T.C. Memo. 1999-122

UNITED STATES TAX COURT

HANS C. SHERRER, Petitioner v. 

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 15292-96. Filed April 13, 1999.

Emily Simon, Joseph Wetzel, Gary R. DeFrang, and Russell A.

Sandor, for petitioner.

Shirley M. Francis, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

BEGHE, Judge: Respondent determined the following

deficiencies in, and additions to, petitioner's Federal income

and self-employment taxes for 1989-94:
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 Additions to Tax 

Year Deficiency Sec. 6651(a) Sec. 6651(f) Sec. 6654

1989 $18,328 -- $13,746 $1,240

1990 57,912 -- 43,434 3,792

1991 66,994 -- 50,246 3,829

1992 48,870 -- 36,653 2,132

1993 9,293 -- 3,206 389

1994 9,603 $2,401 -- 498

All section references are to the Internal Revenue Code in

effect for the taxable years in issue, and all Rule references

are to the Tax Court Rules of Practice and Procedure, unless

otherwise specified.

Following the concession by respondent of the section

6651(f) addition for 1993, the principal issues remaining for

decision are:

1. Whether petitioner is entitled to deductions, in excess

of the amounts allowed by respondent for each of the years 1989-

92, on account of business expenses paid with cash.

2. Whether petitioner's failure to file Federal income tax

returns for each of the years 1989-92 was "fraudulent" within the

meaning of section 6651(f).

3. Whether respondent's determinations of petitioner's

unreported income for 1993 and 1994 should be sustained.

4. Whether the section 6651(a) addition applies to

petitioner's failure to file a return for 1994.

 5. Whether petitioner is liable for the section 6654

addition for failure to pay estimated tax for each of the years

1989-94.
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We sustain all of respondent's determinations, except that

we allow additional deductions, in amounts less than those

claimed by petitioner, for the years 1990-92 for business

expenses paid in cash, resulting in corresponding adjustments to

the income tax deficiencies and the additions to tax for those

years.

FINDINGS OF FACT

Most of the facts have been stipulated and are so found; the

stipulation of facts and related exhibits are incorporated by

this reference.

Petitioner resided in Vancouver, Washington, at the time the

petition was filed.

Petitioner worked as a plumber and plumbing subcontractor

during each of the years in issue (1989-94). Petitioner

conducted this business as a sole proprietorship under the name

"Down to Earth Plumbing".

Petitioner earned gross income from his plumbing business in

each of the years in issue, and his petition acknowledges that he

had taxable income (and still owes tax) for each of those years. 

Nevertheless, petitioner did not file income tax returns for any

of the years in issue. In addition, as of February 1998, no

payments or credits had been made to petitioner's income tax

account for the years in issue, other than a few small payments

in 1996.
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Petitioner's Filing History

Petitioner's repeated failures to file returns did not begin

with the first year in issue. Petitioner's history of nonfiling

began more than 20 years ago, with his filing of a "tax

protester" return for 1975.

Petitioner filed proper income tax returns for 1973 and

1974. Petitioner's 1975 return was a "tax protester" return,

accompanied by voluminous materials advancing arguments now

generally dismissed by courts as having no merit, e.g., that

Federal Reserve Notes are neither "lawful money" nor "dollars",

that the Fifth Amendment relieves taxpayers of the obligation to

file tax returns, etc. Because a tax liability could not be

computed from petitioner's 1975 return, the Commissioner

reconstructed petitioner's income for that year, and determined a

deficiency. Petitioner contested that deficiency in this Court;

we sustained the Commissioner's determination in 1978.

Petitioner also filed a "tax protester" return for 

1976. The Commissioner did not consider this document a valid

"return". In addition, petitioner did not file any Federal

income tax return document for 1977.

In January 1980, petitioner was convicted of willful failure

to file Federal income tax returns for 1976 and 1977, and of the

criminal supplying of a false withholding certificate to his

employer for 1977. Petitioner was sentenced to prison for 1

year. In a letter written to the U.S. probation officer prior to

sentencing, petitioner stated that he believed he was acting as
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the Constitution and law allowed when he filed his 1976 return

document and failed to file his 1977 return. However, he also

stated that:

When anyone has asked me, I tell them that they

should not attempt to take on the government as I did

and that they should file their proper returns. * * *

* * * * * * *

I do not belong to any tax protest groups and I do

not intend to join any in the near or distant future. 

If asked by anyone, I will always inform them to comply

with the tax laws and file tax returns so that what

happened to me will not happen to them. * * *

Petitioner did not file an income tax return for 1978 (the

year following the second of the 2 years for which he was

convicted of willful failure to file), or for any year during the

period 1979-94.

Respondent did at one time conduct a criminal investigation

of petitioner, with respect to at least some of the years in

issue. 

Petitioner's Lack of Records and Dealing in Cash

Petitioner was responsible for the recordkeeping of his

plumbing business. During the years in issue, petitioner did not

maintain as books and records any invoices, receipts for cash

disbursements, general ledger, cash receipts journal, or cash

disbursements journal. Petitioner has not produced any business

or accounting records relating to the years in issue for

respondent to examine.

During the years 1989-92, petitioner withdrew currency from

his bank accounts in the following amounts:
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 Amount of

 Year Currency Withdrawn

 1989 $154,000

 1990 333,645

 1991 232,750

 1992 88,525 

Petitioner's Use of an Incorrect Social Security Number

During each year in issue, petitioner used the same

incorrect Social Security number on the invoices he submitted to,

and on his contracts with, general contractors for construction

projects. Petitioner had used his correct Social Security number

on the income tax returns he filed for 1973, 1974, and 1975.

Petitioner's Use of a Bahamian Bank Account

During 1989-92, petitioner received payments for services

from E.A. White Construction Co. (White Co.) totaling $183,285. 

In 1993, petitioner lent $200,000 to White Co. and received

$20,558 in interest from White Co.

In December 1994, petitioner deposited a White Co. check

payable to Down to Earth Plumbing, in the amount of $46,000, with

a bank in Nassau, Bahamas. In September and October 1995, U.S.

Customs officials seized three additional White Co. checks

payable to petitioner's business, in the total amount of $57,274,

which had been sent for deposit at the same Bahamian bank. By

letter dated January 1996, petitioner, through his attorney,

filed a claim with U.S. Customs that he was the owner of the

three White Co. checks seized in 1995, which he had received in

the ordinary course of his plumbing business.
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The admissibility of these facts concerning petitioner's use

of a Bahamian bank account is considered infra pp. 27-32. 

Respondent's Reconstruction of Petitioner's Income for 1989-92

Due to the lack of returns and records, respondent

reconstructed petitioner's income for each of the years in issue. 

Respondent used the "specific items" method to reconstruct

petitioner's income for 1989-92, in the following manner.

Respondent contacted the payers (i.e., general contractors)

for whom petitioner performed services in 1989-92, to obtain

information about payments made to petitioner (or to petitioner's

sole proprietorship, Down to Earth Plumbing). Respondent

determined petitioner's gross receipts for 1989-92 by adding the

amounts payable on the copies of checks provided by these payers. 

Respondent then summonsed petitioner's bank records, to

reconstruct petitioner's expenses for 1989-92. Respondent

treated almost all checks written by petitioner during those

years--other than checks payable to petitioner or to cash--as

having been used to pay deductible business expenses.

Finally, respondent determined petitioner's unreported net

business income for 1989-92 by subtracting allowed expenses from

gross receipts.

Petitioner's gross receipts, allowed business expenses, and

unreported net business income for 1989-92 as so determined by

respondent were:
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 1989 1990 1991 1992

Gross receipts $336,545 $450,252 $476,785 $234,677

Allowed business

expenses

 280,733 264,280 271,515 103,262

Unreported net

business income

 55,812 185,972 205,270 131,415

Allowed expenses

as a percentage

of gross receipts

 83.4% 58.7% 56.9% 44.0% 

Respondent's Reconstruction of Petitioner's Income for 1993-94

Respondent did not use the "specific items" method to

reconstruct petitioner's income for 1993 and 1994. Instead,

respondent determined petitioner's income by reference to Bureau

of Labor Statistics average cost-of-living survey information. 

Using this information, respondent determined that petitioner had

a cost of living--and therefore must have had unreported net

business income--of $34,533 and $35,638, in 1993 and 1994

respectively. After allowing petitioner one personal exemption,

the standard deduction, and a deduction for self-employment tax,

respondent determined that petitioner's taxable income was

$26,043 and $26,870 in 1993 and 1994, respectively.

OPINION

I. Is Petitioner Entitled to Additional Deductions for 1989-92?

Prior to trial, the parties stipulated that petitioner's

gross receipts for 1989-92 were equal to the amounts determined

by respondent. The parties also stipulated that petitioner's

unreported net business income for 1989-92 was equal to the
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amounts determined by respondent--without taking into account

"any possible undocumented business expenses paid with currency,

money orders, or non-traceable documents".

As a result, with respect to respondent's deficiency

determinations for 1989-92, we need only consider whether

petitioner is entitled to any additional deductions on account of

business expenses paid in cash. Respondent has determined (and

urges us to hold) that petitioner is not entitled to any such

additional deductions for 1989-92. Petitioner asserts that he

paid hundreds of thousands of dollars of business expenses in

cash during those years.

A. The Evidence--Petitioner's Expert's Report

The only evidence petitioner offered was the expert's report

(and related exhibits) and testimony of Edward W. Sager, a

certified public accountant with experience in the construction

industry. 

Mr. Sager's report does not identify any specific expenses,

or any class of expenses, paid by petitioner in cash during the

years in issue. The report also does not attempt to calculate

petitioner's actual receipts, expenses, or taxable income for any

of those years. Due to "a lack of record keeping" and "the lack

of hard financial record", Mr. Sager instead tried to estimate a

"reasonable annual income level" for petitioner, for each of the

years in issue. The estimates in Mr. Sager's report were based

primarily on two sources: (1) Respondent's reconstruction of

petitioner's gross receipts; and (2) information regarding
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petitioner's bidding procedures and costs supplied by petitioner

to Mr. Sager. 

In his testimony, Mr. Sager referred to two sets of

documents that he used in the preparation of his report. The

first set was 36 pages of photocopies of various money orders

(and a few receipts) assertedly representing expenses paid by

petitioner in cash. The second set was seven 1-page "bid

sheets," assertedly representing petitioner's estimates of cost

and profit for seven plumbing jobs.

The parties agreed that these documents were hearsay. 

Accordingly, we admitted them only for the purpose of learning

about the basis for Mr. Sager's testimony and report; we did not

admit them as proof of the matters asserted therein.

B. Copies of Money Orders and Receipts

At trial, it became clear that Mr. Sager relied on the

copies of money orders and receipts only to a limited extent in

preparing his report. Mr. Sager testified that when he reviewed

petitioner's money orders and receipts, he did not try to justify

any of them as an actual business expense. He further said that

he could not tell which of the money orders represented business

expenses and which personal expenses. As petitioner's counsel

stated and Mr. Sager confirmed, the copies of money orders were

offered solely to show that when petitioner told Mr. Sager that

petitioner paid expenses in cash, Mr. Sager "saw things that

looked in that nature".
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In fact, most of the copies of money orders included in the

exhibits show only payees and amounts, with no description of the

associated expenses. Some of the money orders represent expenses

that were almost certainly personal, such as the orders payable

to "Psychology Today" and "New Woman", and the order apparently

payable to "Inside Sports". Other money orders represent credit

card payments, with no information about the underlying charges.

In addition, the payments represented by the copies of money

orders and receipts entered into evidence are de minimis,

relative to the hundreds of thousands of dollars of cash expenses

petitioner urges us to find.

For all these reasons, the copies of money orders and

receipts provide no support for the estimates of petitioner's

income contained in Mr. Sager's report, or for petitioner's

assertion that he paid business expenses in cash.

C. The Bid Sheets and Related Estimates 

Mr. Sager also testified about copies of seven 1-page "bid

sheets" that he used in the preparation of his report. Each of

these handwritten sheets--which Mr. Sager obtained from

petitioner--assertedly represents petitioner's estimates of cost

and profit for a plumbing job.

The bid sheets are quite summary and without supporting

documentation. Each of the bid sheets sets forth five broad

categories of expense: "Labor"; "Material"; "Water Heaters";

"Miscellaneous Job Expenses"; and "Travel Expenses". Following

these categories, each sheet has a "Sub-Total" line; a "Profit"
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line, and a "Net Bid" line. The entries under each category

provide little information beyond quantities and dollar amounts. 

Mr. Sager used the bid sheets to estimate petitioner's

income in the following way. Mr. Sager examined the dollar

amount entered on the "Profit" line on each of the seven bid

sheets, as a percentage of the amount entered on the "Net Bid"

line. Mr. Sager then looked for other potential sources of

profit, such as a 5-percent "Weather Factor" included in the

"Labor" amounts, and 2- to 5-percent factors applied to certain

amounts in the "Materials" category. Taking all these factors

into account, Mr. Sager concluded that a reasonable profit

percentage for petitioner's plumbing business would be 11.14

percent of gross revenues.

All other calculations in Mr. Sager's report (with the

exception of a few "Statistical Projections" discussed below)

depend on this 11.14 percent estimated profit factor. In fact,

Mr. Sager's calculations of petitioner's "gross profit" for 1989-

92 are nothing more than the gross receipts of petitioner as

determined by respondent for each of those years, multiplied by

11.14 percent.

We believe the estimates of petitioner's income based on the

"bid sheets" are unreliable for several reasons. Five of the

seven bid sheets are undated, and one of the sheets that is dated
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1 Of course, a job bid for in 1988 could have been performed

in a later year, but there is no evidence of this in the record.

bears a date in 1988, a year not in issue.1 The job names shown

on five of the seven sheets bear no apparent relation to the

project or account names shown on the copies of checks used to

calculate petitioner's stipulated gross receipts for the years in

issue. Moreover, there is no evidence that the bid sheets were

ever submitted to, or accepted by, any general contractor. 

Therefore, it is not clear that the bid sheets relate to actual

jobs performed by petitioner during the years in issue.

Even if the bid sheets represent any actual jobs, there is

no evidence that the profit factors in the sheets represent the

actual profit realized by petitioner from those jobs. There is

no evidence that Mr. Sager compared any of the bid sheets with

the financial results of any job. 

Finally, even if the bid sheets represented petitioner's

actual profits from actual jobs, there is no evidence that the

sheets represented a reliable sample of the jobs performed by

petitioner during the years in issue. The sheets--which were

obtained from petitioner--represent only seven jobs; yet Mr.

Sager used them to attempt to estimate 6 years of petitioner's

income.

For all these reasons, we are not persuaded that Mr. Sager's

estimates of petitioner's income based on the bid sheets bear any

relation to the actual amount of profit or taxable income
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2 Mr. Sager's report cites Dun & Bradstreet, Industry Norms

and Key Business Ratios (1995); Robert Morris Associates, Annual

Statement Studies 1995; Schonfeld & Associates, IRS Corporate

Financial Ratios (9th ed. 1995); Troy, Almanac of Business and

Industrial Financial Ratios (1996).

realized by petitioner during any of the years in issue. We

therefore give those estimates little weight.

D. Mr. Sager's "Statistical Projections" and Opinion

As a check on his estimates of petitioner's income based on

the bid sheets, Mr. Sager consulted four books setting forth

financial ratios for various industries.2 Mr. Sager stated that

according to these sources, plumbing businesses with annual sales

of less than $1 million generate net income of approximately 4.2

percent. On the basis of this information--and his personal

experience providing accounting services to construction

businesses--Mr. Sager expressed the opinion that his estimates of

petitioner's income for 1989-92 based on the bid sheets were

reasonable. Mr. Sager also opined that the amount of income

determined by respondent for each of the years 1990-92 was

unreasonable. Mr. Sager testified that in his experience, to

come out of a construction job with a 20-percent profit was

generally extraordinary.

Mr. Sager did admit that respondent's determination of

petitioner's business net income for 1989 was reasonable. In

addition, part of Mr. Sager's testimony based on his professional

experience undercuts both his testimony based on the financial

ratios, and his estimates of petitioner's income based on the bid
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sheets. Mr. Sager testified: "Typically material costs in most

construction jobs range from 30 to 60 percent of your bid. Most

labor costs range from 15 to 35 percent of your bid, and that's

pretty--well, that's real broad obviously, but I mean, that is

consistent within the market." As this testimony makes clear,

Mr. Sager admitted that material and labor costs combined can

vary substantially in the construction business--from 45 percent

to 95 percent of the amount bid. 

E. Law and Conclusions

Respondent has determined deficiencies in petitioner's tax

for each of the years 1989-92. Respondent's determinations are

presumed correct; petitioner bears the burden of proving that he

is entitled to the claimed deductions. See Rule 142(a).

If a taxpayer has established that deductible expenses were

incurred but has not established the amount of such expenses, we

may estimate the amount allowable, bearing heavily if we so

choose upon the taxpayer whose inexactitude is of his own making. 

See Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930). 

However, there must be evidence in the record that provides a

rational basis for our estimate. See Williams v. United States,

245 F.2d 559, 560 (5th Cir. 1957); Vanicek v. Commissioner, 85

T.C. 731, 742-743 (1985).

Expert witness testimony may be appropriate where

specialized knowledge can help us understand the evidence or

determine a fact in issue. See Fed. R. Evid. 702. However,

we weigh an expert's testimony in light of his or her
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qualifications, as well as all other credible evidence in the

record. We are not bound by an expert's opinion. We may accept

or reject expert testimony when in our best judgment, based on

the record, it is appropriate to do so. While we may choose to

accept an expert's opinion in its entirety, we may also be

selective in the use of any portion of that opinion. See Seagate

Tech., Inc. & Consol. Subs. v. Commissioner, 102 T.C. 149, 186

(1994), and the authorities cited therein.

The only evidence petitioner offered to support his claim

that he paid hundreds of thousands of dollars of business

expenses in cash in 1989-92 was the report and testimony of

Mr. Sager. As we explained, Mr. Sager neither identified any

expenses paid by petitioner in cash, nor attempted to calculate

petitioner's actual receipts, expenses, or taxable income for any

of the years in issue. Instead, Mr. Sager tried to estimate

petitioner's income, by deriving a single gross profit percentage

(11.14 percent) from a few bid sheets assertedly used by

petitioner, and by applying that percentage to petitioner's

stipulated gross receipts for each year. Because there is no

evidence that the amounts on the bid sheets bear any relation to

petitioner's actual receipts, cost, or income from any actual

plumbing job during the years in issue, we give the estimates of

petitioner's income based on those sheets little weight. 

Mr. Sager did try to support his estimates by comparing them

to some published financial ratios for the plumbing industry. 

However, Mr. Sager did not explain how or why the businesses that
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generated the information he consulted were comparable to

petitioner's business. For this reason we find that the

financial ratios have limited relevance to this case. See Kudo

v. Commissioner, T.C. Memo. 1998-404; Schachter v. Commissioner,

T.C. Memo. 1998-260.

Finally, with respect to Mr. Sager's opinions based on his

professional experience, Mr. Sager admitted that a wide range of

expenses exists in the construction business.

For all these reasons, we do not accept Mr. Sager's report

or testimony in its entirety, and we hold that petitioner has not

proved he is entitled to the additional business expense

deductions that would be necessary to reduce petitioner's taxable

income to the amounts estimated in Mr. Sager's report. However,

after having reviewed the entire record, including Mr. Sager's

report and testimony, we are convinced that respondent has

overstated petitioner's taxable income by at least some amount

for each of the years 1990-92.

The parties have stipulated the amounts of petitioner's

business gross receipts, noncash business expenses, and

unreported net business income (ignoring only any possible cash

expenses), for each of the years 1989-92. As a result, the

parties have effectively stipulated that petitioner's actual net

business income for each of the years 1989-92 cannot be more than

the amounts determined by respondent; it can only be less.

The parties have also stipulated that petitioner withdrew

substantial amounts of cash from his bank accounts, in each of
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the years 1989-92. Respondent, however, has not allowed

petitioner any deduction for those years, on account of business

expenses paid in cash.

Mr. Sager testified that respondent's determination of

petitioner's net business income as 17 percent of gross receipts

for 1989 was reasonable. He also testified, however, that

respondent's determination of net business income for each of the

years 1990-92 was unreasonable and that a profit in excess of 20

percent of gross receipts would be extraordinary. We note that

respondent has determined petitioner's net business income to be

equal to 41 percent, 43 percent, and 56 percent of gross

receipts, for 1990, 1991, and 1992, respectively.

We do not intend to relieve petitioner (or any taxpayer) of

the obligation to keep accurate records. However, the evidence

(including the stipulated facts concerning petitioner's gross

receipts, noncash expenses, and unreported net business income)

has convinced us that respondent has overstated petitioner's net

business income for, and that petitioner must have paid some

business expenses in cash during, each of the years 1990-92. 

For this reason, it is appropriate for us to estimate (and

allow) at least some amount of cash business expense deductions

for each of the years 1990-92, under the rule set forth in

Cohan v. Commissioner, supra, as we applied it in Lollis v.

Commissioner, T.C. Memo. 1976-15, affd. 595 F.2d 1189 (9th Cir.

1979) (on the basis of accountant's testimony concerning industry

financial ratios and the taxpayer's income for several years
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3 Cf. United States v. Marabelles, 724 F.2d 1374, 1383 (9th

Cir. 1984) (Cohan rule inapplicable where a deduction was not

denied in its entirety; Commissioner had allowed all expenses

claimed on a return, and had given taxpayer the benefit of the

doubt with respect to all expenses written on taxpayer's business

checking account).

4 Mr. Sager's report sets forth the value of the plumbing

services petitioner told Mr. Sager he performed personally in

each year, and adds back those amounts to its estimates of

petitioner's profit. We regard this as an admission by

petitioner that his labor costs should be reduced by at least the

amounts indicated in Mr. Sager's report.

subsequent to the years in issue, taxpayer argued that

approximately 70 percent of unidentified payments from business

checking account were deductible expenses; 40 percent of such

payments found deductible under Cohan rule).3

Applying the principles set forth in Cohan and in Lollis--

and making as close an approximation as we can, bearing down

heavily on petitioner--we find that petitioner spent $10,000,

$25,000, and $40,000 in cash, on deductible business expenses, in

1990, 1991, and 1992, respectively. These amounts, when added to

the expenses allowed by respondent, will reduce petitioner's net

business income to approximately 30 percent of his stipulated

gross receipts for each of the years 1990-92, plus the value of

the plumbing services petitioner has admitted he performed

personally in each of those years.4

In all other respects respondent's determinations of

deficiencies in petitioner's tax for 1989-92 are sustained.
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II. Was Petitioner's Failure To File Returns Fraudulent,

 for Each of the Years 1989-92?

Section 6651(a)(1) provides that in the case of failure to

file a required income tax return when due, unless it is shown

that such failure is due to reasonable cause:

there shall be added to the amount required to be shown

as tax on such return 5 percent of the amount of such

tax if the failure is for not more than 1 month, with

an additional 5 percent for each additional month * * *

during which such failure continues, not exceeding 25

percent in the aggregate; 

Section 6651(f) provides that if any failure to file any

income tax return is "fraudulent", section 6651(a)(1) shall be

applied by substituting "15 percent" for "5 percent", and "75

percent" for "25 percent".

In determining whether a failure to file a return is

fraudulent under section 6651(f), we consider the same elements

as we did when considering the imposition of the addition to tax

for fraud under prior law (former section 6653(b)(1)), and as we

do under present section 6663. See H. Rept. 101-247, at 1402-

1403 (1989); Clayton v. Commissioner, 102 T.C. 632, 651-653

(1994). A finding of fraud for any year therefore requires proof

that (1) there was an underpayment of tax for that year, and (2)

at least some part of the underpayment was due to fraud. See

Petzoldt v. Commissioner, 92 T.C. 661, 698-699 (1989). 

With respect to the issue of fraud, respondent has the

burden of proof, and must meet that burden with clear and

convincing evidence. See sec. 7454(a); Rule 142(b).
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5 Petitioner's stipulated net business income, additional

deductions as found by the Court, and taxes owed as estimated by

Mr. Sager (based on the bid sheets) are:

(continued...)

A. Were There Underpayments of Tax for 1989-92?

Petitioner did not file income tax returns for any of the

years 1989-92. Petitioner has stipulated that he received gross

receipts from his plumbing business, in amounts ranging from

$234,677 to $476,785 per year, in each of the years 1989-92.

Therefore, it is uncontested that petitioner had substantial

unreported receipts from a trade or business, in each of the

years 1989-92.

Petitioner has also stipulated that he had unreported net

business income, in amounts ranging from $55,812 to $205,270 per

year, in each of the years 1989-92, with only one exception: any

possible undocumented business expenses paid with cash or by

other nontraceable means.

Petitioner asserts he paid more deductible business expenses

than respondent allowed. We have found that petitioner is

entitled to some additional expenses, but there is no evidence

that petitioner paid expenses in amounts sufficient to offset his

stipulated receipts or net unreported income, in any of the years

1989-92. Mr. Sager's estimates of petitioner's income based on

the bid sheets, and Mr. Sager's estimates based on industry

financial ratios--both of which assume petitioner is entitled to

far more deductions than we have found--show that petitioner owed

tax for each of the years 1989-92.5 Therefore, petitioner's own
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5(...continued)

Stipulated Additional Underpaid Taxes as

Net Income Deductions Estimated by Mr. Sager

Year

1989 $55,812 -- $17,438

1990 185,972 $10,000 23,577

1991 205,270 25,000 23,456

1992 131,415 40,000 6,014

evidence, viewed in the light most favorable to petitioner, shows

that petitioner substantially underpaid his tax for each of the

years 1989-92.

Finally, petitioner's pleadings and brief admit that

petitioner owed taxes for each of the years 1989-92. 

Nevertheless, no payments or credits were made to petitioner's

income tax account for any of the years 1989-92, prior to (or on)

the due dates for the returns for those years. 

On the basis of these facts and the rest of the record, we

hold that respondent has clearly and convincingly proved: (1)

There was a substantial underpayment in petitioner's tax for each

of the years 1989-92; and (2) there was a substantial "amount

required to be shown as tax" (within the meaning of section

6651(a)(1) and (b)(1)) on petitioner's return for each of those

years.

B. Were The Underpayments Due to Fraud--Fraudulent Intent 

To prove fraud for any of the years 1989-92, respondent must

also prove by clear and convincing evidence that some portion of

the underpayment in petitioner's tax for that year was due to

fraud. Respondent is not required to prove the precise amount of
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the underpayment resulting from fraud, but only that some part of

the underpayment is attributable thereto. See Otsuki v.

Commissioner, 53 T.C. 96, 105 (1969).

Fraud is generally defined as intentional wrongdoing on the

part of the taxpayer, with the specific purpose of evading tax

believed to be owed. See Powell v. Granquist, 252 F.2d 56 (9th

Cir. 1958); Mitchell v. Commissioner, 118 F.2d 308, 310 (5th Cir.

1941), revg. and remanding 40 B.T.A. 424 (1939). Negligence of a

taxpayer, whether slight or gross, is not sufficient to prove

fraud. See Mitchell v. Commissioner, supra at 310. To prove

fraud, the Commissioner must show that the taxpayer intended to

evade taxes believed to be owing by conduct intended to conceal,

mislead, or otherwise prevent the collection of taxes. See Parks

v. Commissioner, 94 T.C. 654, 661 (1990). 

The presence of fraud is a question of fact to be resolved

upon consideration of the entire record. See Recklitis v.

Commissioner, 91 T.C. 874, 909 (1988). Because direct proof of

the taxpayer's intent is rarely available, fraud may be proved by

circumstantial evidence. See Spies v. United States, 317 U.S.

492 (1943); Recklitis v. Commissioner, supra at 910. Courts have

developed a nonexclusive list of the types of circumstantial

evidence--often referred to as "badges of fraud"--that will

support a finding of fraudulent intent. 

In Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir.

1986), affg. T.C. Memo. 1984-601, the Court of Appeals for the

Ninth Circuit--to which an appeal of this case would lie--set
-24-

forth the following indicia or "badges" of fraud: (1)

Understatement of income; (2) maintenance of inadequate records;

(3) failure to file tax returns; (4) implausible or inconsistent

explanations of behavior; (5) concealment of assets; and (6)

failure to cooperate with tax authorities. The Court of Appeals

also stated that the existence of the following facts

additionally supported a finding of fraudulent intent: (1)

Dealing in cash to avoid scrutiny of finances; and (2) failing to

make estimated tax payments. See Bradford v. Commissioner at

308.

1. Evidence of Fraud--Failure to File Tax Returns

The parties have stipulated that petitioner did not file

income tax returns for any of the years in issue (1989-94). The

parties have also stipulated that petitioner did not file returns

for any of the years 1978-88.

Although the failure to file a return is evidence of fraud,

we have often said that without more it is insufficient to prove

fraud. This is because a finding of fraud requires proof of some

convincing affirmative act or indication of the taxpayer's

fraudulent intent. See Bagby v. Commissioner, 102 T.C. 596, 607-

608 (1994); Kotmair v. Commissioner, 86 T.C. 1253, 1261 (1986). 

Other courts have stated the law similarly. See, e.g., Zell v.

Commissioner, 763 F.2d 1139, 1143 (10th Cir. 1985), affg. T.C.

Memo. 1984-152. However, the failure to file numerous returns

over an extended period of time is, under certain circumstances,

persuasive evidence of fraud. See Stoltzfus v. United States,
-25-

398 F.2d 1002, 1004-1005 (3d Cir. 1968) (convincing affirmative

indication of intent to defraud exists where taxpayer repeatedly

fails to file and has no reasonable basis for believing that

taxes were not owed); Powell v. Granquist, supra at 60-61

(knowingly refusing to file returns for 9 years seen to be of

equal persuasiveness in proving fraudulent intent as actually

filing false returns).

Because petitioner (1) filed income tax returns for 1973 and

1974; (2) filed "tax protester" returns for 1975 and 1976; (3)

contested his 1975 tax liability before this Court; and (4) was

convicted in 1980 of willful failure to file for 1976 and 1977,

petitioner was undoubtedly aware, with respect to each of the

years 1989-92, that he was required to file an income tax return

if he had taxable income. Indeed, petitioner's 1980 letter to

the U.S. probation officer acknowledges that the tax laws require

individuals to file income tax returns and that they admit of no

exception with respect to petitioner.

With respect to petitioner's knowledge of his taxable income

for 1989-92, petitioner worked as a plumber and had substantial

gross receipts from his plumbing business in each of those years. 

In addition, petitioner's petition admitted--and petitioner's own

witness estimated--that petitioner had substantial taxable income

from his business in each of the years 1989-92. This is

compelling evidence that petitioner knew he had taxable income,

and was not exempt from the filing requirement, with respect to

each of the years 1989-92. 
-26-

Finally, petitioner has not asserted he was acting under a

good-faith belief that his nonfiling for the years in issue was

permitted by law. Cf. Cheek v. United States, 498 U.S. 192

(1991). The existence of any such belief is belied by the

admissions in his 1980 letter. 

The foregoing evidence clearly and convincingly proves that

petitioner's failure to file a return for each of the years 1989-

92 constituted a willful, intentional violation of a known legal

duty. In addition, under the circumstances of this case,

petitioner's repeated and prolonged failure to file returns is

strong and persuasive evidence that petitioner, by not filing

returns for 1989-92, intended fraudulently to evade taxes owed

for those years, by concealing his income and assets from the

Commissioner. See Stoltzfus v. United States, supra; Powell v.

Granquist, supra.

2. Other Evidence of Fraud

There is substantial evidence, in addition to petitioner's

history of nonfiling, that the underpayments in petitioner's

taxes for 1989-92 were due to fraud.

First, petitioner was responsible for the recordkeeping of

his plumbing business. In each of the years in issue, petitioner

did not maintain, as books and records, invoices, receipts for

cash disbursements, a general ledger, a cash receipts journal, or

a cash disbursements journal. Taxpayers are required to maintain

adequate records. See sec. 6001. Under the circumstances of

this case, we find that petitioner's maintenance of inadequate
-27-

records is evidence of fraud. See Bradford v. Commissioner,

supra at 307. 

Second, during each of the years in issue, petitioner used

the same incorrect Social Security number on the invoices he

submitted to, and on his contracts with, general contractors for

construction projects. In many circumstances, the use of an

incorrect Social Security number could be evidence of nothing

more than negligence or mistake. However, in this case it is

clear that petitioner at one time knew his correct number,

because he used it on his 1973, 1974, and 1975 returns. In light

of these and the other facts in the record, petitioner's

consistent use of an incorrect Social Security number, during a

6-year period, with respect to hundreds of thousands of dollars

of business receipts, is relevant evidence of concealment and

fraud.

Third, petitioner made extensive use of cash during the

years 1989-92. Dealing in cash may also be evidence of fraud. 

See Bradford v. Commissioner, supra at 308.

Fourth, as we discuss infra pp. 39-40, it is also clear that

petitioner did not pay any estimated taxes for 1989-92. This is

also an indication of fraud. See Bradford v. Commissioner, supra

at 796 F.2d. 

3. Petitioner's Use of a Bahamian Bank Account

We now consider the admissibility of evidence of certain

other facts, which respondent claims are circumstantial evidence

of fraud.
-28-

In 1994 and 1995 four checks of E.A. White Construction Co.

(White Co.), payable to petitioner's business Down to Earth

Plumbing, in the total amount of $103,274, were deposited (or

were sent for deposit) in a bank in Nassau, Bahamas. Petitioner

admits that he deposited one of the checks and that he was the

owner of the other three checks, which he had received in the

ordinary course of his plumbing business.

Petitioner has filed a motion in limine asking us to exclude

this evidence of petitioner's use of a Bahamian bank account in

1994 and 1995. Petitioner asserts that his use of a Bahamian

bank account in 1994-95 constitutes subsequent "other acts" of

petitioner, which are inadmissible "character" evidence under

rule 404(b) of the Federal Rules of Evidence. More generally,

petitioner asserts that this evidence of petitioner's actions in

1994-95 is unfairly prejudicial, confusing, and cannot be

relevant proof of petitioner's intent with respect to his failure

to file returns for the years 1989-92.

We agree with petitioner that in order to prove fraud for a

particular year, respondent must show that petitioner's failure

to file the return for that year was fraudulent. See sec.

6651(f). However, acts committed subsequent to the due date of a

return may be relevant evidence of a taxpayer's intent in failing

to file that return. See United States v. Farber, 630 F.2d 569,

571-572 (8th Cir. 1980) (tax protester materials filed within 3-1⁄2

years after 1974 return due date are admissible to show intent or

willfulness in taxpayer's prosecution for failure to file that
-29-

return); Bagby v. Commissioner, 102 T.C. 596 (1994) (taxpayer's

use in 1991 of forged tax returns and altered checks is relevant

evidence of taxpayer's fraudulent intent for tax years 1985-87,

where taxpayer had not filed returns for those years).

We also agree with petitioner that under rule 404(a) and (b) 

of the Federal Rules of Evidence, evidence of petitioner's "other

acts" in 1994-95 may not be admitted to prove petitioner's

"character" in order to show that petitioner acted in conformity

therewith in failing to file returns for 1989-92. However, rule

404(b) of the Federal Rules of Evidence expressly provides that

"other acts" evidence may be admitted to show knowledge, intent,

or the absence of accident or mistake. 

The Court of Appeals for the Ninth Circuit--to which an

appeal of this case would lie--construes rule 404(b) of the

Federal Rules of Evidence as a "rule of inclusion"; "other acts"

evidence is admissible under rule 404(b), unless it tends to

prove only propensity or disposition. See United States v.

Ayers, 924 F.2d 1468, 1472-1473 (9th Cir. 1991). The Court of

Appeals applies the following four-part test to determine the

admissibility of "other acts" evidence:

1. sufficient evidence must exist for the trier of fact to

find that the party committed the other acts;

2. the other acts must be introduced to prove a material

issue in the case;

3. the other acts must not be too remote in time; and
-30-

4. if admitted to prove intent, the other acts must be

similar to the offense charged. See United States v. Ayers,

supra at 1472-1473; United States v. Spillone, 879 F.2d 514, 518-

520 (9th Cir. 1989).

The first two parts of this test are obviously satisfied,

because the parties have stipulated that the "other acts"

occurred, and petitioner's fraudulent intent is clearly material

to this case. In our judgment, the other two parts are satisfied

as well.

In United States v. Ayers, supra, the taxpayer made

incorrect or false declarations to U.S. Customs in Nassau,

Bahamas, concerning the amount of cash he was transporting. 

These declarations were made in 1987. The trial court admitted

the declarations as relevant evidence in the prosecution of the

taxpayer for conspiracy to defraud the United States and evade

taxes, even though the conspiracy had ended in 1985. The Court

of Appeals upheld the conviction, reasoning that it was not error

to admit the Bahamian declarations under rule 404(b) of the

Federal Rules of Evidence. According to the Court of Appeals,

the taxpayer's subsequent acts of concealing large amounts of

cash were probative of the taxpayer's earlier intent to defraud

the United States in the collection of taxes, by concealing his

income or net worth. See United States v. Ayers, supra at 1473-

1474.

 In this case, there is no evidence that petitioner made any

false or incorrect statements concerning the Bahamian bank
-31-

account. There is also no evidence that the funds deposited in

(or sent to) the Bahamian bank were derived from (or were

intended for use in) any illegal activity. Furthermore, we are

aware that the ownership or use by a U.S. person of a foreign

bank account, including a Bahamian bank account, is not illegal.

We note, however, that the checks deposited in (or sent to)

the Bahamian bank were White Co. checks, payable to petitioner's

plumbing business. Several of the checks respondent used to

reconstruct petitioner's stipulated gross receipts in 1991 and

1992 were also White Co. checks, and the parties have stipulated

that for the years 1989-92, petitioner received payments for

services from White Co. totaling $183,285. Moreover, during each

of the years 1989-92, petitioner used the same incorrect Social

Security number on the invoices he submitted to, and on his

contracts with, general contractors for construction projects. 

Finally, the stipulated use of the Bahamian bank account occurred

after the Commissioner's Criminal Investigation Division had

notified petitioner that it was investigating petitioner's tax

liability for 1989-92.

In light of these and all other facts in the record, we hold

that the stipulated facts concerning petitioner's use of the

Bahamian bank account are admissible, relevant, probative

evidence of petitioner's intent (in failing to file tax returns

for 1989-92) to conceal income or assets (including moneys

received from White Co.) earned or owned during 1989-92, and

thereby evade the payment of taxes believed to be owed for those
-32-

years. We also believe the probative value of this evidence is

not outweighed by the danger of unfair prejudice or confusion. 

We guard against any such danger by considering the evidence only

for the purpose of determining petitioner's intent, and by

reminding ourselves that there is no evidence that petitioner's

use of the Bahamian bank account was itself illegal. 

4. Effect of Petitioner's Failure To Testify

Petitioner did not testify at trial, or otherwise offer an

explanation of his failure to file. On brief, petitioner

attributes these omissions to his unwillingness to waive his

Fifth Amendment right against self-incrimination. Petitioner

therefore asserts that we may not draw any adverse inference from

his silence. 

As an initial matter, we note that because petitioner did

not appear at trial, petitioner did not actually claim the Fifth

Amendment privilege. Therefore, we did not have the opportunity

to consider whether petitioner would have been entitled to assert

the privilege, either generally or in response to specific

questions. Nevertheless, because respondent did at one time

conduct a criminal investigation of petitioner with respect to

some of the years in issue, we will give petitioner the benefit

of the doubt and assume he validly asserted the Fifth Amendment

privilege.

Petitioner is of course correct that a prosecutor may not

comment on, or tell a jury that it may draw an adverse inference

from, a defendant's Fifth Amendment silence in a criminal case. 
-33-

See Griffin v. California, 380 U.S. 609 (1965). However, the

Supreme Court has clearly stated that a trier of fact in a civil

proceeding may hold a party's silence against him. See Baxter v.

Palmigiano, 425 U.S. 308 (1976). The trier of fact may not reach

a decision adverse to the civil party solely by reason of the

party's silence, because that would make the assertion of the

Fifth Amendment privilege impermissibly costly. However, the

trier may take the party's silence into account along with the

other evidence in the case. See Baxter v. Palmigiano, supra at

316-320; LaSalle Bank Lake View v. Seguban, 54 F.3d 387, 389-391

(7th Cir. 1995) (silence is a relevant factor to be considered in

light of the proffered evidence, but the direct inference of

guilt from silence is forbidden).

The civil fraud addition to tax is neither punishment nor a

criminal penalty. See Helvering v. Mitchell, 303 U.S. 391

(1938); Ianniello v. Commissioner, 98 T.C. 165 (1992) (civil

fraud addition not punishment). Therefore, we are permitted to

draw an adverse inference from a taxpayer's silence in deciding

whether the fraud penalty applies. See Petzoldt v. Commissioner,

92 T.C. 661, 683-686 (1989).

In this case, we take petitioner's silence into account, as

a factor to be considered in combination with all the other

evidence in the record, in confirming our decision that

petitioner is liable for the fraud additions for 1989-92.
-34-

C. Holding on the Fraud Additions

We find that the evidence clearly and convincingly proves

that petitioner's failure to file an income tax return for each

of the years 1989-92 was fraudulent within the meaning of section

6651(f). Respondent's determination that the 75-percent fraud

addition under section 6651(a) and (f) applies to each of the

years 1989-92 is sustained. 

III. Should Respondent's Determinations of Petitioner's

Unreported Income for 1993 and 1994 Be Sustained?

Respondent did not use the "specific items" method to

reconstruct petitioner's income for 1993 and 1994. Instead,

respondent determined petitioner's income by reference to average

cost-of-living survey information obtained from the Bureau of

Labor Statistics (BLS). Using tables that classify the BLS

statistics according to age, size of consumer unit, occupation,

and location, respondent determined that petitioner had a cost of

living--and therefore must have had net business income--of

$34,533 and $35,638, in 1993 and 1994 respectively. 

 We sustain respondent's determinations of deficiencies in

petitioner's tax for 1993 and 1994, for the following reasons.

A. Reasonable Use of BLS Statistics

In certain circumstances, the Commissioner may use cost of

living statistics, including BLS survey information, to

reconstruct a taxpayer's income. See Giddio v. Commissioner, 54

T.C. 1530 (1970); Bennett v. Commissioner, T.C. Memo. 1998-96. 

As we stated in Giddio v. Commissioner, supra at 1533:
-35-

Where * * * there is evidence of taxable income but no

information can be acquired to ascertain the amount of

such income, we do not think it is arbitrary for the

Commissioner to determine that the taxpayer had income

at least equal to the normal cost of supporting his

family. * * * 

 The parties have made the following stipulations concerning

petitioner's income for 1993 and 1994:

1. Petitioner earned gross income from his plumbing

business in 1993 and 1994.

2. In the course of his plumbing business, petitioner

received payments from White Co. in 1993 and 1994, in amounts

totaling $48,504 and $46,000, respectively. 

3. In 1993, petitioner lent $200,000 to White Co., and

received interest income from White Co. in the amount of $20,558.

In addition, petitioner's pleadings admit that petitioner

owed tax for both 1993 and 1994.

The parties have also stipulated as follows concerning

respondent's lack of information about the amount of petitioner's

taxable income for 1993-94:

1. Petitioner did not file a tax return for 1993 or 1994. 

2. Respondent has no documentation concerning petitioner's

business expenses for 1993 and 1994.

3. Petitioner did not maintain, as books and records for

1993 or 1994, invoices, receipts for cash disbursements, a

general ledger, a cash receipts journal, or a cash disbursements

journal.
-36-

4. Petitioner did not produce any business or accounting

records for respondent to examine, with respect to 1993 or 1994. 

Under these circumstances, we find that respondent's

reconstruction of petitioner's income by reference to the BLS

information was reasonable. It is uncontested that petitioner

received unreported business gross receipts and interest in 1993

and 1994, in amounts substantially in excess of the unreported

income determined by respondent for those years using the BLS

method. Also, petitioner's petition admitted that petitioner

owed tax for 1993 and 1994. Therefore, there is ample evidence

that petitioner had taxable income in 1993-94, other than the

purely circumstantial proof provided by the cost of living data.

It is also clear that respondent lacked the information necessary

to ascertain the amount of that income.

B. Petitioner's Asserted Deductions for 1993-94

Petitioner asserts that he paid substantial business

expenses in 1993-94, and that his taxable income for each of

those years was therefore less than the income determined by

respondent using the BLS method. We find that petitioner is not

entitled to any reduction in the amount of taxable income

determined by respondent for 1993 or 1994, for two reasons. 

First, the BLS method used by respondent is based on petitioner's

assumed cost of living; it is therefore an estimate of

petitioner's net business income, and has already taken business

deductions into account. Second, as noted above, petitioner

received business gross receipts and interest in 1993 and 1994,
-37-

in amounts substantially in excess of the unreported taxable

income determined by respondent for those years, and petitioner

has not proved that he is entitled to any business expense

deductions from that unreported income.

With respect to 1993 and 1994 as well, petitioner's only

evidence concerning business expenses was the report and

testimony of Mr. Sager. The data and methodology underlying

Mr. Sager's estimates of petitioner's taxable income for 1993-94

are almost identical to the data and methodology underlying

Mr. Sager's estimates of petitioner's taxable income for 1989-92. 

We therefore give Mr. Sager's estimates for 1993-94 little

weight, for the reasons set forth in our discussion of the

deficiencies for 1989-92.

We also note that Mr. Sager's testimony with respect to

1993-94 differed from his testimony with respect to 1989-92. On

the basis of his professional experience and the financial

reference books he consulted, Mr. Sager testified that

respondent's determinations of petitioner's taxable income for

1990-92 were unreasonable. By contrast, Mr. Sager did not opine

that respondent's determinations for 1993 and 1994 were

unreasonable.

Finally, although the parties have stipulated that

petitioner had some gross receipts for 1993 and 1994, they have

not stipulated petitioner's total gross receipts for either of

those years. Petitioner's actual gross receipts and actual

taxable income for 1993 and 1994 may have been greater than the
-38-

6 This could not have been the case for 1989-92, because the

parties stipulated that petitioner's total business gross

receipts for each of those years were equal to the amounts

determined by respondent.

amounts determined by respondent, even if petitioner paid

substantial deductible business expenses in those years.6

Therefore, even if petitioner's evidence had convinced us that he

had paid substantial business expenses in 1993-94, the conditions

for applying the Cohan rule for those years would not be

satisfied. See Norgaard v. Commissioner, T.C. Memo. 1989-390,

affd. on this issue and revd. in part 939 F.2d 874 (9th Cir.

1991) (Cohan rule not applicable to estimate gambling losses

where taxpayer had not established his actual gambling gross

receipts). 

For all these reasons, we find that petitioner is not

entitled to any additional deductions for 1993 and 1994;

respondent's deficiency determinations for those years are

sustained.

IV. Does the Section 6651(a)(1) Addition Apply for 1994?

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

failure to file an income tax return within the time prescribed

by law, unless it is shown that the failure is due to reasonable

cause. A failure to file is due to reasonable cause if the

taxpayer exercised ordinary business care and prudence and was

nevertheless unable to file the return within the prescribed

time. See sec. 301.6651-1(c)(1), Proced. & Admin. Regs. The

taxpayer bears the burden of showing that the failure was due to
-39-

reasonable cause. See Rule 142(a); United States v. Boyle, 469

U.S. 241, 245 (1985).

The parties have stipulated that petitioner did not file an

income tax return for 1994. Respondent has determined that

petitioner did not have reasonable cause for his failure to file. 

Having sustained respondent's determination that there was a

deficiency in petitioner's tax for 1994, we find that petitioner

was required to file a 1994 return and that he did not do so.

Petitioner did not argue or offer any evidence suggesting

that he had reasonable cause for his failure to file a 1994

return. Petitioner's arguments and evidence challenged only the

amount of the deficiency determined by respondent; petitioner did

not attempt to establish that he had cause for his failure to

file. Accordingly, we find that petitioner has not shown that

his failure to file a 1994 return was due to reasonable cause and

not to willful neglect. We therefore sustain respondent's

determination of the section 6651(a)(1) addition for 1994.

V. Estimated Tax Additions for 1989-94

Respondent also determined that petitioner is liable for

additions to tax under section 6654(a), for failure to pay

estimated tax in each of the years 1989-94. Section 6654(a)

provides for an addition to tax in the case of any underpayment

of estimated tax by an individual. The addition to tax under

section 6654 is mandatory absent a showing by the taxpayer that

one of the statutory exceptions applies. See Clayton v.

Commissioner, 102 T.C. at 653. 
-40-

We have already sustained respondent's deficiency

determinations for the years 1989, 1993, and 1994. We have found

that petitioner is entitled to some additional business expense

deductions for 1990, 1991, and 1992. However, we have otherwise

sustained respondent's deficiency determinations, and have found

that petitioner still owed substantial amounts of tax, for each

of those years.

We have found that no payments or credits were made to

petitioner's income tax account for any of the years 1989-94,

prior to 1996. Therefore, we also find that no required

installments of estimated tax were paid for those years.

Petitioner neither argued nor offered evidence suggesting that

any of the statutory exceptions to the estimated tax additions

apply, or that respondent's determination of petitioner's

liability for those additions is in error. 

Accordingly, we sustain respondent's determinations of the

additions to petitioner's tax under section 6654(a), for each of

the years 1989-94, except to the extent such determinations must

be adjusted to take account of the additional deductions we have

found for 1990-92.

To reflect all the foregoing,

 An order will be issued

 denying petitioner's motion in

limine, and decision will be

entered under Rule 155.