Petitioners, as they had stopped cooperating and

refused to mee t with her except when officially summoned.

After some adjustments made during Petitioners ’ internal appeal

with the IRS and in this litigation (as described below), the updated

bank accounts analysis yielded taxable deposits of $3,038,797 in 2011

and $2,562,819 i n 2012 and cost s of goods sold of $1,000,927 in 2011 and

$946,538 in 2012. As explained above, these calculations of cost s of

goods sold do not include any amount for cars that South Bay sold in

either year in issue but for which Mr. Alvarado could not substantiate a

purchase with a matchi ng VIN.

IV. IRS Appeals and Pret rial Discovery

During Petitioners’ internal appeal with the IRS, Mr. Alvarado

continued his pattern of canceling meetings and providing requested

documents late or incompletely if at all. However, he did produce

several documents of potential relevance to redetermining Petitioners’

income. First, he submitted dealer statements from NextGear and

buyer receipts from AutoNation Auto Auction and South Bay Auto

Auction 5 (together, auto auctions). The NextGear statements list by

VIN all cars that South Bay purchased during the years in issue using

loans from NextGear. The buyer receipts list by VIN some of the cars

South Bay purchased from the auto auctions during the years in issue.

RA Kaplan crosschecked the VINs from these statements and buyer

receipts with the VINs appearing in the 2011 and 2012 car jackets.

When she found a match for a car whose car jacket did not include a

purchase invoice, she added the purchase price from the statements or

receipts to her calculation of cost of goods sold.

5 South Bay Auto Auctions is not related to Mr. Alvarado’s South Bay business.7

[* 7 ] Additionally, before trial Mr. Alvarado came forward with 8

canceled checks from 2011 and 22 from 2012, each written by South Bay

to an auction house for a car included in the car jackets but not

previously included in RA Kaplan’s calculations of cost s of goods sold.

The Commissioner added the amounts of these checks to RA Kaplan’s

totals, yielding cost s of goods sold of $1,000,927 for 2011 and $946,538

for 201 2

.

During the internal IRS appeal, Mr. Alvarado also submitted

several hundred pages of printouts from his account with DealerCenter,

an inventory management system for car dealers. The printouts contain

information on several hundred cars South Bay purchased during the

years in issue, including VIN, purchase price, original purchase date

(that is, the date on which South Bay acquired the car), and the “asking

price” for sale to customers. However, there is no indication in these

records of when, if ever, t he cars were sold to customers nor whether the

“asking price” matched the eventual sale price. Mr. Alvarado and his

employees created these records contemporaneously with inventory

purchases in the years in issue.

Some of the cars listed in the DealerCenter records have VINs

matching those in the car jackets that Mr. Alvarado supplied to RA

Kaplan during the examination. At trial Mr. Alvarado submitted

supplemented versions of RA Kaplan’s spreadsheets, in which he added

purchase prices for cars whose VINs appeared in both the car jackets

and the DealerCenter records but whose purchase prices RA Kaplan had

not previously recorded. The Commissioner refused to recognize these

additional claimed inventory purchases, o n grounds of suspicion about

the authenticity of the DealerCenter printouts.

Before trial Mr. Alvarado also produced quarterly summary

reports for the years in issue prepared contemporaneously by Topaz for

South Bay. Each quarterly report contains (1) a listing of the car

contracts (by selling date and dollar amount) that South Bay sold to

Topaz during that quarter, (2) a listing of the payments that Topaz

actually made to South Bay during the quarter, (3) a listing of all

outstanding loans (by borrower name, VIN, and outstanding loan

balance) originated by South Bay but which Top az deemed uncollectible

during that quarter, and (4) a listing of all beginning and outstanding

loan balances (by loan date, car model and year, borrower name, and

beginning and outstanding loan balances). The reports show a total of

291 car purchases tha t Topaz financed for South Bay customers in 2011

and 160 purchases financed in 2012.8

[* 8 ] RA Kaplan’s bank accounts analysis included canceled checks

that South Bay wrote to Topaz totaling $111,006 in 2011 and $80,519 in

2012. The Commissioner made no adjustments to either gross receipts

or cost of goods sold on account of the Topaz reports o r the canceled

checks.

Finally, before trial Mr. Alvarado produced transaction

summaries prepared by Premier for approximately 80 car loans that

Premier purchased from South Bay between June and December 2012.

Each summary lists (among other things) the original loan balance, the

amount paid to Sou th Bay (as reduced by various offsets, including a

reserve withheld

— at least initially

— by Premier), the date of payment

to South Bay, borrower name, car model and year, and VIN. Again, the

Commissioner made no adjustments to RA Kapla n’s bank accounts

analysis on account of the Premier transaction summaries.

V. Final Deficiency Determinations

After the agreed adjustments made during the internal IRS

appeal and the discovery period of litigation, RA Kaplan revised her

bank accounts analysis to yield the following calculations of Schedule C

gross income, which the Commissioner asks us to uphold:9

2011 2012

Form 1040

, Schedule C Determined

by the IRS Form 1040,

Schedule C Determined

by the IRS

Gross Receipts $1,815,410 $3,038,797 $2,538,525 $2,562,819

Cost of Goods

Sold (1,515,510) (1,000,927) (2,146,780) (946,538)

Advertising (107,620) (60,922) (144,250) (114,015)

Commissions (8,880)

— (48,500)

—

Insurance (other

than health) (8,250) (1,548) (7,800) (1,015)

Legal and

Professional

Services (17,220)

— (18,200)

—

Office Expense (4,250) (14,945) (4,800) (8,370)

Rent (113,100) (109,283) (103,500) (103,497)

Taxes and

Licenses (4,180) (169,834) (4,440) (119,484)

Utilities (18,250) (6,796) (18,500)

—

Cell Phone (4,250)

— (6,220)

—

Occasional Help

— — (5,500)

—

Towing

— (2,050)

— (10,807)

Referral Fee

— (177)

— (600)

Refunds

— (22,678)

— (18,400)

Car and Truck

Expenses — (239,263)

— (228,480)

Net Profit $ 13,900 $ 1,410,374 $30,035 $1,011,613 [* 9 ]10

[* 10 ] During this litigation, the parties stipulated th e correctness of the

expense amounts in RA Kaplan’s bank accounts analysis (as reflected in

the preceding table) in the following categories for bot h years in issue : advertising, office expense s

, rent

, taxes and licenses, towing, referral

fee, refunds

, and car and truck expenses . The parties also stipulated

the correctness of RA Kaplan’s calculation of utilities expense s for 2011.

OPINION

I. Burden of Proof

Generally, the Commissioner ’ s determinations in a notice of

deficiency are presumed correct , and the taxpayer bears the burden of

proving them erroneous

. See Rule 142(a); Welch v. Helvering , 290 U.S.

111, 115 (1933)

. In cases of unreported income, the Commissioner must

establish an evidentiary foundation connecting the taxpayer with an

income

- producing activity or otherwise demonstrate that the taxpayer

actually received income

. Walquist v. Commissioner

, 152 T.C. 61, 67

(2019)

. Once the Commissioner makes the required threshold showing,

the burden shifts to the taxpayer to prove by a preponderance of the

eviden ce that the Commissioner ’ s determinations are arbitrary or

erroneous. Id. at 67

– 68

.

II. Income Reconstruction

If a taxpayer fails to maintain adequate records of income as

required under section 6001, the Commissioner may reconstruct his

income by any reasonable method that clearly reflects income. See

I.R.C. § 446(b); Holland v. United States , 348 U.S. 121, 130

– 32 (1954);

Harper v. Commissioner , 54 T.C. 1121, 1129 (1970). One indirect

method of income reconstruction is a bank accounts analysis,

incorporating both deposits and expenditures. We have long accepted

bank accounts analysis as a reasonable reconstruction method

. See, e.g.

, Nicholas v. Commissioner , 70 T.C. 1057, 1064

– 65 (1978); Harper , 54

T.C. at 1129. While not conclusive, bank deposits are prima facie

evidence of income. Tokarski v. Commissioner , 87 T.C. 74, 77 (1986).

The taxpayer bears the burden of showing that the deposits c ame from

a nontaxable source. See Rule 142(a); Harper , 54 T.C. at 1129. For

purpose s of a bank accounts analysis , all money deposited in to a taxpayer’s account is presumed to be taxable unless the taxpayer can

show otherwise. DiLeo v. Commissioner , 96 T.C. 858, 868 (1991), aff’d

, 959 F.2d 16 (2d Cir. 1992) . However, the Commissioner must account11

[* 11 ] for any nontaxable deposits or deductible expenses of which he is

aware. Id.

Mr. Alvarado failed to maintain adequate records of South Bay’s

income. The collection of car jackets he provided to RA Kaplan was

patently incomplete, as indicated by the large gap for each year in issue

between (a) the sum of sale prices listed in the jackets and (b) RA

Kaplan’s bank accounts analysis of gross receipts. (Indeed, Mr.

Alvarado himself conceded as much.) The number of car jackets for 2011

(265) is considerably less than the number of car purchases financed by

Topaz that year (291).

The other records Mr. Alvarado produced during the IRS internal

appeal and this litigation are likewise insufficient to compute net

income. The DealerCenter records do not indicate when (if ever) a car

was sold or the amount of South Bay’s gross receipts for any sale.

Neither the Topaz reports nor the Premier transact ion summaries

indicate how much South Bay originally paid for the cars it sold to

customers. And the Topaz quarterly reports contain VINs only for the

cars whose buyers defaulted on their lo ans. Overall, we cannot

generally match the gross receipts that South Bay received from Topaz

or Premier with other evidence in the record concerning South Bay’s

purchase prices for its inventory (i.e.

, cost of goods sold). If all these

pieces of evidence could somehow be collated to yield full and accurate

records of South Bay’s net profit (which appears unlikely), Mr. Alvarado

has made no effort to show us how. We therefore generally accept the

Commi ssioner’s reconstruction of Petitioners’ net income v ia RA

Kaplan’s bank accounts analysis, subject to certain adjustments

discussed below.

A. Gross Receipts

Mr. Alvarado disputes the Commissioner’s refusal to reduce

South Bay’s gross receipts by the sum of payments from South Bay to

Topaz: $100,313 in 2011 and $80,519 in 2012. Mr. Alvarado testified at

trial that these amounts represented downpayments that cu stomers

made to South Bay and that South Bay then remitted to Topaz when

Topaz purchased those customers’ loans. On brief the Commissioner

argues that Mr. Alvarado failed to show a paper trail of funds moving

from customers to Topaz via South Bay, with o ne exception: One

customer made a downpayment of $395 to South Bay on November 2,

2011, while a check (written close in time) from South Bay to Topaz on

November 7, 2011, for $827.42 includes a written breakdown for (in12

[* 12 ] part) $394.78 corresponding to a loan number that matches a loan

on one of the contemporaneous Topaz quarterly reports.

We found credible Mr. Alvarado’s testimony that the only

payments South Bay made to Topaz were related to customer

downpayments. On this point we return to the bank accounts analysis

on which South Bay’s income was reconstructed and reiterate that a

taxp ayer may bring forward proof that certain deposits should not be

considered taxable. Where, as here, payments were made back to Topaz

for customer deposits related to sales contracts assigned to Topaz and

funded by Topaz, the corollary return of a portion of that funding should

reduce gross income.

In addition, Mr. Alvarado argues that we should reduce South

Bay’s gross receipts by the full amount of the Topaz “returned loans”

— that is, the outstanding balances of customers who defaulted on the

loans that Topaz acquired, as listed in the quarterly su mmary reports.

South Bay guaranteed these loans. However, each quarterly summary

report reduces South Bay’s “Total Accounts Receivable” by “Total

Returns,” indicating that (at least in many cases) Topaz simply offset its

payments to South Bay for new loa ns by a running total of previously

purchased loans that had gone into default. In that case, South Bay

would not transfer money to Topaz to make good on its guarant y of the

customers’ loans; rather, its gross receipts from Topaz would already

reflect the reduction. Therefore, reducing South Bay’s gross receipts by

the amount of the returned loans would effectively give Petitioners a

double deduction.

We therefore modify the Commissioner’s bank accounts analysis

to account for the proven payments from South Bay to Topaz ($100,313

in 2011 and $80,519 in 2012), yielding gross receipts of $2,938,484 for

2011 and $2,482,300 for 2012.

B. Cost of Goods Sold

Cost of goods sold is a reduction made in the course of computing

gross income. Treas. Reg. § 1.61

- 3(a). It is not a deduction and so is not

subject to the limitations of section 162, which generally denies a

deduction for business expenses unless they are “ordinary and

necessary” for the business in question. See, e.g.

, Metra Chem Corp. v.

Commissioner , 88 T.C. 654, 661 (1987); Nunn v. Commissioner , T.C.

Memo. 2002

- 250, 84 T.C.M. (CCH) 403, 408. In the case of cash basis

taxpayers such as Petitioners, the cost of goods sold reduces gross13

[* 13 ] income only for the tax year when cash or other property is

received in exchange for the goods. See Treas. Reg. § 1.61

- 3(a) (“[A] n amount cannot be taken into account in the computation of cost of goods

sold any earlier than the taxable year in which economic performance

occurs with respect to the amount

. . . . ”).

A taxpayer is required to maintain sufficient permanent records

to substantiate all components of reported net income, including cost of

goods sold. See I.R.C. § 6001; Treas. Reg. § 1.6001

- 1(a), ( e ). However,

the Court may estimate cost of goods sold under a variation of the Cohan

rule

, see Cohan v. Commissioner , 39 F.2d 540, 543

– 44 (2d Cir. 1930)

, even when cost of goods sold is not fully substantiated

, provided that

there is a reasonable basis for making such an estimate

, Olive v.

Commissioner , 139 T.C. 19, 34 (2012), aff’d , 792 F.3d 1146 (9th Cir.

2015)

. Under the Cohan rule, if a taxpayer adequately establishes that

he paid or incurred a deductible expense but does not establish the

precise amo unt, then the Court may in some instances estimate the

allowable deduction

. Cohan v. Commissioner , 39 F.2d at 543

– 44

. But

the taxpayer must provide some reasonable basis for such an estimate.

See Vanicek v. Commissioner , 85 T.C. 731, 742

– 43 (1985). In making an

estimate under the Cohan rule, the Court “ bear[s] heavily if it chooses

upon the taxpayer whose inexactitude is of his own making. ” Cohan v.

Commissioner , 39 F.2d at 544 . While the Cohan rule by its terms applies

to deductible expenses, this Co urt has adapted it to estimate cost of

goods sold as well. See, e.g.

, Olive , 139 T.C. at 34; Alterman v.

Commissioner , T.C. Memo. 2018

- 83, at *30

– 31 ; Huzella v.

Commissioner , T.C. Memo. 2017

- 210, at *7

– 9.

The Commissioner’s final position on brief is that Petitioners are

entitled to cost of goods sold of $1,000,927 for 2011 and $946,538 for

2012. These amounts comprise the purchase prices of all cars for which

Mr. Alvarado provided proof of both purchase and sale in 2011 or 2012,

as identified by matching VIN s . The Commissioner did not allow cost of

goods for any purchases occurring before 2011, out of concern that Mr.

Alvarado may have immediately deducted such purchases. As a result,

the Commissioner ta kes the extreme position that many of the used cars

sold in the years in issue had no inventory cost whatsoever. The

Commissioner’s analysis results in cost s of goods sold of 34% of sales for

2011 and 38% for 2012, making gross margins for South Bay’s used cars

sales in the years in issue well over 60%, an implausible amount.

We hold that the law does not require this bizarre result. Rather,

we include in South Bay’s cost s of goods sold for the years in issue the14

[* 14 ] purchase prices of any cars sold in those years for which Mr.

Alvarado provided credible records along with an estimat e of the cost of

other cars sold during the years in issue for which we can conservatively

estimate an inventory cost. For this purpose, we find the DealerCenter

printouts credible as contemporaneous business records: For several

hundred cars, they list VI N, car model and year, mileage, vehicle cost,

date in stock, and asking price. There is nothing facially suspicious

about them. The Commissioner objected to these records for the

following reasons : (1) Mr. Alvarado never provided or mentioned these

reco rds during the examination ; (2) s ome of the printouts list a “Date in

Stock” of January 1, 2011, yet it seems unlikely that auto auctions were

open on a national holiday ; and (3) s ome of the printouts list a “Days in

Stock” number of around 3,000 , approximately the number of days

between early 2011 and mid

- 2019, when Mr. Alvardo first provided the

printouts to the IRS. The Commissioner suggests that Mr. Alvarado

may have retroactively generated these records for purposes of his

internal appeal wi th the IRS , casting serious doubt on their accuracy.

The Commissioner’s concerns ultimately are unconvincing. Mr.

Alvarado credibly testified that he subscribed to and used DealerCenter

during the years in issue. Only about five records out of several hundred

list a Date in Stock of January 1, 2011. Two records list a Date in Stock

of January 1, 2012. As well, it appears that all the printouts listing

“Days in Stock” of over 3,000 also list the “Vehicle Status” as “In

Inventory.” (Those with a Vehicle Status of “Sold” tend to list Days in

Stock of under 200.) This is not surprising considering Mr. Alvarado’s

testimony that he printed the records during his internal appeal with

the IRS, after temporarily regaining access to his DealerCenter account

(for which he had stopped paying years earlier). It stands to reason that

the records, accessed ye ars later, would contain apparent temporal

anomalies for cars that Mr. Alvarado or his employees had never marked

“Sold.” Overall, we find it more likely than not that the DealerCenter

records are authentic and r eliable, despite Mr. Alvarado’s somewhat

confused answers to questions at trial about why he did not provide

them to RA Kaplan during the initial examination.

Mr. Alvarado submitted to the Court a marked

- up version of RA

Kaplan’s car purchase spreadsheets, adding purchase prices that she did

not include (typically because the purchase date was pre

- 2011) but that

appeared under matching VINs in the DealerCenter p rintouts. For the

reasons stated above, we accept these additions to South Bay’s cost of

goods sold for the years in issue, except for (1) a $3,000 purchase price

for a 1998 Toyota Sienna sold on September 4, 2012, and (2) a $3,59515

[* 15 ] purchase price for a 2000 Toyota Camry sold on May 20, 2012. RA

Kaplan’s spreadsheets indicate that these same cars were previously

sold on May 13 and January 20, 2012, respectively, leading us to

conclude that the initial customers returned the vehicles or that South

Bay repossessed them. In either case South Bay should receive an

addition to cost of goods sold for these cars only once. We also ha ve

cross

- checked the low

- outlier purchase prices on RA Kaplan’s

spreadsheets (with a purchase

- to

- sales price ratio of under 0.1) with the

DealerCenter printouts. Having found two discrepancies, we increase

the purchase price of a 2004 Chrysler Pacifica ( sold on November 13,

2012) from $493.77 (per RA Kaplan’s spreadsheets) to $5,740 (per

DealerCenter) , and we increase the purchase price of a BMW 5 Series

(sold on November 20, 2012) from $642.97 (per RA Kaplan’s

spreadsheets) to $6,340 (per DealerCenter)

. 6

These additions yield tentative cost s of goods sold of $1,224,593

for 2011 and $1,238,416 for 2012, as more thoroughly detailed at

Appendi x es A and B. However, we cannot take these figures as final

because the cars whose purchase prices are included in these figures

(hereafter, purchase

- verified cars) clearly do not account for all of South

Bay’s gross receipts for the years in issue. For i nstance, when we sum

the sale prices (based on the contracts in the car jackets) of the purchase

verified cars, we a rrive at gross receipts of $2,139,642 for 2011 and

$2,298,644 for 2012. These sums are substantially lower than the gross

receipts we found above ($2,938,484 for 2011 and $2,482,300 for 2012).

Further, South Bay’s actual gross receipts for the purchase

- verified cars

are almost certainly lower still: Mr. Alvarado’s testimony, the Topaz

reports, and the Premier summaries all demonstrate that South Bay

often received only a fraction of a ca r’s jacket

- listed sale price (at least

during the year of sale), beca use of a combination of (1) the financers’

policy of holding back a reserve amount and (2) the frequency of

customer defaults on their loans (in which case South Bay had to

reimburse the financers).

Since the purchase

- verified cars clearly do not account for all of

South Bay’s gross receipts, our foregoing estimates of cost of goods

sold

— which were based only on the purchase

- verified cars

— are inadequate. See Cohan v. Commissioner , 39 F.2d at 544 (“[T]he Board

6 On the marked

- up versions of RA Kaplan’s spreadsheets, Mr. Alvarado added

some missing purchase prices by citing copies of canceled checks rather than the

DealerCenter printouts. We ignore these citations because the checks either match

the DealerCenter printouts or do not indicate either VIN or car model/year.16

[* 16 ] [of Tax Appeals] should make as close an approximation as it can

. . . . [T]o allow nothing at all appears to us inconsistent with saying

that something was spent.”). We must estimate the gap s between the

gross receipts from the purchase

- verified cars and the total gross

receipts we found above, and then extrapolate cost of goods sold figure s for the unrecorded car sales responsible for the gap.

However, even our first step

— estimating the gap s

— is not

straightforward. Mr. Alvarado was unable to show the Court what

South Bay’s actual gross receipts were for any of the purchase

- verified

cars, and the records he submitted do not clearly reveal this information.

(For instance, the Topaz reports do not indicate the VINs or models of

the cars whose sales contracts were assumed by Topaz, nor how much

Topaz paid for these contracts individually.) It might be possible to infer

South Bay’s actual gross re ceipts for some of the purchase

- verified cars

by cross

- checking the copies of canceled checks paid to South Bay, the

Topaz reports, the Premier summaries, and RA Kaplan’s spreadsheets

(as supplemented by Mr. Alvarado). However, we will not do Mr.

Alvarado ’s work for him. His burden of proof includes the burden of

clearly explaining how admissible evidence supports his case, and he

. . . may not merely “dump” data for the Court to wade through on its own

. “Judges are not expected to be mindreaders. Conse quently, a litigant

has an obligation to ‘spell out [his] arguments squarely and distinctly,’

or else forever hold [his] peace.” Rivera

- Gomez v. De Castro , 843 F.2d

631, 635 (1 st Cir. 1988) (quoting Paterson

- Leitch Co. v. Mass. Mun.

Wholesale Elec. Co. , 840 F.2d 985, 990 (1 st Cir. 1988)); see also Hale v.

Commissioner , T.C. Memo. 2010

- 229, 100 T.C.M. (CCH) 345, 347 (“We

need not (and shall not) undertake the task of sorting through the

voluminous evidence [the taxpayer] has provided in an attempt to see

what is, and what is not, adequate substantiation of the items on [the

taxpayer’s] return.”).

Thus, for purposes of the Cohan rule as adapted to cost of goods

sold, we will “bear heavily” on Mr. Alvarado, see Cohan v. Commissioner

, 39 F.2d at 544, in part by assuming that South Bay’s actual gross

receipts for each purchase

- verified car equaled the sale price for that car

listed in the car jacket. Accordingly, we estimate gross receipts from the

purchase

- verified cars of $2,139,642 for 2011 and $2,298,644 for 2012.

See Appendixes A and B. However, our assumption leaves us with gross

receipts gap s of $798,842 in 2011 and $183,656 in 2012

— receipts that

we have not yet associated with any cost of goods sold.17

[* 17 ] At this point the Cohan rule turns a friendlier eye on Mr.

Alvarado, as we may estimate some associated cost s of goods sold for the

gross receipts in the gap s , provided some reasonable basis exists for

doing so. See Cohan v. Commissioner , 39 F.2d at 544; Huzella v.

Commissioner , T.C. Memo. 2017

- 210 , at *7

– 9 (estimating cost of goods

sold using eBay records and sales catalogs) ; Arizaga v. Commissioner

, T.C. Memo. 2016

- 57, at * 6

– 7 (estimating cost of goods sold for a

restaurant that kept no relevant records) ; Heinbockel v. Commissioner

, T.C. Memo. 2013

- 125, at *67

– 68 (estimating cost of goods sold for a

personal shopping business at 50% of gross receipts).

As a threshold matter, we do have proof that for the following

gross receipts there was no associated cost of goods sold or that there is

no reasonable basis for estimating such cost: (1) $5,500 from the

September 4, 2012, resale of a 1998 Toyota Sienna ( as discussed above);

(2) $7,900 from the May 20, 2012, resale of a 2000 Toyota Camry (as

discussed above); (3) $2,350 of fees charged to Alvarado Tax Service

customers for preparation of tax returns in 2012; and (4) $2,580 from a

subtenant at South Bay’s b usiness premises in Hawthorne, California

in 2012. We are then left with $798,842 of gross receipts for 2011 and

$165,326 of gross receipts for 2012 that appear to derive from car sales

but for which we have not yet made any provision for cost s of goods sold.

In analyzing the cost s of goods sold for which we do have data, we

note that the figure s range from a low of 5% to over 100% of the ultimate

sale price s , with an average cost of goods sold margin of 56.4% in 2011

and 54.2% in 2012. See Appendixes A and B. Using these average

margins as the basis for our estimate yields an average gross profit

margin of around 45%, which is likely high given South Bay’s financial

struggles and ultimate demise. However, given that we “bear heavily”

on Mr. Alvarado for his fa i lure to keep adequate records, see Cohan v.

Commissioner , 39 F.2d at 544 , we will proceed with these reasonable

estimates. Applied to the remaining gross receipts in the gap, a cost of

goods sold margin of 56.4% yields an estimated $450,547 of additional

cost of goods sold for 2011, and a cost of goods sold margin of 54.2% yi elds

an estimated $89,607 of additional cost of goods sold for 2012. We add

these estimates to the figures for the purchase

- verified cars ( $1,224,593

in 2011 and $1,238,416 in 2012) t o find total cost of goods sold of

$1,675,140 for 2011 and $1,328,023 for 2012.18

C. Expenses

The parties stipulated most of the Commissioner’s revisions to

South Bay’s Schedule C expenses for both years in issue, which were

based on RA Kaplan’s bank accounts analysis. Unstipulated expense

categories for both years in issue are the following: comm issions,

insurance (other than health), legal and professional services, and cell

phone expense. For 2012, utilities and occasional help are also

unstipulated.

At trial and on brief the only expense category Mr. Alvarado

challenged was legal and professional services. He testified that he

hired a lawyer

, Larry Rucker

, to defend him in a suit brought against

South Bay under the Americans with Disabilities Act. We find this

testimony credible and accordingly allow a legal and professional

services deduction of $10,000 for 2011 and $5,000 for 2012, based on the

checks paid to “Law Offices of Fred Rucker” summarized in RA Kaplan’s

bank account expenditures spreadsheets.

Since Mr. Alvarado did not dispute the Commissioner’s

determinations in any of the other unstipulated expense categories at

trial or on brief, we conclude that Petitioners have abandoned the

disagreements they raised in their Petition about these expenses

. See

Nicklaus v. Commissioner , 117 T.C. 117, 120 n.4 (2001).

D. Redetermined Net Profit

After accounting for the foregoing adjustments to gross receipts,

cost of goods sold, and expenses, we redetermine Schedule C net profit

of $625,848 for 2011 and $544,609 for 2012. As stated earlier,

Petitioners reported net profit of only $13,900 for 2011 and $30,035 for

2012. [* 18 ]19

2011 Form 1040

, Schedule C Determined by

the IRS Found by the

Court

Gross Receipts $1,815,410 $3,038,797 $2,938,484

Cost of Goods

Sold (1,515,510) (1,000,927) (1,675,140)

Legal and

Professional

Services (17,220)

— (10,000)

Other Expenses (268,780) (627,496) (627,496)

Net Profit $ 13,900 $ 1,410,374 $625,848

2012 Form 1040

, Schedule C Determined by

the IRS Found by the

Court

Gross Receipts $2,538,525 $2,562,819 $2,482,300

Cost of Goods

Sold (2,146,780) (946,538) (1,328,023)

Legal and

Professional

Services (18,200)

— (5,000)

Other Expenses (343,510) (604,668) (604,668)

Net Profit $30,035 $1,011,613 $544,609

III. Additions to Tax and Penalties

T he Commissioner determined section 6651(a)(1) late

- filing

addition s to tax against Petitioners and section 6663 fraud penalt ies

against Mr. Alvarado. 7 The Commissioner has also determined against

7 The Commissioner’s initial assertion of the section 6663 penalt ies , using

Letter 950 (the “30

- day letter”), did not distinguish between Mr. Alvarado and Ms. [* 19 ]20

[* 20 ] Mr. Alvarado, as an alternative to the fraud penalt ies , section

6662 accuracy

- related penalt ies for underpayment s of tax by reason of

substantial understatement s of income tax.

Under section 7491(c), the Commissioner bears the burden of

production regarding penalties and additions to tax asserted against

individuals and must come forward with sufficient evidence indicating

that it is appropriate to impose them

. Higbee v. Commissioner , 116 T.C.

438, 446

– 47 (2001)

. One part of this burden is to show compliance with

section 6751(b)(1), which provides that “[n]o penalty . . . shall be

assessed unless the initial determination of such assessment is

personally approved (in writing) b y the immediate supervisor of the

individual making such determination.” See Graev v. Commissioner

, 149 T.C. 485, 493 (2017), supplementing and overruling in part 147 T.C.

460 (2016)

. Petitioners have not disputed that the Commissioner

satisfied the supervisory approval requirement , and we see no evidence

in the record to suggest otherwise.

A. Section 6651 Late

- Filing Addition s to Tax

Section 6651(a)(1) imposes an addition to tax for the failure to file

a return on or before the due date (including extensions) unless the

taxpayer can establish that such failure was “due to reasonable cause

and not due to willful neglect.” (After five months or more of delay, the

addition equals 25 % of the amount of tax otherwise due.) To

demonstrate reasonable cause, a taxpayer must show that he exercised

ordinary business care and prudence but was nevertheless unable to file

on time. United States v . Boyle , 469 U.S. 241, 246 (1985) ; Treas. Reg.

§ 301.6651

- 1(c)(1)

.

Petitioners filed their 2011 joint income tax return over 9 months

late, and they filed their 2012 return over 14 months late. At trial Mr.

Alvarado explained the late filings as the result of his being

overwhelmed with South Bay business and of his need to await financial

information from Topaz. However, this Court has held that work

demands

— even extreme ones

— do not constitute reasonable cause for

purposes of section 6651(a)(1). Dustin v. Commissioner , 53 T.C. 491, 507

(1969), aff’d , 467 F.2d 47 (9th C ir. 1972). And Mr. Alvarado failed to

explain how, if at all, he used the Topaz reports to prepare the tax

returns (which is not self

- evident). We therefore sustain the

Velasquez. The notices of deficiency made clear that the fraud penalt ies did not apply

to Ms. Velasquez by virtue of section 6663(c).21

[* 21 ] Commissioner’s imposition of the section 6651(a)(1) addition to tax

on Mr. Alvarado. 8

B. Section 6663 Fraud Penalt ies

Section 6663(a) imposes a penalty equal to 75 % of the taxpayer’s

underpayment of tax that is due to fraud. A taxpayer commits fraud

when he intentionally contrives to evade a tax liability that he knows to

be owing. Maciel v. Commissioner , 489 F.3d 1018, 1026 (9th Cir. 2007),

aff’g in part

, rev’g in part T.C. Memo. 2004

- 28; Petzoldt v. Commissioner

, 92 T.C. 661, 698

– 99 (1989). If any portion of the underpayment is

attributable to fraud, the entire underpayment will be treated as

fraudulent unless the ta xpayer establishes by a preponderance of the

evidence that part of the underpayment is not due to fraud. I.R.C. §

6663(b). Section 6664(a) provides that for purposes of the fraud penalty,

“underpayment” generally means “the amount by which any tax

impose d by this title [i.e., the Code] exceeds .

. . the amount shown as

the tax by the taxpayer on his return.”

The Commissioner has the burden of proving fraud by clear and

convincing evidence. See I.R.C. § 7454(a); Rule 142(b). To carry that

burden for a given tax year, the Commissioner must show that (1) an

underpayment of tax exists for that year and (2) some part of the

underpayment is attributable to fraud. See I.R.C. §§ 6663(a), 7454(a);

DiLeo , 96 T.C. at 873. The existence of fraud is a question of fact to be

resolved upon consideration of the entire record. DiLeo , 96 T.C. at 874.

Fraud is never presum ed and must be established by clear and

convincing evidence of fraudulent intent. Baumgardner v.

Commissioner , 251 F.2d 311, 322 (9th Cir. 1957), aff’g T.C. Memo. 1956

- 112. Since direct evidence of a taxpayer’s fraudulent intent is seldom

available, fraud may be shown by circumstantial evidence. Bradford v.

Commissioner , 796 F.2d 303, 307 (9th Cir. 1986), aff’g T.C. Memo. 1984

-

601 ; Petzoldt , 92 T.C. at 699 . The taxpayer’s entire course of conduct

may establish the requisite fraudulent intent. Niedringhaus v.

Commissioner , 99 T.C. 202, 210

– 11 (1992).

The circumstantial evidence by which the Commissioner may

prove fraud includes various “badges of fraud” on which courts often

rely. See Bradford v. Commissioner , 796 F.2d at 307; DiLeo , 96 T.C. at

875. These badges focus on whether the taxpayer engaged in certain

8 Again, Ms. Velasquez is not liable for this penalty by virtue of the relief

provided by section 6015(b), as conceded by the Commissioner.22

[* 22 ] conduct that is indicative of fraudulent intent, such as

(1) understating income

, (2) failing to maintain adequate records

, (3) offering implausible or inconsistent explanations

, (4) concealing

income or assets

, (5) failing to cooperate with tax authorities

, (6) engaging in illegal activities

, (7) providing incomplete or misleading

information to a tax return preparer

, ( 8 ) filing false documents,

including false income tax returns

, ( 9 ) failing to file tax returns or filing

them late, and (1 0 ) engaging in extensive dealings in cash. See Bradford

v. Commissioner , 7 96 F.2d at 307

– 08; Parks v. Commissioner , 94 T.C.

654, 664

– 65 (1990)

. The existence of any one badge is not dispositive,

but the existence of several badges may be persuasive circumstantial

evidence of fraud. Niedringhaus , 99 T.C. at 211. We may also consider

a taxpayer’s education, training, business experience, and knowledge of

income tax laws in deciding whether he acted with fraudulent intent.

Worsham v. Commissioner , T.C. Memo. 2012

- 219, 104 T.C.M. (CCH)

129, 134

, aff’d , 531 F. App’x 310 ( 4th Cir. 2013) ; see also Chico v.

Comm issioner , T.C. Memo. 2019

- 123, at *46

– 47, aff’d

, No. 20

- 71017,

2021 U.S. App. LEXIS 30243 (9th Cir. Oct. 8, 2021)

.

We must now decide whether the Commissioner has introduced

clear and convincing evidence that Mr. Alvarado has an underpayment

(as defined in section 6664(a)) for each year in issue and that at least

some portion of the underpayment for each year is due to fraud on Mr.

Alvarado’s pa rt. We begin by noting the obvious implication of our

deficiency analysis

, that either Mr. Alvarado did not keep adequate

records of South Bay’s used car inventory purchases and sales or he did

not provide such records to the C ommissioner and this Court. In either

event, under our caselaw we may accept a bank accounts analysis for

South Bay’s gross income and adapt the Cohan rule to estimate South

Bay’s cost s of goods sold. Any reasonable application of these rules

yields tax liabilit ies in excess of what Petitioners reported on their 2011

and 2012 returns (both of which showed a refund due, even before

accounting for any withholding or estimated tax payments). We now

clarify that the Cohan rule (and its adaptation to cost of g oods sold)

contributes to determining

— rather than merely estimating

— the tax

imposed by the Code for those taxpayers who do not keep (or at least do

not furnish) adequate financial records. Therefore, the Commissioner

has satisfied his burden of proof for the first element of fraud: There is

clear and convincing evidence that Mr. Alvarado did not keep (or

furnish) adequate records for South Bay and that he underpaid his

income tax for both years in issue within the meaning of section 6664(a).23

[* 23 ] However, our analysis in this case “b [ ore ] heavily” on Mr.

Alvarado because his own behavior of keeping incomplete and scattered

records created the need for estimat es in the first place. In particular,

we assumed (unfavorably to Mr. Alvarado) that for each of the purchase

verified cars South Bay received the full sale price listed in the contract

in the car jacket. And we then assumed (unfavorably to Mr. Alvarado)

tha t all cars other than the purchase

- verified cars had average cost of

goods sold margin s relative to th ose of the purchase

- verified cars (this

latter margin being measured under the first unfavorable assumption).

However, the Topaz reports and Premier summaries show it to be just

as likely that South Bay received only fraction s of the listed sale price s for most of the cars it sold, owing to the subprime financing

arrangements for most customers.

If we use the Topaz

- financed cars as a basis for estimating

average receipts for all cars, we find an average of $7,145 per car in 2011

and $5,720 per car in 2012. (Topaz made total payments to South Bay

of $2,079,310 for 291 contracts in 2011, and it pai d $915,239 for 160

contracts in 2012.) Meanwhile, the purchase

- verified cars had an

average cost (that is, the price South Bay paid for them) of $6,123 in

2011 and $5,049 in 2012. Using those numbers, the cost of goods sold

margin would be between 86% (i n 2011) and 88% (in 2012), much higher

than the figures we determined under the Cohan rule (56.4% in 2011

and 54.2% in 2012). The result would then be gross profit margins

between 12% and 14%, which, after accounting for South Bay’s

expenses, would result in net loss es rather than the profitability that we

determined.

Because we find it just as likely that South Bay had negative net

profit as positive net profit for both years in issue, we lack clear and

convincing evidence that Mr. Alvarado believed he and Ms. Velasquez

owed more tax than they reported and paid. Yet the second component

of the section 6663 fraud penalty requires that the taxpayer knew (and

thus believed) he owed more tax than he reported and paid. See Petzoldt

, 92 T.C. at 698. If South Bay in fact had no positive net profit in either

year, then give n the evidence that Petitioners had no other substantial

income in either year, Mr. Alvarado likely did not believe he and Ms.

Velasquez owed any positive amount of income tax for either year.

Mr. Alvarado held a PTIN and prepared returns for some other

taxpayers, and he was a commercial lender at Comerica Bank for over

two decades. However, a trained tax professional in Mr. Alvarado’s

presumptive position

— that is, palpably suffering business losses but24

[* 24 ] devoid of the records to prove it

— reasonably could have believed

his business would not have tax liabilit ies for the years in issue. Cf.

Capp v. Commissioner , T.C. Memo. 1968

- 53, 27 T.C.M. (CCH) 280, 283

(“ [W]e must conclude here that the smattering of knowledge of taxation

and accounting acquired in the [relevant] period and possessed by this

[taxpayer] is not clear and convincing evidence of a specific intent to

evade tax . . . .” ). Because we find some probability that South Bay made

zero or negative net profit s for the years in issue, we find it meaningfully

probable that Mr. Alvarado did not believe he and Ms. Velasquez were

underreporting or underpaying their income tax.

True, Mr. Alvarado kept inadequate records for South Bay; he

and Ms. Velasquez filed their tax returns late several years in a row; the

various inputs on the Schedules C that Mr. Alvarado prepared for both

years in issue appear to be estimated (as all amounts end in “0” or “5”);

Mr. Alvarado initially failed to reveal to RA Kaplan that he prepared

some tax retur ns for pay; and Mr. Alvarado repeatedly delayed meetings

with IRS agents, sometimes failed to appear at meetings absent a

summons, and only inconsi stently complied with document requests

(including during the lead

- up to trial). We certainly do not condone any

of these practices, and we admonish Mr. Alvarado for his poor behavior.

Nonetheless, these facts are consistent with a mixture of negligence and

being overwhelmed by his failing business venture. They do not add up

to a compelling counterweight to the above considerations regarding the

probability that Mr. Alvarado did not believe he underreported or

underpaid his tax liabilities. The apparen t fabrication of inputs on the

Schedules C is perhaps the most concerning factor, but even this is

consistent with Mr. Alvarado ’s having a rough sense of what South Bay’s

actual net profit s were and trying to “reverse

- engineer” th ose amount s on the tax returns (perhaps erring on the side of overestimation).

Although Petitioners underreported and underpaid their income

tax liabilities, we lack clear and convincing evidence that Mr. Alvarado

believed they owed more. Thus, we do not find him liable for the fraud

penalty under section 6663

.

C. Section 6662 Accuracy

- Related Penalt ies

Section 6662 provides for a 20 % accuracy

- related penalty on an

underpayment of tax attributable to (among other things) a substantial

understatement of income tax. I.R.C. § 6662(a)

, (b) (2). An

understatement of income tax generally means the excess of tax

required to be reported on the return over the amount of tax shown on25

[* 25 ] the return. I.R.C. § 6662(d)(2)(A). In the case of an individual, a n

understatement is “ substantial ” if it exceeds the greater of 10% of the

tax required to be shown on the return or $5,000. I.R.C. § 6662 (d)(1)(A).

Unlike the section 6663 fraud penalty, the accuracy

- related penalty

requires the Commissioner to carr y the burden of production but not the

burden of proof with respect to the accuracy

- related penalty. I.R.C.

§ 7491(c); Rule 142(a) ; Higbee , 116 T.C. at 446

– 49 . Given the amount of

net profit that we have redetermined for each year in issue, Mr.

Alvarado clearly has a substantial understatement of income tax for

each year.

The accuracy

- related penalty under section 6662(a) and (b)(2)

does not apply if the taxpayer had reasonable cause for the substantial

understatement and acted in good faith. I.R.C. § 6664(c)(1). Mr.

Alvarado offered no evidence that he qualifies for the reasonable cause

exception, and we see none in the record. Accordingly, we hold Mr.

Alvarado liable for the accuracy

- related penalty on his entire

underpayment for each year in issue.

IV. Conclusion

W e hold that for the years in issue, in addition to the

Commissioner’s concessions and before the application of section 6015(b)

relief for Ms. Velasquez and her estate, Petitioners’ gross income, cost of

goods sold, and Schedule C expenses must be adjusted as redetermined

above; and Petitioners are liable for the section 6651(a)(1) addition s to

tax. Mr. Alvarado is also subject to accuracy

- related penalt ies under

section 6662(a) and (b)(2) for both years in issue.

We have considered all the arguments made by the parties and,

to the extent they are not addressed herein, we find them to be moot,

irrelevant, or without merit.

To reflect the foregoing,

Decision will be entered under Rule 155.26



## APPENDIX A

– 201 1

VIN Date of

Sale Car Sales Price Cost of

Goods Sold

(COGS) COGS

Margin

WAUED68D2WA058468 12/23/2011 98 Audi $7,900.00 $3,676.15 46.5%

IGYEC63T92R133421 2/12/2011 2002 Cadillac Escalade $13,000.00 $7,870.62 60.5%

2FMZA5243BA92177 5/21/2011 2003 Ford Windstar $7,900.00 $3,800.00 48.1%

2FTRX17W93CAG7941 8/13/2011 2003 Ford F

- 150 $7,350.00 $6,133.61 83.5%

1GKEK63U73J314216 1/10/2011 2003 GMC Yukon $13,900.00 $7,918.15 57.0%

4F2YZ0616SKM08491 12/28/2011 2005 Mazda Tribute $8,700.00 $5,000.00 57.5%

SAJEA51C03WD37041 11/12/2011 2003 Jaguar X

- Type $7,900.00 $4,292.69 54.3%

1GCCS19W028188575 9/2/2011 2002 Chevrolet S10 Ext $9,500.00 $4,770.03 50.2%

WBAGL63444DP71595 1/3/2011 2004 BMW 7 Series $13,500.00 $14,110.53 104.5%

WDBJF65J818384279 2/24/2011 2001 Mercedes

- Benz $9,900.00 $6,009.58 60.7%

WDBUF70JX3A221796 3/12/2011 2003 Mercedes

- Benz $14,500.00 $10,569.81 72.9%

WBABM3344YJN63035 6/3/2011 2000 BMW 3 Series $6,900.00 $4,400.00 63.8%

2FMZA514828805546 8/28/2011 2002 Ford Windstar $5,900.00 $2,932.96 49.7%

WBANA735458818181 7/30/2011 2005 BMW 5 Series $17,900.00 $12,500.00 69.8%

5UMEU27A21U066589 8/14/2011 2001 Lincoln Navigator $7,000.00 $6,080.00 86.9%

1GNEK13R4WJ341993 6/25/2011 1998 Chevrolet Tahoe $8,900.00 $3,100.00 34.8%

1GNDS135532299418 6/26/2011 2003 Chevrolet Trail Blazer $7,540.33 $5,300.00 70.3%

1G6DM57N730145001 1/23/2011 2003 Cadillac CTS $10,900.00 $6,177.07 56.7%

SALTY15422A742641 10/20/2011 2002 Land Rover Discovery $6,240.00 $3,850.42 61.7%

2GCEC19T7Y1159954 5/25/2011 2000 Chevrolet Silverado 1500 $9,900.00 $5,013.54 50.6% [* 26 ]27

[* 27 ]

WBAGN63412DR07821 1/16/2011 2002 BMW 7 Series $16,000.00 $10,989.52 68.7%

1GKEK63U91J237376 1/26/2011 2001 GMC Yukon $11,900.00 $5,900.00 49.6%

1GNEC13T31R116676 2/20/2011 2001 Chevrolet Tahoe $12,900.00 $6,600.00 51.2%

JT88H68X8Y0024577 7/26/2011 2000 Lexus GS $11,900.00 $6,982.93 58.7%

1GYEK63N12R03768 1/20/2011 2002 Cadillac Escalade $13,400.00 $8,100.00 60.4%

1GCEK19T31E253904 9/4/2011 2001 Chevrolet Silverado 1500 $7,600.00 $4,679.22 61.6%

WDBRF61J81F071332 3/11/2011 2001 Mercedes

- Benz C Class $12,900.00 $6,250.00 48.4%

1GCEC19R4TE244357 9/26/2011 1996 Chevrolet 1500 Extended $8,900.00 $3,800.00 42.7%

WBAAM3346YCB24891 2/10/2011 2000 BMW 3 Series $10,900.00 $5,000.00 45.9%

3GKEC16T12G358182 9/2/2011 2000 GMC Yukon XL 1500 $10,900.00 $6,200.00 56.9%

WDBNG75J72A254392 2/18/2011 2002 Mercedes Benz S Class $12,900.00 $6,500.00 50.4%

STBRN341X25314096 12/26/2011 2002 Toyota Tundra Access $8,900.00 $5,390.00 60.6%

SAJEA51DX2XC32685 3/12/2011 2002 Jaguar X

- Type $10,900.00 $6,100.00 56.0%

JT6HF10UXX0030523 2/12/2011 1999 Lexus $10,900.00 $5,324.19 48.8%

1FMZU63E72UA34725 3/7/2011 2002 Ford Explorer $10,900.00 $5,180.00 47.5%

WDBNG78J52A239126 8/5/2011 2002 Mercedes Benz S Class $16,900.00 $13,347.31 79.0%

JT8BD68S8X0074958 1/31/2011 1999 Lexus GS $10,900.00 $5,700.00 52.3%

2GIFP22G8Y2128887 4/8/2011 2000 Chevrolet Camero $11,900.00 $7,192.95 60.4%

JT8BH68X7W0011610 7/28/2011 1998 Lexus GS $12,900.00 $6,500.00 50.4%

2HKRL1862XH512692 110/4/11 1999 Honda Odyssey $10,900.00 $6,000.00 55.0%

WBAEV33452KL67097 8/25/2011 2002 BMW 3 Series $11,250.00 $5,736.70 51.0%

WBABM3345YJN81012 4/9/2011 2000 BMW 3 Series $8,900.00 $4,505.00 50.6%

4TEJ062N86Z313083 2/22/2011 2006 Toyota Tacoma Double $19,900.00 $15,321.84 77.0%28

[* 28 ]

JNKCV51E23M013611 11/19/2011 2003 Infiniti G $10,900.00 $6,200.00 56.9%

JTKDE177370159013 9/6/2011 2007 Scion TC $12,900.00 $10,329.00 9 80.1%

WDBRF64JX2E002046 5/5/2011 2002 Mercedes Benz S Class $10,900.00 $7,000.00 64.2%

WDBNG70J72A242380 2/10/2011 2002 Mercedes Benz S Class $13,900.00 $6,700.00 48.2%

WBAFA5355ILM89729 4/8/2011 2001 BMW X5 $15,900.00 $9,168.55 57.7%

WAUDC68D61A114547 9/28/2011 2001 Audi A4 $10,900.00 $5,540.00 50.8%

WDBNG70J01A174051 11/26/2011 2001 Mercedes Benz S Class $10,900.00 $5,000.00 45.9%

2C3HE6GX1H602336 1/27/2011 2001 Chrysler 300 $6,900.00 $3,542.84 51.3%

1GNEC13V92R265824 8/14/2011 2002 Chevrolet Tahoe $12,900.00 $7,776.62 60.3%

1LNHM87ASYY822595 7/16/2011 2000 Lincoln LS $9,900.00 $4,695.00 47.4%

WDBPJ78J92A019773 9/6/2011 2002 Mercedes Benz CL Class $22,900.00 $15,000.00 65.5%

1GNEC16T831215183 8/19/2011 2003 Chevrolet Suburban 1500 $13,900.00 $8,500.00 61.2%

WDBNG70J5YA29033 9/15/2011 2000 Mercedes Benz S Class $11,700.00 $5,915.58 50.6%

3GNCK18R5XG230638 8/11/2011 1999 Chevrolet Tahoe $6,900.00 $3,758.50 54.5%

1GNEC13T83R248013 3/11/2011 2003 Chevrolet Tahor $13,900.00 $8,000.00 57.6%

1FMEU15L83LA22622 5/8/2011 2003 Ford Expedition $10,700.00 $5,500.00 51.4%

2FTZX07291CA68723 6/17/2011 2001 Ford F150 Super Cab $9,900.00 $6,266.05 63.3%

2GIWF55E119254200 12/24/2011 2001 Chevrolet Impala $6,900.00 $900.71 13.1%

1GNEC13T01J140318 1/20/2011 2001 Chevrolet Tahoe $13,400.00 $7,369.55 55.0%

1FAFP33P82W225238 1/3/2011 2002 Ford Focus $4,900.00 $5,900.00 120.4%

1FMCU04122KA15543 7/21/2011 2002 Ford Focus $10,500.00 $4,700.00 44.8%

9 COGS figures in bold (and the associated COGS margins) were reflected in the DealerCenter printouts but not in RA Kaplan’s

spreadsheets.29

[* 29 ]

2MEHM75V73X625035 3/30/2011 2003 Mercury Marauder $10,900.00 $5,500.00 50.5%

1FAFP34302W255300 10/30/2011 2002 Ford Focus $7,900.00 $3,300.00 41.8%

1FMZU62E72Z837311 7/6/2011 2002 Ford Explorer $7,900.00 $4,747.06 60.1%

W06VR54R9VR153773 2/4/2011 1996 Cadillac Catera $4,400.00 $2,500.00 56.8%

WDBNG75J71A208897 6/9/2011 2001 Mercedes Benz S Class $11,900.00 $6,800.00 57.1%

WBAGL634X2DP56418 8/4/2011 2002 BMW 7 Series $14,250.00 $6,500.00 45.6%

WDBJF55F6VJ030620 6/1/2011 1997 Mercedes Benz E Class $7,900.00 $5,321.20 67.4%

1GYEK1388XR413817 12/20/2011 1999 Cadillac Escalade $8,800.00 $3,675.00 41.8%

4T3ZF19CXYU305151 2/20/2011 2000 Toyota Sienna $7,900.00 $4,000.00 50.6%

1N4DL01D9XC230595 12/6/2020 1999 Nissan Altima $2,900.00 $1,000.00 34.5%

1GYEK13R0YR165578 9/29/2011 2000 Cadillac Escalade $10,900.00 $5,000.00 45.9%

1N4AL11D95N923502 4/25/2011 2005 Nissan Altima $12,900.00 $6,700.00 51.9%

JN8DR09X71W568112 2/15/2011 2001 Nissan Pathfinder $9,900.00 $4,300.00 43.4%

1GCEC14V4YZ155179 1/13/2011 2000 Chevrolet Silverado 1500 $10,900.00 $5,324.19 48.8%

2FMZA51686BA63385 2/12/2011 2006 Ford Freestar $9,900.00 $4,420.79 44.7%

WDBNG75J0YA060408 7/16/2011 2000 Mercedes Benz S Class $13,900.00 $5,900.00 42.4%

WBAAM5345YFR20538 1/15/2011 2000 BMW 3 Series $9,900.00 $2,950.00 29.8%

LITARN81A0RZ162721 12/19/2011 1994 Toyota Truck $2,900.00 $1,000.00 34.5%

JTHBF30GG25031425 8/1/2011 2002 Lexus ES $14,900.00 $7,000.00 47.0%

JM3LW28G2Y0112956 4/16/2011 2000 Mazda MPV $5,900.00 $3,400.00 57.6%

WDBNG70J0YA006422 3/6/2011 2000 Mercedes Benz S Class $10,900.00 $4,500.00 41.3%

JT8BD68S0X0064974 1/26/2011 1999 Lexus GS 300 $9,900.00 $6,500.00 65.7%

2GCEK19T1X1263177 6/24/2011 1999 Chevrolet Silverado 1500 $10,500.00 $5,072.00 48.3%30

[* 30 ]

WBAAM3336YFP68460 6/10/2011 2000 BMW 3 Series $7,089.00 $4,951.67 69.9%

1GKEC13RXXJ748972 2/8/2011 1999 GMC Yukon $7,400.00 $3,400.00 45.9%

1G1ND52183M515735 6/14/2011 2003 Chevrolet Malibu $7,900.00 $3,987.96 50.5%

1GNDS135222376115 6/19/2011 2003 Chevrolet Trail Blazer $10,900.00 $5,390.00 49.4%

1GNEC13791R129556 12/8/2011 2001 Chevrolet Tahoe $10,000.00 $5,900.00 59.0%

4JGAB54E51A247328 8/20/2011 2001 Mercedes Benz ML $11,900.00 $6,877.65 57.8%

3VWSK69M93M012173 7/20/2011 2003 Volkswagen Jetta $8,900.00 $4,192.10 47.1%

1GBDV13147D176215 8/30/2011 2007 Chevrolet Uplander $8,900.00 $4,000.00 44.9%

1GKCC13T91R221865 8/10/2011 2001 GMC Yukon $11,900.00 $6,000.00 50.4%

JT8BH68X2Y0025675 2/2/2011 2000 Lexus GS $10,900.00 $5,200.00 47.7%

3GNEC16T42G356851 11/29/2011 2002 Chevrolet Suburban $9,900.00 $7,500.00 75.8%

1GKEC13R4XJ807790 2/6/2011 1999 GMC Yukon $8,900.00 $3,850.48 43.3%

2GCEC19V021179665 2/25/2011 2002 Chevrolet Suburban $9,300.00 $4,405.00 47.4%

WDBNG70J9YA106275 9/30/2011 2000 Mercedes Benz S Class $12,900.00 $6,340.00 49.1%

JN8DR09X71WS68112 12/9/2011 2001 Nissan Pathfinder $9,000.00 $4,300.00 47.8%

1GBFG15T341148789 5/9/2011 2004 Chevrolet Express 1500 $14,900.00 $12,000.00 80.5%

5TBRT38121S140345 2/27/2011 2001 Toyota Tundra $9,900.00 $6,426.29 64.9%

3GKEC16T4YG137345 3/26/2011 2000 GMC Yukon XL 1500 $7,900.00 $4,300.00 54.4%

4JGAB72E01A241435 3/26/2011 2001 Mercedes Benz ML Class $12,400.00 $5,547.59 44.7%

SALME114X3A135410 4/3/2011 2003 Land Rover Range Rover $18,999.00 $11,250.00 59.2%

1G6DM57N430143836 5/9/2011 2003 Cadillac CTS $12,900.00 $6,620.94 51.3%

3GNEC16TX1G131378 1/19/2011 2001 Chevrolet Suburban 1500 $9,900.00 $7,500.00 75.8%

JT88F28G0W5019503 10/26/2011 1998 Lexus ES $7,900.00 $5,878.00 74.4%

1N4AL11D76N317925 3/13/2011 2006 Nissan Altima $9,600.00 $7,000.00 72.9%31

[* 31 ]

2GTEC19T221379039 3/20/2011 2002 GMC Sierra 1500 Ext $9,900.00 $5,225.00 52.8%

1G1ZS52F75F186326 1/24/2011 2005 Chevrolet Malibu $7,900.00 $3,400.00 43.0%

1GCEC14V71Z110517 4/2/2011 2001 Chevrolet Silverado 1500 $7,900.00 $3,400.00 43.0%

WDBLJ65G4WF034448 1/16/2011 1998 Mercedes Benz CLK $7,900.00 $4,000.00 50.6%

19UUA56613A079444 2/27/2011 2003 Acura TL $10,900.00 $5,400.00 49.5%

1D4GP24R768673012 12/11/2011 2006 Dodge Grand Caravan $8,900.00 $6,006.48 67.5%

1LNHM87A52Y681048 10/9/2011 2002 Lincoln LS $9,900.00 $5,656.78 57.1%

JTEGH20V830095745 3/23/2011 2003 Toyota Rav4 $10,400.00 $5,700.00 54.8%

1GNEC13RSYR151847 12/16/2011 2000 Chevrolet Tahoe $7,900.00 $3,195.00 40.4%

1B3ESS6C04D502246 12/5/2011 2004 Dodge Neon $5,900.00 $2,700.00 45.8%

4JGAB54E32A361975 11/5/2011 2002 Mercedes

- Benz ML $11,900.00 $7,060.75 59.3%

WBXPA73455WC49424 9/6/2011 2005 BMW X3 $16,400.00 $10,800.00 65.9%

1FAFP46V1WF177622 7/2/2011 1998 Ford Mustang $9,900.00 $5,500.00 55.6%

JN1CA21D7WT500657 6/4/2011 1998 Nissan Maxima $6,900.00 $3,680.00 53.3%

2GCEC19W821132683 3/18/2011 2002 Chevrolet Silverado 1500 $7,900.00 $5,500.00 69.6%

JT8BD68S4X0060023 4/11/2011 1999 Lexus GS $11,800.00 $5,730.00 48.6%

28KA43R16H416054 12/13/2011 2006 Dodge Charger $11,900.00 $7,950.77 66.8%

WBAAm3343YFP79893 3/31/2011 2000 BMW 3 Series $8,900.00 $5,149.39 57.9%

WBAXA73555B815676 4/4/2011 2005 BMW 5 Series $16,400.00 $9,000.00 54.9%

1GCEC14X17Z174286 4/7/2011 2007 Chevrolet Silverado $11,900.00 $7,000.00 58.8%

4JGAB72E41A265737 2/23/2011 2001 Mercedes

- Benz ML $12,900.00 $6,800.00 52.7%

WBAAM5332XFR04559 4/2/2011 1999 BMW 3 Series $10,900.00 $4,922.25 45.2%

WDBRF64JXZE002046 2/12/2011 2002 Mercedes

- Benz C Class $10,900.00 $10,300.00 94.5%32

[* 32 ]

19UCA56832A041388 1/24/2011 2002 Acura TL $9,900.00 $6,362.48 64.3%

JS1VT54A252100524 4/5/2011 2005 Suzuki SV1000 $8,900.00 $3,500.00 39.3%

2G1WE52E949161370 2/27/2011 2004 Chevrolet Impala $7,900.00 $3,000.00 38.0%

1GNEC13TZYJ128631 5/14/2011 2000 Chevrolet Tahoe $9,900.00 $6,469.66 65.4%

1GKEK13R2YR153099 2/20/2011 2000 GMC Yukon Denali $9,900.00 $7,825.00 79.0%

1FMRC15W03LC49959 1/23/2011 2003 Ford Expedition $10,900.00 $5,136.38 47.1%

1FMRU15W92LA97856 2/26/2011 2002 Ford Expedition $8,900.00 $4,149.18 46.6%

3GYEK63N72G212753 2/19/2011 2002 Cadillac Escalade $16,900.00 $9,800.00 58.0%

JHLRD1842XC012624 7/2/2011 1999 Honda CR

- V $6,700.00 $3,000.00 44.8%

1GNDT13W5W2189117 8/20/2011 1998 Chevrolet Blazer $4,900.00 $1,500.00 30.6%

WAUJC68E93A206945 9/11/2011 2003 Audi A4 $10,900.00 $7,500.00 68.8%

2GCEC19V911278807 9/23/2011 2001 Chevrolet Silverado 1500 $10,400.00 $5,870.64 56.4%

2G1WB55K869169587 4/4/2011 2006 Chevrolet Impala $10,900.00 $6,925.00 63.5%

1GYEC63%74R107886 10 1/6/2011 2004 Cadillac Escalade $17,900.00 $11,398.09 63.7%

2HNYD18862H543966 11/12/2011 2002 Acura MDX $9,900.00 $4,900.00 49.5%

1FMZU63E92ZC18759 8/18/2011 2002 Ford Explorer $10,900.00 $5,275.03 48.4%

1GNEC13V04R193673 11/3/2011 2004 Chevrolet Tahoe $13,900.00 $11,841.83 85.2%

1G8ZK52762Z178710 9/29/2011 2002 Saturn S

- Series $4,900.00 $2,315.00 47.2%

WCBNG70J9VA069051 10/17/2011 2000 Mercedes Benz S Class $11,900.00 $5,700.00 47.9%

2GCEC19V7X1225015 11/6/2011 1999 Chevrolet Silverado 1500 $8,900.00 $4,500.00 50.6%

JT88F28G8W5014288 8/20/2011 1998 Lexus ES $5,900.00 $3,800.00 64.4%

10 Some VINs listed in RA Kaplan’s spreadsheets contain nonalphanumeric characters and/or more or fewer digits than 17. Those

VINs are reproduced here although the Court believes them to contain transcription errors.33

[* 33 ]

3GTEC14X97G166310 6/11/2011 2007 GMC Sierra (Classic) $10,900.00 $6,580.00 60.4%

1GNEC13R0YR142375 11/27/2011 2000 Chevrolet Tahoe $4,900.00 $3,608.01 73.6%

2G1FP23G512134068 4/16/2011 2001 Chevrolet Camero $12,900.00 $7,300.00 56.6%

1GTEC19T8YZ138294 1/24/2011 2002 GMC Sierra 1500 Ext $10,900.00 $5,850.00 53.7%

1N4BL11E63C299096 9/18/2011 2003 Nissan Altima $10,900.00 $6,275.00 57.6%

1G1BL52P8TR180649 8/27/2011 1996 Chevrolet Impala $9,900.00 $4,800.00 48.5%

1D4GP24R16B711835 6/8/2011 2006 Dodge Grand Caravan $7,900.00 $5,425.00 68.7%

WBANA735X4B806051 1/27/2011 2004 BMW 5 Series $19,900.00 $14,341.43 72.1%

1GNEC138R4YR179994 1/8/2011 2000 Chevrolet Tahoe $12,900.00 $4,900.00 38.0%

3GNEC16TX3G117838 2/23/2011 2003 Chevrolet Suburban 1500 $11,900.00 $8,800.00 73.9%

1GKEC13R4VJ743022 5/13/2011 1997 GMC Yukon $7,499.00 $3,618.33 48.3%

3GYFK66N54G269052 2/14/2011 2004 Cadillac Escalade $16,500.00 $10,300.00 62.4%

1GYEK63N02R189302 2/5/2011 2002 Cadillac Escalade $18,900.00 $7,705.00 40.8%

WBABM5346VJP03324 12/8/2011 2000 BMW 3 Series $10,900.00 $5,823.10 53.4%

1GMDC23E83D237496 7/23/2011 2003 Pontiac Montana $7,900.00 $4,700.00 59.5%

JT8BH68X1Y0024159 8/25/2011 2000 Lexus GS $10,500.00 $5,775.00 55.0%

19UUA56672A021319 7/16/2011 2002 Acura TL $8,400.00 $5,800.00 69.0%

2GCEC19T821429281 5/15/2011 2002 Chevrolet Silverado 1500 $9,600.00 $5,066.74 52.8%

5FNRL18092B022673 2/6/2011 2002 Honda Odyssey $9,900.00 $5,225.00 52.8%

1GKFK66U02J214129 2/5/2011 2002 GMC Yukon XL 1500 $13,900.00 $8,431.87 60.7%

1G1ND521X1M565436 12/15/2011 2001 Chevrolet Malibu $5,900.00 $2,415.00 40.9%

1GKEK63R5YR207668 12/18/2011 2000 GMC Yukon Denali $7,900.00 $3,695.00 46.8%

WBAAN37461ND46851 10/15/2011 2001 BMW 3 Series $10,900.00 $4,378.17 40.2%34

[* 34 ]

1GYEK63N03R190841 8/4/2011 2003 Cadillac Escalade $14,900.00 $10,650.00 71.5%

1GNEC13T6Y1164939 7/30/2011 2000 Chevrolet Tahoe $9,900.00 $5,651.93 57.1%

BDBNG70J4YA107933 8/2/2011 2000 Mercedes Benz S Class $12,900.00 $8,290.22 64.3%

1FMZU63K73ZA54709 7/22/2011 2003 Ford Explorer $9,900.00 $5,100.00 51.5%

5UXFA53542LP56586 2/20/2011 2002 BMW X5 $15,225.00 $11,304.22 74.2%

WDBNG70J32A291057 1/8/2011 2002 Mercedes

- Benz S Class $11,400.00 $5,700.00 50.0%

19UUA56612A015533 1/10/2011 2002 Acura TL $10,300.00 $6,759.99 65.6%

1GKEK66U41J241528 2/22/2011 2001 GMC Yukon XL 1500 $11,900.00 $6,831.17 57.4%

SALNY22263A226964 7/20/2011 2003 Land Rover Freelander $7,900.00 $3,815.92 48.3%

JN1CA21D7TT726385 12/5/2011 Nissan Maxima $4,900.00 $3,900.00 79.6%

1G6DM57N730119028 3/30/2011 2003 Cadillac CTS $9,900.00 $7,000.00 70.7%

1G6DM7NX30137409 3/18/2011 2003 Cadillac CTS $13,400.00 $8,688.33 64.8%

WDBNG70J92A252036 1/28/2011 2002 Mercedes

- Benz S Class $14,900.00 $8,300.00 55.7%

2HKRL18501H589947 3/12/2011 2001 Honda Odyssey $9,900.00 $5,100.00 51.5%

1GKEC13T02R188787 8/10/2011 2002 GMC Yukon $8,900.00 $5,525.00 62.1%

3VWTG69M11M109824 11/15/2011 2001 Volkswagen Jetta $7,900.00 $3,565.00 45.1%

JT8BF12G3T0186014 7/2/2011 1996 Lexus ES $6,500.00 $3,300.00 50.8%

WDBGA76E1PA120187 8/12/2011 1993 Mercedes

- Benz 600SEC $11,500.00 $6,500.00 56.5%

WP1A829P54LA70364 12/20/2011 2004 Porsche Cayenne $20,900.00 $15,950.00 76.3%

1GCEC14V02Z141416 7/24/2011 2002 Chevrolet Silverado 1500 $11,900.00 $6,208.43 52.2%

2HNYD18693H541371 3/13/2011 2003 Acura MDX $14,900.00 $12,000.00 80.5%

WBAGN63493DR09737 2/11/2011 2003 BMW 7 Series $20,400.00 $12,000.00 58.8%

Total (or Average) $2,139,642.33 $1,224,592.71 56.4%

( A verage)35



## APPENDIX B

– 2012

VIN Date of

Sale Car Sales Price COGS COGS

Margin

1GKDT135832197556 12/29/2012 2003 GMC Envoy $7,900.00 $5,500.00 69.6%

1G1NE52J016172210 12/22/2012 2001 Chevrolet Malibu $4,900.00 $3,500.00 71.4%

1HGEM225031028044 6/2/2012 2003 Honda Civic $10,700.00 $6,000.00 56.1%

WBAFA535711M87951 8/26/2012 2001 BMW X5 $11,900.00 $5,000.00 42.0%

1LNHM87A64Y665346 8/31/2012 2004 Lincoln LS $7,900.00 $5,262.31 66.6%

1GCEC1417YZ109957 3/4/2012 2000 Chevrolet Silverado 1500 $8,900.00 $3,600.00 40.4%

JNKAY41E73M002256 3/8/2012 2003 Infiniti $11,900.00 $6,175.00 51.9%

JT81Z31C4P0011743 3/28/2012 1993 Lexus SC $5,900.00 $1,500.00 25.4%

1GND5135532321711 3/4/2012 2003 Trail Blazer $7,300.00 $5,375.00 73.6%

WDBNG70391A176803 2/23/2012 2001 Mercedes

- Benz C Class $10,900.00 $6,908.30 63.4%

WBAAV53421J593586 1/7/2012 2001 BMW 3 Series $8,900.00 $4,887.57 54.9%

1N4AL11D95C266597 5/13/2012 2005 Nissan Altima $10,900.00 $6,890.20 63.2%

1GKFK66U551255086 5/11/2012 2005 GMC Yukon XL 1500 $16,400.00 $11,500.00 70.1%

WBADT43471GF7530 6/30/2012 2001 BMW 5 Series $9,900.00 $5,040.00 50.9%

5TDZT38A215053956 12/24/2012 2001 Toyota Sequoia $10,900.00 $5,600.00 51.4%

1FMD U 65W94ZA52519 11/20/2012 2004 Ford Explorer $11,900.00 $6,377.93 53.6%

4JGAB72E41A265737 8/29/2012 2001 Mercedes

- Benz ML Class $11,900.00 $6,266.11 52.7%

1GTEK9T0XZ533846 7/24/2012 1999 GMC Sierra 1500 Extend $9,900.00 $4,840.00 48.9%

1GCCS19W3Y8149987 6/2/2012 2000 Chevrolet S10 Ext. Cab $6,900.00 $2,400.00 34.8%

1GCCS19W02852176 12/2/2012 2002 Chevrolet S10 Ext. Cab $9,400.00 $4,700.00 50.0%

JT88F22G6V0033300 4/1/2012 1997 Lexus ES $9,900.00 $5,840.00 59.0% [* 35 ]36

[* 36 ]

1B7GG2A2515109577 5/27/2012 2001 Dodge Dakota Quad Cab $5,900.00 $4,980.00 84.4%

WDBNG705YA029033 3/20/2012 2000 Mercedes

- Benz S Class $10,900.00 $4,911.28 45.1%

WBADT43421GX22705 3/20/2012 2001 BMW 5 Series $10,900.00 $5,516.65 50.6%

4A3AA46G01E049505 7/5/2012 2001 Mitsubishi Galant $5,900.00 $2,200.00 37.3%

1TJGF10U630161797 12/22/2012 2003 Lexus RX $11,900.00 $7,500.00 63.0%

WVWPD6381eP272622 12/17/2012 2003 Volkswagen Passat $7,900.00 $2,400.00 30.4%

WDBPJ75J02A020282 11/27/2012 2002 Mercedes Benz CL Class $7,500.00 $7,000.00 93.3%

2GCEC19V921108786 11/12/2012 2002 Chevrolet Silverado 1500 $7,900.00 $6,640.00 84.1%

SAJEA51D23XD53602 9/8/2012 2003 Jaguar X

- Type $7,900.00 $3,973.76 50.3%

1GCCS19W118196909 5/10/2012 2001 Chevrolet S10 Ext. Cab $10,900.00 $5,600.00 51.4%

2GCED19W421375519 8/4/2012 2002 Chevrolet Silverado 1500 $8,900.00 $5,040.00 56.6%

WDBJF55F8%J006266 8/7/2012 1996 Mercedes Benz E Class $3,000.00 $3,300.00 110.0%

WP1AB29P924LA76684 6/3/2012 2004 Porsche Cayenne $18,900.00 $16,000.00 84.7%

1N4BL11D43C250115 5/26/2012 2003 Nissan Altima $10,900.00 $5,430.56 49.8%

WDBRF64J13F308855 3/14/2012 2003 Mercedes Benz C Class $11,900.00 $5,900.00 49.6%

1NXBR32EX32131423 3/8/2012 2003 Toyota Corolla $8,900.00 $5,775.00 64.9%

3VWRC29M7XM058806 2/10/2012 1999 Volkswagen Jetta $6,500.00 $3,300.00 50.8%

1TLKT324950214885 2/10/2012 2005 Scion $10,900.00 $6,875.00 63.1%

WBAEV53453KM27991 3/30/2012 2003 BMW 3 Series $8,900.00 $771.42 8.7%

1GNC513WSY2121580 5/18/2012 2000 Chevrolet Blazer $5,900.00 $1,520.00 25.8%

1GYEK1388VR159950 5/11/2012 2000 Cadillac Escalade $8,900.00 $3,395.00 38.1%

1G2WK52142F134604 8/5/2012 2002 Pontiac Grand Prix $8,900.00 $2,225.00 25.0%

WBAAM5332XFR08501 5/26/2012 1999 BMW 3 Series $9,900.00 $4,272.30 43.2%37

[* 37 ]

WBADM6348XGU02578 9/7/2012 1999 BMW 5 Series $6,900.00 $2,500.00 36.2%

JT8UF11E680198059 12/30/2012 1994 Lexus LS $9,900.00 $499.30 5.0%

1FMBU17L611829745 2/1/2012 2001 Ford Expedition $8,900.00 $4,545.00 51.1%

1FAFP34322W260174 11/22/2012 2002 Ford Focus $6,900.00 $2,810.00 40.7%

2T1CE22PG32023068 9/11/2012 2003 Toyota Solara $8,900.00 $4,025.00 45.2%

JT88H68X1Yoo24159 10/3/2012 2000 Lexus GS $8,900.00 $5,990.00 67.3%

WBADT63491CF05951 9/5/2012 2001 BMW 5 Series $9,900.00 $3,995.00 40.4%

1GNEC13T71J108448 8/13/2012 2001 Chevrolet Tahoe $8,900.00 $6,000.00 67.4%

2C4GM68465R367995 1/18/2012 2005 Chrystler Pacifica $10,900.00 $5,179.04 47.5%

WDBJF55F6VJ030620 3/26/2012 1997 Mercedes Benz E Class $7,900.00 $4,900.00 62.0%

2A8GM68X47R145042 2/16/2012 2007 Chrystler Pacifica $12,900.00 $7,605.00 59.0%

WDB8F405A562092 4/20/2012 2004 Mercedez Benz C Class $12,900.00 $8,240.00 63.9%

3VWSK69M85M015357 9/23/2012 2005 Volkswagen Jetta $10,900.00 $5,140.00 47.2%

1GTEC14V522229605 8/16/2012 2002 GMC Sierra 1500 Reg. Cab $10,900.00 $5,000.00 45.9%

WBAEV33442P055030 1/28/2012 2002 BMW 3 Series $7,500.00 $4,900.00 65.3%

1GCEK19% E 1E107728 3/13/2012 2001 Chevrolet Silverado 1500 $9,500.00 $4,000.00 42.1%

3VWBK21C31M469988 3/23/2012 2001 Volkswagen Beetle $7,900.00 $4,400.00 55.7%

WBAMA735748059251 2/20/2012 2004 BMW 5 Series $16,900.00 $10,995.00 65.1%

WDBRF61J33A536406 9/20/2012 2003 Mercedes Benz C Class $10,900.00 $6,946.57 63.7%

WAUJC68E45A119800 11/20/2012 2005 Audi A4 $9,900.00 $5,500.00 55.6%

2HKRL18982H523148 9/14/2012 2002 Honda Odyssey $10,100.00 $4,840.00 47.9%

2G1WT58K779164147 2/4/2012 2007 Chevrolet Impala $8,900.00 $3,610.43 40.6%

1GKES16S346151663 2/13/2012 2004 GMC Envoy XL $10,000.00 $4,645.00 46.5%38

[* 38 ]

1FMZU63W532A53447 1/4/2012 2003 Ford Explorer $10,900.00 $5,700.00 52.3%

WBAAM3341YCA89810 3/14/2012 2000 BMW 3 Series $8,600.00 $5,300.00 61.6%

JTHBD182910003343 2/17/2012 2001 Lexus IS $9,900.00 $5,940.00 60.0%

JT88D68S9W0026609 5/16/2012 1998 Lexus GS 300 $9,900.00 $3,725.00 37.6%

WDBRF64J62E005008 1/24/2012 2002 Mercedez Benz C Class $10,900.00 $5,509.11 50.5%

WDBNF7019YA033881 12/23/2012 2000 Mercedes

- Benz S Class $11,900.00 $6,140.00 51.6%

5FNRL18693B016619 10/30/2012 2003 Honda Odyssey $10,900.00 $6,017.35 55.2%

1LNHM8653YY602589 10/26/2012 2000 Lincoln LS $6,900.00 $3,500.00 50.7%

1HGCM72644A002945 11/3/2012 2004 Honda Accord $8,900.00 $4,810.90 54.1%

1GNEK13T51R158818 9/30/2012 2001 Chevrolet Tahoe $8,500.00 $4,940.00 58.1%

WBADT43452G644699 8/13/2012 2002 BMW 5 Series $9,900.00 $4,300.00 43.4%

2CGCEK19T3Y1287241 7/1/2012 2000 Chevrolet Silverado 1500 $7,400.00 $5,097.95 68.9%

5J6YH18573L010748 6/11/2012 2003 Honda Element $11,000.00 $8,469.20 77.0%

1GCEC14XX27142557 2/4/2012 2002 Chevrolet Silverado 1500 $9,900.00 $4,800.00 48.5%

2G1WJ115K779402999 11/24/2012 2007 Chevrolet Monte Carlo $3,900.00 $2,800.00 71.8%

1FAF P 33 P8 2W225238 8/12/2012 2002 Ford Focus $5,400.00 $5,900.00 109.3%

WDBNG70J52A299256 8/20/2012 2002 Mercedez Benz C Class $11,400.00 $6,827.81 59.9%

1G6EL12Y8XU614791 5/7/2012 1999 Cadillac Eldorado $7,400.00 $3,600.00 48.6%

4T1BF22K9XU086814 2/11/2012 1999 Toyota Camry $7,900.00 $2,885.00 36.5%

JT8UF11E1N0109766 3/16/2012 1992 Lexus LS $4,900.00 $2,000.00 40.8%

2G1WX15K429290606 10/7/2012 2002 Chevrolet Monte Carlo $6,900.00 $2,615.00 37.9%

1GCCS146268270580 3/30/2012 2006 Chevrolet Colorado Reg. $3,000.00 $3,995.00 133.2%

1GNEC13T64R194583 1/23/2012 2004 Chevrolet Tahoe $9,900.00 $6,340.00 64.0%39

[* 39 ]

5UXFA53573LV97077 9/6/2012 2003 BMW X5 $12,900.00 $6,140.00 47.6%

1FMFU19525LA69115 12/2/2012 2005 Ford Expedition $11,900.00 $4,600.00 38.7%

JN1DA31A52T307353 5/28/2012 2002 Nissan Maxima $9,900.00 $5,400.00 54.5%

WDBNG7512YA040242 7/27/2012 2000 Mercedes

- Benz S Class $12,900.00 $5,745.28 44.5%

1N4AL11032C202504 7/29/2012 2002 Nissan Altima $8,900.00 $6,000.00 67.4%

1FMYU02144KB06454 9/8/2012 2004 Ford Escape $5,900.00 $4,200.00 71.2%

WBAAM3349YFP72673 6/9/2012 2000 BMW 3 Series $9,900.00 $5,100.00 51.5%

1ZVFT84N775215746 4/7/2012 2007 Ford Mustang $14,900.00 $10,650.91 71.5%

1GNEC13T04R111391 2/5/2012 2004 Chevrolet Tahoe $12,900.00 $7,904.48 61.3%

1GYEK13R8YR159950 8/20/2012 2002 Cadillac Escalade $9,400.00 $3,395.00 36.1%

YV1R5G1R012044405 11/23/2012 2001 Volvo S60 $7,800.00 $3,300.00 42.3%

JT2EL55D050019620 2/17/2012 1995 Toyota Tercel $3,900.00 $1,850.00 47.4%

1LNHM87A73Y668898 6/17/2012 2003 Lincoln LS $10,900.00 $6,912.90 63.4%

WBADT43413G031457 11/20/2012 2003 BMW 5 Series $11,300.00 $6,340.00 56.1%

JT8CH32Y3T0050758 12/11/2012 1996 Lexus SC $5,900.00 $1,800.00 30.5%

JTEDW21AU70022671 12/16/2012 2007 Toyota Highlander $12,900.00 $8,000.00 62.0%

1FMRU15L13LA38727 7/10/2012 2003 Ford Expedition $11,750.00 $6,500.00 55.3%

WDBL165G4WF034448 6/18/2012 1998 Mecerdes Benz CLK $6,900.00 $4,000.00 58.0%

1FMFU18L73LB23425 6/23/2012 2003 Ford Expedition $10,900.00 $6,340.00 58.2%

JT88H68XeY0024577 3/31/2023 2000 Lexus GS $8,900.00 $6,625.00 74.4%

1FMYU01111KA70431 1/20/2012 2001 Ford Escape $4,500.00 $4,000.00 88.9%

1G6EL12Y8XU614791 4/1/2012 1999 Cadillac Eldorado $7,900.00 $3,600.00 45.6%

JT2BF28K0Y0251324 1/20/2012 2000 Toyota Camry $7,900.00 $3,595.00 45.5%40

[* 40 ]

1GCEK19T61E220105 12/27/2012 2001 Chevrolet Silverado 1500 $8,900.00 $3,500.00 39.3%

1GKES165636145838 4/23/2012 2003 GMC Envoy $10,900.00 $6,524.00 59.9%

2HGES26782H521810 7/29/2012 2002 Honda Civic $9,400.00 $5,045.00 53.7%

2T1CG22P4YC345600 1/11/2012 2000 Toyota Solara $7,400.00 $4,550.00 61.5%

JN8A208T93W109670 1/8/2012 2003 Nissan Murano $11,800.00 $7,300.00 61.9%

1GCEK19T3YE336162 12/16/2012 2000 Chevrolet Silverado 1500 $9,700.00 $5,000.00 51.5%

3GKFK16T9YG118698 7/2/2012 2000 GMC Yukon XL 1500 $8,900.00 $3,625.00 40.7%

WBAEV3312KL77125 12/16/2012 2002 BMW 3 Series $9,900.00 $4,739.45 47.9%

1GKFK66U913198787 12/17/2012 2001 GMC Yukon XL 1500 $11,900.00 $6,500.00 54.6%

2B3KA43RX7H606999 11/15/2012 2007 Dodge Charger $15,900.00 $10,500.00 66.0%

JT8BD6850X0063744 10/14/2012 1999 Lexus GS $9,500.00 $4,440.00 46.7%

1FMRU17W23LC31802 6/27/2012 2003 Ford Exposition $12,900.00 $6,540.00 50.7%

WBAAM3346YCA89897 4/21/2012 2000 BMW 3 Series $10,500.00 $5,445.00 51.9%

WBAGJ8325WDM15370 8/31/2012 1998 BMW 7 Series $6,900.00 $3,750.00 54.3%

WDBDA68FSXF174512 2/23/2012 1999 Mercedes Benz SL Class $11,900.00 $7,603.23 63.9%

KNDUP132856713927 2/11/2012 2005 Kia Sedona $7,900.00 $5,800.00 73.4%

1GKFK66U93J164822 9/19/2012 2003 GMC Yukon XL 1500 $11,700.00 $5,700.00 48.7%

1LNHM86S93Y698575 4/1/2012 2003 Lincoln LS $9,900.00 $4,125.00 41.7%

2G2FV32G822163170 4/28/2012 2002 Pontiac Firebird $10,900.00 $6,275.00 57.6%

1FMZU65W42ZC45793 4/8/2012 2002 Ford Explorer $7,900.00 $3,400.00 43.0%

SALME114X4A175892 4/3/2012 2004 Land Rover Range Rover $17,900.00 $13,265.00 74.1%

JT1GF10U81016619 7/4/2012 2001 Lexus RX $10,900.00 $5,980.28 54.9%

2GIWF52E419291567 1/27/2012 2001 Chevrolet Impala $3,000.00 $3,065.00 102.2%41

[* 41 ]

3VWRK69M83M121173 1/1/2012 2003 Volkswagen Jetta $7,900.00 $3,400.00 43.0%

1GCCS1441X8206708 3/12/2012 1999 Chevrolet S10 Regular

Cab $6,900.00 $2,915.00 42.2%

2B3LA43G47H636812 2/24/2012 2007 Dodge Charger $12,900.00 $8,205.00 63.6%

1FMYU01111KA70431 6/12/2012 2001 Ford Escape $5,900.00 $4,000.00 67.8%

1GNEC3TS1R154099 12/23/2012 2001 Chevrolet Tahoe $11,900.00 $6,000.00 50.4%

2G1WB58KD69161673 9/29/2012 2006 Chevrolet Imapal $8,900.00 $3,700.00 41.6%

2HKRL18602H522999 12/17/2012 2002 Honda Odyssey $10,900.00 $5,400.00 49.5%

1GTEC19VD5Z120496 11/20/2012 2005 GMC Sierra 1500 Ext. Cab $12,400.00 $4,500.00 36.3%

19UYA42673A005785 8/23/2012 2003 Acura CL $7,900.00 $5,000.00 63.3%

19UUA56903A013042 8/27/2012 2003 Acura IL $9,900.00 $4,600.00 46.5%

WAULC68E52A047672 7/28/2012 Audi A4 $9,050.00 $5,840.00 64.5%

WDBNG70J12A234596 6/30/2012 2002 Mercedes Benz S Class $12,900.00 $9,000.00 69.8%

1D4GP24R17B244031 5/19/2012 2007 Dodge Grand Caravan $6,900.00 $4,545.00 65.9%

1FMCU03172KD66885 1/15/2012 2002 Ford Escape $9,650.00 $4,711.81 48.8%

WBAFA53541LM72632 9/12/2012 2001 BMW X5 $11,900.00 $6,350.00 53.4%

JTHBF30G625031425 10/31/2012 2002 Lexus ES $7,500.00 $7,137.69 95.2%

1GKFK66UDLH88004 8/18/2012 2001 GMC Yukon XL 1500 $8,900.00 $6,044.03 67.9%

1DrHD38K65F506843 5/24/2012 2005 Dodge Duragno $10,900.00 $4,868.31 44.7%

1FAHP3439VW257533 4/15/2012 2000 Ford Focus $5,900.00 $4,000.00 67.8%

SAJEA01U63HM53146 3/18/2012 2003 Jaguar S

- Type $10,900.00 $7,179.97 65.9%

WDB1F65H1XA814293 2/7/2012 1999 Mercedes Benz E Class $6,900.00 $4,000.00 58.0%

2T1CG22P1YC321366 5/17/2012 2000 Toyota $6,900.00 $3,150.00 45.7%

2C8GM68424R633431 11/13/2012 2004 Chrysler Pacifica $9,400.00 $5,740.00 61.1%42

[* 42 ]

3VWBC21C4YM452169 9/25/2012 2000 Volkswagon Beetle $6,900.00 $2,300.00 33.3%

SALNE22274A296497 5/29/2012 2004 Land Rover Freelander $7,700.00 $3,725.00 48.4%

WBABM3348YJN85314 4/12/2012 2000 BMW 3 Series $8,900.00 $5,000.00 56.2%

JTJHF100210195012 4/9/2012 2001 Lexus RX $10,400.00 $6,500.00 62.5%

WAUED2809XA208487 3/15/2012 1999 Audi A4 $6,900.00 $3,600.00 52.2%

JTJHF100110230915 3/11/2012 2001 Lexus RX $12,400.00 $7,200.00 58.1%

JN8AZ08T24W221955 3/3/2012 2004 Nissan Murano $9,400.00 $7,797.80 83.0%

1LNHM865S12Y705369 1/25/2012 2002 Lincoln LS $4,600.00 $3,357.00 73.0%

5LMFL2567LJ14259 1/17/2012 2007 Lincoln Navigator L $25,150.00 $19,125.49 76.0%

1GYDE637X40138966 4/19/2012 2004 Cadillac SRX $12,700.00 $6,152.70 48.4%

3VWTH69M13M038799 9/14/2012 2003 Volkswagen Jetta $9,400.00 $3,695.00 39.3%

2B3KA43R06H390658 9/13/2012 2006 Dodge Charger $11,900.00 $5,500.00 46.2%

1GCCS145018151314 9/30/2012 2001 Chevrolet S10 Reg. Cab $7,500.00 $2,493.77 33.3%

1GCCS19W0Y8105302 11/4/2012 2000 Chevrolet S10 Ext. Cab $6,400.00 $2,210.00 34.5%

1GCCS19W818156438 8/12/2012 2001 Chevrolet S10 Ext. Cab $9,900.00 $4,840.00 48.9%

1GCEC14X232231511 3/29/2012 2003 Chevrolet Silverado 1500 $10,900.00 $6,475.00 59.4%

SFNRL180738086678 5/19/2012 2003 Honda Odyssey $7,300.00 $5,540.00 75.9%

1D4HD48D84F216710 2/2/2012 2004 Dodge Durango $12,900.00 $6,900.00 53.5%

2D4GP44L17R175057 2/19/2012 2007 Dodge Grand Caravan $8,900.00 $4,500.00 50.6%

JT8BF22GXV0029797 1/29/2012 1997 Lexus ES $7,900.00 $4,295.00 54.4%

1G1ZH57B69F149455 4/3/2012 2009 Chevrolet Malibu $13,500.00 $10,000.00 74.1%

4T3ZF13C2WU010017 5/13/2012 1998 Toyota Sienna $8,900.00 $3,000.00 33.7%

1FMDU65W52ZA89029 7/7/2012 2002 Ford Explorer $9,900.00 $3,100.94 31.3%43

[* 43 ]

WDBNG7S151A211944 11/29/2012 2001 Mercedes Benz S Class $11,900.00 $4,240.00 35.6%

1FAFP53U91G121593 12/22/2012 2001 Ford Taurus $3,999.00 $2,000.00 50.0%

JTGHF10U0X0035004 11/12/2012 1999 Lexus RX $9,900.00 $5,000.00 50.5%

1N4AL11D65C129830 5/27/2012 2005 Nissan Altima $9,500.00 $6,020.00 63.4%

SAL1V124XXA562312 2/4/2012 1999 Land Rover Discovery $6,900.00 $2,430.03 35.2%

2CNDL73F156090514 5/6/2012 2005 Chevrolet Equinox $10,295.00 $4,438.25 43.1%

JT8UF11ESM0094834 11/10/2012 1991 Lexus LS $5,900.00 $2,892.83 49.0%

JN1CA31D1Yt509833 10/16/2012 2000 Nissan Maxima $4,000.00 $2,595.00 64.9%

1YVFP84DX45N84864 9/26/2012 2004 Mazda 6 $10,900.00 $4,440.00 40.7%

1G1YY0781F5101589 7/31/2012 1985 Chevrolet Corvette $2,900.00 $4,000.00 137.9%

1GNEC16T421334654 6/7/2012 2002 Chevrolet Suburban 1500 $8,900.00 $3,325.00 37.4%

WDBRF64J61F04792 7/25/2012 2001 Mercedes Benz C Class $11,900.00 $6,375.00 53.6%

WBAG163452DP54799 10/5/2012 2002 BMW 7 Series $15,900.00 $8,649.19 54.4%

5TDZT38A925079780 10/21/2012 2002 Toyota Sequoia $10,900.00 $5,545.00 50.9%

1GCEC14T5XZ113066 6/5/2012 1999 Chevrolet Silverado 1500 $7,700.00 $4,550.98 59.1%

2GCEC19V921328610 5/23/2012 2002 Chevrolet Silverado 1500 $8,900.00 $4,900.00 55.1%

3GNDA13D375543081 3/16/2012 2007 Chevrolet HHR $8,900.00 $4,200.00 47.2%

3VWRC29M1YM115793 2/15/2012 2000 Volkswagen Jetta $6,900.00 $3,000.00 43.5%

WDBRF61JX1F069131 4/14/2012 2001 Mercedes Benz C Class $9,900.00 $5,800.00 58.6%

2G1WH55K449255183 2/26/2012 2004 Chevrolet Impala $9,900.00 $4,345.00 43.9%

YU1RS61R712059371 12/5/2012 2001 Volvo S60 $7,900.00 $2,000.00 25.3%

WDBNG75J7YA066299 5/19/2012 2000 Mercedes

- Benz S Class $10,900.00 $3,300.00 30.3%

WDBLJ65GGXF098699 9/21/2012 1999 Mercedes Benz CLK Class $7,900.00 $3,115.00 39.4%44

[* 44 ]

1FMFU18L73LB25160 7/23/2012 2003 Ford Explorer $11,900.00 $5,840.00 49.1%

2G1WX15K349242890 6/12/2012 2004 Chevrolet Monte Carlo $3,900.00 $2,800.00 71.8%

1GKFK66U41J174459 6/6/2017 2001 GMC Yukon XL 1500 $10,900.00 $5,490.00 50.4%

1N4BL11D02C707419 5/3/2012 2002 Nissan Altima $9,700.00 $6,267.50 64.6%

WDBRF61J83A480625 3/3/2012 2003 Mercedes Benz C Class $10,900.00 $5,975.00 54.8%

2HKRL1861YH613675 10/27/2012 2000 Honda Odyssey $10,900.00 $8,500.00 78.0%

1GNEC13T81R111389 9/2/2012 2001 Chevrolet Tahoe $8,900.00 $4,500.00 50.6%

JT8UZ30C150040723 5/4/2012 1995 Lexus SC $5,500.00 $2,095.00 38.1%

YV1R553D212058074 8/23/2012 2001 Volvo 560 $9,300.00 $4,165.70 44.8%

1GKEK13R8WJ710836 7/28/2012 1998 GMC Yukon $6,900.00 $1,550.00 22.5%

JT8GK13T150100226 11/20/2012 1995 Lexus ES $7,900.00 $2,410.00 30.5%

3VWSD29M61M030839 6/14/2012 2001 Volkswagen Jetta $6,500.00 $3,995.00 61.5%

1FAFP53U91G121593 8/16/2012 2001 Ford Taurus $6,900.00 $2,544.71 36.9%

KNDJD733735051400 8/1/2012 2003 Kia Sorento $9,900.00 $5,861.27 59.2%

WBAAM3346YCB24891 4/2/2012 2000 BMW 3 Series $7,500.00 $5,000.00 66.7%

WBAAV334X1FU85345 6/29/2012 2001 BMW 3 Series $5,900.00 $3,395.00 57.5%

1HGCG22431A035567 7/2/2012 2001 Honda Accord $7,900.00 $4,540.00 57.5%

19UUA56652A036028 6/7/2012 2002 Acura TL $8,700.00 $3,615.00 41.6%

3VWSA69M35M014510 3/3/2012 2005 Volkswagen Jetta $9,900.00 $4,700.00 47.5%

JN8DR09X71W568112 4/22/2012 2001 Nissan Pathfinder $8,900.00 $4,300.00 48.3%

1GYEK13R3XR418195 4/14/2012 1999 Cadillac Escalade $8,900.00 $4,065.00 45.7%

SAJPD1845XC871938 4/14/2012 1999 Jaguar XJ Series $7,000.00 $6,146.22 87.8%

WVWMD23B6YP301860 4/15/2012 2000 Volkswagen Passat $5,900.00 $3,500.00 59.3%45

[* 45 ]

JT2EL55D050019620 2/20/2012 1995 Toyota Tercel $3,400.00 $1,850.00 54.4%

2GCEC19T321239565 2/25/2012 2002 Chevrolet Silverado 1500 $8,900.00 $5,475.00 61.5%

JHMBB6247XC004043 2/17/2012 1999 Honda Prelude $8,000.00 $4,887.19 61.1%

WFMDA516X5BA51814 2/4/2012 2005 Ford Freestar $7,900.00 $2,854.18 36.1%

1GMES165846172768 11/26/2012 2004 Chevrolet Trailblazer $11,900.00 $5,640.00 47.4%

WAUJC68E64A144955 9/13/2012 2004 Audi A4 $12,900.00 $5,240.00 40.6%

1GTEC19TSYZ160995 7/23/2012 2000 GMC Sierra 1500 Ext $9,400.00 $4,840.00 51.5%

JT88068S7Y0100953 3/21/2012 2000 Lexus GS $11,900.00 $5,700.00 47.9%

WBADT43432GZ97212 6/2/2012 2002 BMW 5 Series $10,900.00 $4,240.00 38.9%

JTHFN48Y020031361 6/18/2012 2002 Lexus CS $12,900.00 $8,805.57 68.3%

5UXFA53592LP48001 4/16/2012 2002 BMW X5 $15,900.00 $11,051.40 69.5%

1FMFU18516LA28588 3/14/2012 2006 Ford Exposition $17,650.00 $7,301.18 41.4%

2G1WF52E659145676 2/14/2012 2005 Chevrolet Impala $8,400.00 $4,511.71 53.7%

1B3ES26CX2D556763 9/28/2012 2002 Dodge Neon $6,900.00 $1,695.00 24.6%

2GCECL19TX11385038 7/22/2012 2001 Chevrolet Silverado 1500 $8,900.00 $3,595.00 40.4%

1GCEK19TS1E159832 8/1/2012 2001 Chevrolet Silverado 1500 $10,000.00 $4,882.00 48.8%

T otal (or Average) $2,298,644.00 $1,238,416.00 54.2%

( A verage)