t c memo united_states tax_court zinovy brodsky petitioner v commissioner of internal revenue respondent docket no filed date martin a schainbaum and david b porter for petitioner allan d hill for respondent memorandum findings_of_fact and opinion table of contents findings_of_fact ee eee ee the accounts of petitioner and or ms brodsky identification of the accounts of petitioner and or ms brodsky certain activity with respect to petitioner’s accounts eee ew ee ek kl -- - petitioner’s income-producing activities university video wholesale mz trading company felix vulis nikolas kiritopoulos vladimir syelsky m p electronics new age electronics church street property sanchez street property interest and telephone expenses tax returns joint returns of petitioner and ms brodsky for through mz trading’s return for respondent’s examination of certain returns notices of deficiency amendment to answer and reply to that amendment opinion evidentiary issues issues relating to the burden_of_proof the court’s evaluation of evidence in the record on which the parties rely testimonial evidence oe ee the testimony of ms rodegeb ms martin and mr oliveras petitioner’s testimony mr dibernardo’s testimony mr jordan’s testimony mr raja’s testimony mr syelsky’s testimony mr vulis’ testimony mr dubrovsky’s testimony mr sutton’s testimony mr guterman’s testimony documentary_evidence unreported income alleged personal loan sec_15 ‘77 alleged business loans to uvw alleged reimbursements se ee ee alleged advances to purchase personal item sec_101 alleged rental payment sec_104 alleged items of mz trading alleged repayments of loan sec_117 claimed cost_of_goods_sold claimed schedule c deduction sec_122 claimed interest deductions - claimed telephone expense deduction sec_127 claimed bad_debt deduction claimed capital_loss church street property claimed capital_gain sanchez street property claimed schedule e deduction sec_142 fraud_penalty under sec_6663 a underpayment fraudulent intent accuracy-related_penalty under sec_6662 a addition_to_tax under sec_6651 a chiechi judge respondent determined the following defi- ciencies in addition under sec_6651 to and fraud penalties under sec_6663 on petitioner’s federal income ‘all section references are to the internal_revenue_code code in effect for the years at issue unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure respondent issued to both petitioner and his former wife natalya brodsky ms brodsky a notice_of_deficiency notice for and and a separate notice for ms brodsky did not join in the petition that petitioner filed and is not a party in the present case tax tax addition_to_tax fraud_penalty year deficiency under sec_6651 a under sec_6663 a dollar_figure --- dollar_figure big_number --- big_number dollar_figure big_number respondent determined in the alternative to the determinations under sec_6663 that petitioner is liable for each of the years at issue for the accuracy-related_penalty under sec_6662 a the issues remaining for decision are does petitioner have unreported income for each of the years at issue we hold that he does to the extent stated herein is petitioner entitled to reduce for each of the years at issue his schedule c gross_receipts by certain claimed cost_of_goods_sold we hold that he is not is petitioner entitled to deduct for each of the years and certain claimed schedule c expenses we hold that he is not for did petitioner realize a loss from the sale of certain real_property located pincite church street san francisco california church street property or did he realize a gain from that sale in the amount determined by respondent we hold that he did not realize a loss but that he realized and is required to recognize the gain determined by respondent - - is petitioner required to recognize for gain from the sale of certain real_property located pincite sanchez street san francisco california sanchez street property in excess of the amount that he reported we hold that he is is petitioner entitled to deduct for each of the years and certain claimed schedule e expenses we hold that he is not is petitioner liable for each of the years at issue for the fraud_penalty under sec_6663 we hold that he is not is petitioner liable for each of the years at issue for the accuracy-related_penalty under sec_6662 we hold that he is is petitioner liable for for the addition_to_tax under sec_6651 we hold that he is the court held the trial in this case on date at that trial petitioner appeared pro_se sometime after the trial in this case and before the posttrial briefs were due petitioner retained counsel on date petitioner through that counsel filed inter alia a motion to open the record in order to receive additional evidence petitioner’s motion by order dated date date order the court granted petitioner’s motion and calendared a further trial in this case to commence on date the date order directed the parties in pertinent part as follows -- - after due consideration it is ordered that each expert witness shall prepare a written report a copy of which shall be submitted by counsel for the party who is proffering such report directly to the undersigned and served on the other party on or before date ordered that any documents or materials that are not part of the existing record in this case and that a party expects to use at the further trial in this case except for impeachment but which are not stipulated shall be identified in writing and exchanged by the parties on or before date the court may refuse to receive into evidence any document or mate- rial not stipulated or exchanged unless otherwise agreed by the parties or allowed by the court for good cause shown ordered that each party shall prepare a further trial memorandum which shall be served and submitted directly to the undersigned on or before date the further trial memorandum shall contain---- a statement of issues statement of issues in which each party shall set forth separately a each issue of fact including any issue sub- sidiary to an ultimate issue and b each issue of law including any issue subsidiary to an ulti- mate issue to be resolved by the court each such issue shall be set forth in the statement of issues in sufficient detail so as to enable the court to decide the case in its entirety by ad- dressing each of the issues listed a statement of positions and theories state- ment of positions and theories in which each party shall set forth separately a clear and full but concise exposition of such party’s position and the theory underlying that position with re- - jj - spect to each of the issues that are separately set forth in such party’s statement of issues required by above ordered that the statement of issues required to be included in each party’s further trial memorandum as ordered above shall govern the admissibility of evidence at the further trial in this case in that evidence offered at such further trial by a party shall be deemed irrelevant unless it pertains to one or more of the issues set forth in such party’s statement of issues it is further ordered that neither party shall be allowed to advance a position or theory underlying that position with respect to any of the issues required to be in- cluded in the statement of issues as ordered above which is different from the position and theory as to each such issue required to be included in the state- ment of positions and theories as ordered above the court held the further trial in this case on august through findings_of_fact some facts have been stipulated and are so found except as stated herein at the time the petition was filed petitioner resided in san rafael california petitioner who was born in russia immigrated to the united_states in date during the years at issue petitioner and ms brodsky were married they divorced sometime after the accounts of petitioner and or ms brodsky identification of the accounts of petitioner and or ms brodsky during the taxable years indicated petitioner and or ms brodsky maintained at least the following bank accounts credit card accounts and loan accounts with the financial institutions shown below collectively petitioner’s banks taxable financial type of year institution account account no account_holder bank of checking petitioner america bank of checking uvw department america bank of checking petitioner and america ms brodsky bank of bank ms brodsky america bank of line of petitioner and america credit ms brodsky mckesson checking s ms brodsky employees’ federal credit_union mckesson checking d ms brodsky employees’ federal credit_union american bank’ ms brodsky savings american saving sec_4 ms brodsky as savings custodian for victoria brodsky bank of automobile petitioner america loan citibank credit card ms brodsky bank of master card petitioner america bank of master card petitioner and america ms brodsky bank of visa’ petitioner and america ms brodsky 'the letters uvw stand for university video wholesale which as discussed below was a name under which petitioner operated a sole proprietor- ship during the years at issue the record does not disclose the reason why account no over which petitioner had signature_authority refers to uvw department rather than merely to uvw the record does not disclose whether account no was a checking a savings or some other type of account 7account no was a revolving loan account which had a credit limit of dollar_figure ‘the record does not disclose whether account no was a checking a savings or some other type of account the parties stipulated that account no was a master card account that petitioner maintained during the years indicated that stipulation is clearly contrary to the facts that we have found are established by the record and we may and we shall disregard it see 93_tc_181 the record establishes and we have found that account no was a visa account in the names of both petitioner and ms brodsky for convenience we shall refer to bank of america account no as petitioner’s uvw account to bank of america account no as petitioner’s equity line account collectively to petitioner’s equity line account petitioner’s bank of america automobile loan account no and all credit card accounts listed above as petitioner’s credit accounts collectively to all banking checking and savings accounts listed above as petitioner’s bank accounts and collectively to all the accounts listed above as petitioner’s accounts certain activity with respect to petitioner’s accounts during the years at issue the total_amounts shown below were deposited into petitioner’s bank accounts including peti- tioner’s uvw account or were deposited into petitioner’s credit accounts including petitioner’s equity line account were paid against the balances due on such credit accounts -- - account no type of account bank 'dollar_figure 'dollar_figure ‘dollar_figure bank 'dollar_figure 'dollar_figure dollar_figure bank dollar_figure dollar_figure dollar_figure bank --- --- --- line of credit dollar_figure dollar_figure 'dollar_figure bank dollar_figure dollar_figure dollar_figure d bank -- dollar_figure dollar_figure bank -- --- --- bank dollar_figure --- dollar_figure bank dollar_figure dollar_figure -- credit card dollar_figure dollar_figure dollar_figure master card dollar_figure dollar_figure dollar_figure master card dollar_figure dollar_figure dollar_figure visa dollar_figure dollar_figure dollar_figure ‘dollar_figure dollar_figure 1'dollar_figure ‘the total_amounts of the various deposits into certain of petitioner’s accounts which the parties stipulated contained mathematical errors such stipulations of such total_amounts are clearly contrary to the facts that we have found are established by the record in this case we have disregarded such incorrect total_amounts and have listed above the correct total_amounts of deposits that we have found are established by the record see cal-maine foods inc v commissioner supra during the years at issue petitioner received the amounts of cash shown below when certain deposits were made into certain of petitioner’s bank accounts including petitioner’s uvw ac- count and certain payments were made against the balances due on certain of petitioner’s credit accounts including petitioner’s eguity line account account no type of account bank dollar_figure dollar_figure dollar_figure bank big_number big_number big_number bank --- bank --- --- line of credit --- s bank --- d bank --- --- master card --- --- master card on date petitioner cashed a cashier’s check payable to him in the amount of dollar_figure that was issued by home savings of america included within the total deposits during into peti- tioner’s uvw account were the following deposits date of amount of deposit description and payor of item deposited deposit check for dollar_figure from vladimir kroma dollar_figure bank of america cashier’s check for dollar_figure pur- big_number chased by uvw and made payable to marcel feldberg’ ‘the last name of vladimir kroma mr kroma also appears in the record as khoma uvw purchased the dollar_figure cashier’s check by tendering to bank of america a dollar_figure check dated date payable to the order of uvw and drawn on the account of rad tronics inc a dollar_figure check dated date payable to cash and drawn on petitioner’s uvw account and a dollar_figure check dated date payable to cash and drawn on petitioner’s uvw account included within the total deposits during the years at issue into petitioner’s equity line account were the following depos-- its which included one check a portion of which was deposited into that account and a portion of which was negotiated for cash amount date of amount of negotiated deposit description and payor of item deposited deposit for cash not disclosed by credible_evidence in the dollar_figure --- record great western bank cashier’s check no big_number --- for dollar_figure payable to peti- tioner check for dollar_figure from old east-west trad- big_number --- ing co east-west check for dollar_figure from east-west big_number --- check for dollar_figure from east-west big_number --- dollar_figure in cash from east-west and mikhail big_number --- guterman check for dollar_figure from first marin realty big_number dollar_figure inc check for dollar_figure from first marin realty big_number --- inc dollar_figure in cash from east-west big_number --- dollar_figure in cash from east-west big_number --- dollar_figure in cash from roman kirdan big_number ---- during certain checks including the following were drawn on petitioner’s uvw account date of check check no payee amount konstantin reingatch dollar_figure igor dubrovsky cash big_number cash big_number cash big_number during and certain checks including the follow- ing were drawn on petitioner’s equity line account date of check check no payee amount cash dollar_figure not disclosed by credible_evidence dollar_figure in the record cash dollar_figure mr kroma ’ dollar_figure k reingatch dollar_figure k reingatch dollar_figure not disclosed by credible_evidence dollar_figure in the record ylb east west trading co dollar_figure ‘check no is not part of the record the date of check no shown above is the date on which that check was posted to petitioner’s equity line account the record includes only a copy of the front of check no although we are satisfied from that copy that check no was negotiated we are not satisfied from the copy of the front of check no or from any other evidence in the record that mr kroma deposited and or cashed that check nor do we know from the record the date on which check no was negotiated for example mr kroma could have endorsed check no to petitioner who in turn deposited and or cashed it check no is not part of the record the date of check no shown above is the date on which that check was posted to petitioner’s equity line account the following check was drawn on checking account no that petitioner and ms brodsky maintained at bank of america during the years at issue_date of check check no payee amount cash dollar_figure during the following purchases were made from carvis discount and charged to master card account no transaction date amount dollar_figure dollar_figure on the dates shown below petitioner purchased from bank of america the following cashier’s checks payable to the payees indicated date payee amount macy’s california dollar_figure macy’s california big_number macy’s california big_number mr kroma big_number carvis discount big_number 'the copy of the dollar_figure cashier’s check payable to macy’s california is not totally legible but it appears that the date in date appearing on that check i sec_3 the record includes only a copy of the front of the purchaser’s copy of the cashier’s check payable to mr kroma we are not satisfied from that copy or from any other evidence in the record that that cashier’s check was ever negotiated even if we were satisfied that that cashier’s check was negoti- ated we are not satisfied from that copy or from any other evidence in the record that mr kroma deposited and or cashed the cashier’s check payable to him nor do we know from the record the date on which that check was negoti- ated for example mr kroma could have endorsed that cashier’s check to petitioner who in turn deposited and or cashed it the record includes only a copy of the front of the purchaser’s copy of the cashier’s check payable to carvis discount we are not satisfied from that copy or from any other evidence in the record that that cashier’s check was ever negotiated even if we were satisfied that that cashier’s check was negotiated we are not satisfied from that copy or from any other evidence in the record that carvis discount deposited and or cashed the cashier’s check payable to it nor do we know from the record the date on which that check was negotiated for example carvis discount could have endorsed that cashier’s check to petitioner who in turn deposited and or cashed it petitioner’s income-producing activities as discussed in more detail below during each of the years at issue petitioner operated one or more sole proprietorships and engaged in certain income-producing activities with certain individuals and entities in addition during part of petitioner was a partner in a partnership operating under the name mz trading company mz trading on date date and date petitioner and ms brodsky did not have a cash hoard or other -- - substantial accumulation of cash university video wholesale during the years at issue petitioner operated a sole_proprietorship under the name university video wholesale that engaged in various activities relating to the sale of video equipment to small retail stores and the purchase for resale of certain other types of consumer goods such as shoes and handbags mz trading company around date petitioner and mikhail guterman mr guterman formed a partnership known as mz trading company mz trading engaged in various activities relating to the purchase in the united_states of certain types of merchandise and the sale of such merchandise to customers located in russia and the ukraine during at least part of a checking account over which petitioner had signature_authority was maintained at bank of america in the name of mz trading mz trading account included within the total deposits during into peti- tioner’s checking account were the following depos- its which included two checks a portion of each of which was deposited into that account and a portion of each of which was as discussed below the joint tax returns of petitioner and ms brodsky for and indicated that the name under which petitioner operated the schedule c business that he reported in those returns was zinovy brodsky and their joint tax_return for did not provide the names under which petitioner operated the two schedule c businesses that he reported in that return negotiated for cash amount date of description and amount of negotiated deposit payor of item deposited deposit for cash check for dollar_figure from mz trading dollar_figure --- check for dollar_figure from mz trading --- check for dollar_figure from mr guterman dollar_figure check for dollar_figure from mz trading big_number --- check for dollar_figure from mz trading big_number --- check for dollar_figure from mz trading check for dollar_figure from mr guterman --- included within the total deposits during into peti- tioner’s uvw account were the following deposits which included four checks a portion of each of which was deposited into that account and a portion of each of which was negotiated for cash amount nego- date of description and amount of tiated deposit payor of item deposited deposit for cash check for dollar_figure from mz trading dollar_figure --- check for dollar_figure from mz trading big_number ---- check for dollar_figure from mz trading big_number ---- check for dollar_figure from mz trading dollar_figure check for dollar_figure from mz trading ---- check for dollar_figure from mr guterman ---- check for dollar_figure from mz trading check for dollar_figure from mr guterman ---- check for dollar_figure from mz trading check for dollar_figure from mz trading check for dollar_figure from mr guterman big_number --- included within the total deposits during into peti- date of deposit check for dollar_figure from mr description and payor of check check for dollar_figure from the mz trading account payable to b a custom line petitioner petitioner tioner’s equity line account were the following checks amount of deposit and signed by guterman payable to dollar_figure dollar_figure petitioner signed a check dated date in the amount of dollar_figure that was drawn on the mz trading account and made payable to b a and negotiated it to make a payment against the balance due on his master card account no at a time after the year that is not disclosed by credible_evidence in the record petitioner and mr guterman prepared most if not all of a handwritten document dated date that lists a series of transactions in which petitioner claims mz trading engaged during we shall refer to the handwritten document dated date as mz trading’s purported transaction summary for each transaction listed on mz trading’s purported transaction summary entries appeared under columns headed cost sold profit and expenses numbers and handwriting that is largely illegible appeared under each of those columns felix vulis during at least the years at issue petitioner participated in various income-producing activities with felix vulis mr vulis and certain organizations with which mr vulis was associ- ated during at least and mr vulis was chief_executive_officer of amuke’ group of companies amuke group and slava averbach mr averbach and alex ferrer mr ferrer also partic- ‘the word amuke stood for america ukraine -- - ipated in operating those companies during those years amuke group which had an undisclosed relationship with an entity known as america-ukraine professional business association and chamber of commerce amuke business association engaged in various activities relating to the purchase of certain merchandise and the sale of such merchandise to customers located in the former soviet union we shall refer collectively to amuke group and amuke business association as the amuke organizations during and petitioner engaged in certain income- producing activities with the amuke organizations which con- sisted of petitioner’s locating for those organizations certain merchandise that they believed they would be able to sell ata profit to their customers in general if petitioner located certain merchandise that the amuke organizations wanted to purchase for resale they advanced petitioner the funds to acquire that merchandise over the course of their business relationship petitioner located and the amuke organizations purchased various kinds of merchandise such as sweatshirts water filters candies lighters men’s suits and canned fruit the amuke organizations compensated petitioner for locating certain merchandise on their behalf by paying him a portion of the profit from the resale of such merchandise petitioner received form_1099 miscellaneous income form_1099 from amuke group for that form showed that petitioner received from amuke group during nonemployee compensation of dollar_figure the record does not disclose whether amuke group issued form_1099 to petitioner for at a time that is not disclosed by the record mr vulis guarantied repayment of a dollar_figure loan that mr ferrer who was a business_associate of mr vulis at amuke group made to peti- tioner mr ferrer’s dollar_figure loan at a time that also is not disclosed by the record mr vulis as the guarantor of mr ferrer’s dollar_figure loan repaid that loan during at least petitioner participated in certain income-producing activities with commonwealth enterprises another business with which mr vulis was associated common- wealth enterprises like the amuke organizations was engaged in the purchase of certain merchandise for resale to customers located in the former soviet union petitioner conducted busi- ness with commonwealth enterprises in a manner similar to the manner in which he conducted business with the amuke organiza-- tions that is to say in general petitioner located certain merchandise on behalf of commonwealth enterprises that it be- lieved it would be able to resell at a profit to its customers and commonwealth enterprises compensated petitioner for his work by paying him a portion of the profit from the resale of such merchandise included within the total deposits during into peti- - - tioner’s uvw account were the following deposits which included one check a portion of which was deposited into that account and a portion of which was negotiated for cash amount date of amount of negotiated deposit description and payor of item deposited deposit for cash check for dollar_figure from amuke group dollar_figure dollar_figure check for dollar_figure from amuke group payable big_number --- to uvw and bank of america cashier’s check for dollar_figure purchased by petitioner and payable to l f banks co check for dollar_figure from commonwealth enter- big_number --- prise sec_12 check for dollar_figure from commonwealth enter- big_number ---- prises ‘petitioner purchased the dollar_figure cashier’s check by tendering to bank of america inter alia a dollar_figure check dated date from commonwealth enterprises payable to petitioner included within the total deposits during and into petitioner’s equity line account e payments against the balance due on that account were the following checks including one check a portion of which was deposited into that account e paid against the balance due on that account anda portion of which was negotiated for cash amount date of amount of negotiated payment description and payor of check payment for cash bank of america cashier’s check for dollar_figure 1dollar_figure ---- purchased by petitioner payable to star electronics check for dollar_figure from amuke business asso- big_number --- ciation payable to petitioner and check for dollar_figure from amuke business asso- ciation payable to uvw check for dollar_figure from amuke business asso- big_number dollar_figure ciation payable to petitioner check for dollar_figure from amuke group payable big_number --- to uvw with water systems written on the memorandum line check for dollar_figure from amuke group payable big_number --- to petitioner check for dollar_figure from commonwealth enter- big_number -- prises payable to petitioner check for dollar_figure from mr vulis payable to big_number --- cash check for dollar_figure from mr vulis payable to big_number --- cash check for dollar_figure from commonwealth enter- big_number --- prises payable to petitioner ‘petitioner purchased the dollar_figure cashier’s check by tendering to bank of america inter alia from amuke a dollar_figure check dated may business association that was payable to cash the record does not disclose what happened to the remaining dollar_figure of the dollar_figure check that was not used to make a payment against the balance due on petitioner’s equity line account the proceeds of the check for dollar_figure from amuke group that is listed above constituted an advance or loan from amuke group to petitioner in order for him to purchase certain water filters in the following check payable to commonwealth enter- prises was drawn on petitioner’s uvw account date of check check no amount dollar_figure nikolas kiritopoulos during at least part of petitioner participated in certain income-producing activities with nikolas kiritopoulos -- - mr kiritopoulos during at least part of that year mr vulis had signature_authority over a bank account maintained by mr kiritopoulos kiritopoulos’ account pursuant to that author- ity on the date shown below mr vulis signed the following check that was drawn on mr kiritopoulos’ account payable to petitioner and deposited into petitioner’s equity line account date of description and amount deposit payor of item deposited of deposit check for dollar_figure from mr kiritopoulos dollar_figure payable to petitioner vladimir svelsky during petitioner engaged in certain income-producing activities with vladimir syelsky mr syelsky an immigrant to the united_states who was born in the former soviet union on date mr syelsky filed a notice of commence-- ment of case under chapter of the bankruptcy code meeting of creditors and fixing of dates with the united_states bankruptcy court for the northern district of california bankruptcy court on date mr syelsky filed a document with the bankruptcy court that was entitled declaration concerning debtor’s schedules mr syelsky’s declaration in that docu- ment mr syelsky declared under penalties of perjury that the debtor’s schedules and summary of schedules that he filed with that court were true and correct attached to mr syelsky’s declaration was a summary of schedules in which he reported to the bankruptcy court that he had dollar_figure of total assets and - - dollar_figure of total liabilities on date mr syelsky filed a document entitled report of trustee in no asset case dated date which was signed by the trustee of mr syelsky’s bankruptcy_estate and which stated inter alia that the trustee has made diligent inquiry into the whereabouts of property belonging to the estate and that there is no property available for distribution from the estate over and above that exempted by the debtor s on date the bankruptcy court filed a final decree which ordered inter alia mr syelsky’s case under chapter of the u s bankruptcy code closed on date a check for dollar_figure which mr syelsky signed and on which the words and commission were written mr syelsky’s check was deposited along with a check for dollar_figure from eid’s tv into petitioner’s uvw account the proceeds of mr syelsky’s check constituted an advance or loan from mr syelsky to petitioner mr syelsky’s dollar_figure loan in order for him to purchase on behalf of mr syelsky certain merchandise that petitioner had located and that mr syelsky wanted to resell to one of mr syelsky’s customers mr vulis guarantied repayment of mr syelsky’s dollar_figure loan sometime after mr syelsky gave petitioner mr syelsky’s check mr -the date of date appeared on the front of the check for dollar_figure that mr syelsky signed however it is clear from the record that that check was actually signed and deposited on date and that the year was written on that check by mistake -- - syelsky canceled his order for the merchandise in question and asked petitioner to return the dollar_figure thereafter mr vulis as the guarantor of mr syelsky’s dollar_figure loan repaid that loan around date mr syelsky gave petitioner a dollar_figure check that mr syelsky signed and that represented a personal loan by mr syelsky to petitioner on that date the proceeds of that dollar_figure check were used to make a payment against the balance due on petitioner’s equity line account m p electronics at certain times during and petitioner conducted certain business transactions with m p klectronics a business operated by hardit chaudry mr chaudry and kishore raja mr raja at those times m p electronics engaged in the purchase for resale of various types of merchandise from retail stores such as circuit city macy’s and good guys retail stores which were overstocked defective damaged and or otherwise not salable by such stores we shall refer collectively to the types of merchandise that m p electronics purchased from certain retail stores as nonsalable merchandise generally at those times petitioner and m p electronics jointly placed bids with certain retail stores for the purchase of certain of such stores’ nonsalable merchandise on the dates shown below the following checks were drawn on petitioner’s uvw account and made payable to m p electronics or fashions for less date of amount check check no payee of check fashions store dollar_figure fashions store fashions store big_number fashions store m p electronics m p electronics big_number on date petitioner purchased a cashier’s check for dollar_figure from bank of america that was payable to m p elec-- tronics on date a cashier’s check for dollar_figure which was signed by petitioner as the purchaser of the check and payable to circuit city was purchased from bank of america although petitioner signed that cashier’s check as the purchaser the words purchaser m and p electronics were typewritten on the purchaser’s copy of that check new age electronics during at least part of petitioner engaged in certain business transactions with new age electronics inc new age that are not disclosed by the record which involved the purchase of certain merchandise for resale in russia new age issued petitioner form_1099 for which showed that petitioner received nonemployee compensation of dollar_figure ‘during at least part of mr raja’s wife operated a ladies clothing store under the name fashions for less fashions store church street property from through at least mr vulis who at the time of the further trial in this case was a licensed real_estate broker in the state of california was the broker in charge of markfel property management and investment corporation markfel in general during those years markfel served as a real_estate investment vehicle for various individuals who wanted to invest in certain real properties as such markfel identified a particular real_property as a desirable investment collected funds from those individuals who were interested in investing in that real_property and purchased that real_property in the names of those interested individuals and not in its own name any individual who chose to invest through markfel in a particular real_property was responsible for any expenditures with respect to that real_property in proportion to such individual’s invest- ment interest therein at times that are not disclosed by credible_evidence in the record petitioner paid markfel amounts of money that are not disclosed by credible_evidence in the record which were to be used to invest in certain real properties to increase his respective investment interests in such properties and or to pay his proportionate share of any respective expenditures with respect to such interests over the course of his dealings with markfel petitioner allocated the funds that he paid markfel to several real properties one of the real properties that markfel had identified as a desirable investment was a property located pincite church street san francisco california sometime around the end of date the church street property was purchased in the names of mr vulis and peter kogan mr kogan at a time not disclosed by credible_evidence in the record petitioner directed that an unspecified portion of the funds that he had paid markfel be invested in the church street property at least during part of and until the date of the sale of the church street property mr vulis mr kogan and petitioner owned certain interests in that property the extent of petitioner’s interest in that property is not disclosed by credible_evidence in the record as an owner of an interest in the church street prop- erty petitioner was responsible for paying a certain portion of any expenditures with respect to that property in the church street property was sold sometime thereafter mr vulis provided certain information with respect to that sale which is not disclosed by the record to edward sutton mr sutton the preparer return preparer of form_1040 u s individual_income_tax_return that petitioner and ms brodsky jointly filed joint_return for sanchez street property during at least and petitioner ms - - brodsky joseph dubrovsky mr dubrovsky ’ and certain other individuals invested in certain real properties including a property located at camino del mar san francisco california camino property and a property located pincite sanchez street san francisco california on the dates shown below petitioner and ms brodsky paid the following amounts by check to acquire their interest in the camino property date of check amount of check dollar_figure big_number big_number on date mr dubrovsky and his wife bella dubrovsky ms dubrovsky transferred to petitioner and ms brodsky a 10-percent interest in the camino property around date the camino property was sold or exchanged around date petitioner deposited a dollar_figure check dated date from mr dubrovsky sometime in date mr dubrovsky and ms dubrovsky acquired the sanchez street property during at least the period beginning sometime in and ending on the date of the sale of the sanchez street property in petitioner and ms brodsky owned an interest in that property no credible_evidence in the record discloses the extent of that interest or how or when they acquired that interest as owners of an interest in the sanchez ‘mr dubrovsky’s first name also appears in the record as josif and josef -- street property petitioner and ms brodsky were responsible for paying any expenditures with respect to that property in propor- tion to their investment_interest therein included within the total deposits during into peti- tioner’s uvw account were the following deposits which included one or two checks a portion of which was deposited into that account and a portion of which was negotiated for cash amount date of amount of negotiated deposit description and payor of item deposited deposit for cash check for dollar_figure from mr dubrovsky and dollar_figure -- ms dubrovsky check for dollar_figure from conti- nental video system and cash deposits totaling dollar_figure money order for dollar_figure from mr dubrovsky big_number ---- and cash deposits totaling dollar_figure check for dollar_figure from s j co and check big_number dollar_figure for dollar_figure from west coast video ‘during and as of the time of the further trial in this case mr dubrovsky was a part owner of s j co mr dubrovsky owned any part of s j co the record does not disclose whether on date on the dates shown below the following checks that were payable to mr dubrovsky were drawn on petitioner’s uvw account date of check check no amount dollar_figure big_number on the dates shown below the following checks that were payable to mr dubrovsky were drawn on petitioner’s equity line account date of check check no amount dollar_figure big_number -- - interest and telephone expenses during and petitioner paid interest to bank of america with respect to petitioner’s equity line account in the respective amounts of dollar_figure dollar_figure and dollar_figure during the years at issue petitioner maintained sepa- rate home telephone lines one of which was supposed to be used for personal purposes and one of which was supposed to be used for business purposes and separate cellular telephone lines one of which was supposed to be used for personal purposes and one of which was supposed to be used for business purposes he paid the charges with respect to all of those telephone lines by checks drawn on petitioner’s uvw account and one or more of petitioner’s other accounts during each of the years at issue petitioner paid at least the following amounts for telephone expenses by checks drawn on petitioner’s uvw account telephone service provider pacific bell dollar_figure dollar_figure dollar_figure cellular one dollar_figure dollar_figure dollar_figure nationwide cellular --- --- dollar_figure services inc tax returns joint returns of petitioner and ms brodsky for through petitioner and ms brodsky filed joint returns for each of the years at issue the and joint returns identified --- - mr sutton as the return preparer the joint_return identi- fied richard j dibernardo c p a mr dibernardo as the return preparer at the time the joint_return was being prepared respondent was conducting an examination of certain of petitioner’s tax returns for years prior to on page of the joint_return petitioner and ms brodsky reported inter alia the following line on page of amount item_of_income or loss the return reported wages salaries tips etc dollar_figure taxable interest_income 8a dividend income taxable refunds of state and big_number local_income_taxes business income or loss big_number total pensions and annuities l7va big_number rents royalties partnerships estates trusts etc other income’ ‘petitioner and ms brodsky reported on page line 17b that none of the reported amount of pensions and annuities was taxable petitioner and ms brodsky described their other income as an investment_interest adjustment in their joint_return petitioner and ms brodsky reported adjusted_gross_income of dollar_figure itemized_deductions of dollar_figure and taxable_income of dollar_figure the joint_return included schedule c profit or loss from business schedule c the schedule c indicated that petitioner operated an audio-video sales business under the name ‘mr dibernardo first met petitioner in sometime prior to date the date on which respondent received the joint_return in question - - zinovy brodsky in part i income of the schedule c petitioner and ms brodsky reported gross_receipts or sales of dollar_figure cost_of_goods_sold of dollar_figure other income of dollar_figure and gross_income of dollar_figure in part ii of the schedule c expenses petitioner and ms brodsky claimed deduc-- tions for inter alia other interest of dollar_figure and other expenses of dollar_figure petitioner and ms brodsky reported in the schedule c total expenses before expenses for business use of your home of dollar_figure expenses for business use of your home of dollar_figure and net_profit_or_loss of dollar_figure the joint_return also included schedule e supplemental income and loss schedule e in which petitioner and ms brodsky reported the church street property and the sanchez street property as rental properties in part i of the schedule e petitioner and ms brodsky claimed only rental and royalty expenses with respect to the church street property and both rental and royalty income and rental and royalty expenses with respect to the sanchez street property in part i of the schedule e petitioner and ms brodsky claimed total expenses of dollar_figure and a deductible rental loss of dollar_figure with respect to the church street property in that part of that according to a statement attached to their joint_return petitioner and ms brodsky reported that the deduction claimed for other expenses included inter alia dollar_figure for car phone and dollar_figure for phone - - schedule they reported rents received of dollar_figure and claimed total expenses of dollar_figure and a deductible rental loss of dollar_figure with respect to the sanchez street property in part i of the schedule e petitioner and ms brodsky claimed total rental or royalty income or loss of dollar_figure with respect to the church street property and the sanchez street property on page of the joint_return petitioner and ms brodsky reported inter alia the following line on page of item_of income or loss the return amount wages salaries tips etc dollar_figure taxable interest_income 8a dividend income taxable refunds credits or off- big_number sets of state_and_local_income_taxes business income or loss big_number capital_gain or loss big_number total pensions and annuities l7a big_number rents royalties partnerships big_number estates trusts etc other income’ ‘petitioner and ms brodsky reported on page line 17b that only dollar_figure of the reported amount of pensions and annuities was taxable petitioner and ms brodsky described their other income as an investment_interest carryover the joint_return showed adjusted_gross_income of dollar_figure itemized_deductions of dollar_figure and no taxable_income the joint_return included schedule c which indicated that petitioner operated an audio-video sales business under the name zinovy brodsky in part i income of the schedule c petitioner and ms brodsky reported gross_receipts or sales of dollar_figure cost_of_goods_sold of dollar_figure and gross_income of - - dollar_figure in part ii of the schedule c expenses petitioner and ms brodsky claimed inter alia other interest of dollar_figure travel of dollar_figure and other expenses of dollar_figure ' the schedule c showed total expenses before expenses for business use of home of dollar_figure expenses for business use of your home of dollar_figure and net_profit_or_loss of dollar_figure the joint_return also included schedule d capital_gains_and_losses schedule d part ii of the schedule d long-term_capital_gains and losses reported that on date petitioner and ms brodsky sold for dollar_figure an interest in the church street property which they claimed they acquired on date that on the date of that sale they had a basis of dollar_figure in that property interest and that they realized a loss from that sale of dollar_figure part v of the schedule d capital_loss carryovers from to reported all of that claimed loss as a long-term_capital_loss carryover to the joint_return also included schedule e in which petitioner and ms brodsky reported the church street property and the sanchez street property as rental properties in part i of the schedule e petitioner and ms brodsky reported no rental and royalty income and claimed no rental and royalty expenses with respect to the church street property in that petitioner and ms brodsky reported that the amount claim- ed for other expenses included inter alia dollar_figure for phone - - part of that schedule they reported rents received of dollar_figure and claimed total expenses of dollar_figure and a deductible rental real_estate loss of dollar_figure with respect to the sanchez street property in part i of the schedule e petitioner and ms brodsky claimed total rental real_estate and royalty income or loss of dollar_figure with respect to the sanchez street property on date respondent received the joint_return on page of the joint_return petitioner and ms brodsky reported inter alia the following line on page of item_of_income or loss the return amount wages salaries tips etc dollar_figure taxable interest_income 8a dividend income big_number business income or loss big_number capital_gain or loss big_number total ira_distributions 16a ‘8 rental real_estate royalties big_number partnerships s_corporations trusts etc ‘petitioner and ms brodsky reported that the entire amount of the ira_distributions was taxable in the joint_return petitioner and ms brodsky reported adjusted_gross_income of dollar_figure itemized_deductions of dollar_figure and taxable_income of dollar_figure the joint_return included two schedules c one of which showed that petitioner operated a business as an audio video components wholesaler wholesale business and the other of which showed that petitioner operated a business described as - - consignment sales -- cd’s consignment sales business part i income of the schedule c relating to the wholesale business reported gross_receipts or sales of dollar_figure cost_of_goods_sold of dollar_figure and gross_income of dollar_figure the schedule c for the wholesale business showed total expenses before expenses for business use of home of dollar_figure expenses for business use of your home of dollar_figure and net_profit_or_loss of dollar_figure part i income of the schedule c relating to the consignment sales business reported no gross_income total expenses before expenses for business use of home of dollar_figure and net_profit_or_loss of dollar_figure the joint_return also included schedule d part ii of the schedule d long-term_capital_gains and losses reported gain from form of dollar_figure long-term_capital_loss carry- over from schedule d of dollar_figure and net_long-term_capital_gain or loss of dollar_figure the joint_return also included form_4797 sales of business property form that was referenced in part ii of the schedule d in part iii of that form gain from dispo- sition of property under sec_1245 sec_1250 sec_1252 sec_1254 and sec_1255 petitioner and ms brodsky reported that on date they sold for dollar_figure an interest in the sanchez street ‘the respective schedules c for those two businesses did not list the names under which petitioner operated them - - property which they claimed they acquired on date that on the date of that sale they had a basis of dollar_figure in that property interest depreciation or depletion allowed_or_allowable of dollar_figure and an adjusted_basis of dollar_figure and that they realized total gain from that sale of dollar_figure the joint_return also included schedule e in which petitioner and ms brodsky reported the sanchez street property as rental property in part i of the schedule e petitioner and ms brodsky claimed only rental and royalty expenses with respect to that property in that part of that schedule they claimed total expenses and deductible rental real_estate loss of dollar_figure and total rental real_estate and royalty income and loss of dollar_figure with respect to the sanchez street property in part ii of the schedule e income or loss from partner- ships and s_corporations petitioner and ms brodsky claimed dollar_figure of nonpassive_income from schedule_k-1 from mz trading mz trading’s return for mz trading filed form_1065 u s partnership return of income form_1065 for which reported that mz trading started business on date in the form_1065 mz trading reported gross_receipts or sales of dollar_figure cost_of_goods_sold of dollar_figure and total income of dollar_figure respondent’s examination of certain returns sometime in respondent assigned kathleen rodegeb ms - - rodegeb one of respondent’s revenue agents to examine the joint returns that petitioner and ms brodsky had filed for the taxable years through sometime after she began the examination of those returns ms rodegeb commenced an examina-- tion of the joint_return that petitioner and ms brodsky had filed for the taxable_year mr sutton represented peti- tioner and ms brodsky during the course of respondent’s examina-- tion of their joint returns for through during her examination of the joint returns of petitioner and ms brodsky for through ms rodegeb asked peti- tioner to send her all of his records with respect to those taxable years in response to that request petitioner provided ms rodegeb with only limited records consisting of certain bank statements certain purchase invoices and certain canceled checks petitioner did not provide ms rodegeb with any books of account such as general ledgers or other records with respect to his income-producing activities books_and_records for the taxable years through that she needed in order to conduct the examination of those taxable years consequently ms rodegeb issued summonses on behalf of respondent to the banks at which petitioner had informed her he and or ms brodsky had maintained accounts during through around date ms rodegeb held a conference date conference with petitioner and mr sutton at which -- -- she informed them that she did not believe that the limited books_and_records that petitioner had provided to her substantiated the various items that were claimed in the joint returns for through at that conference ms rodegeb made certain recommendations to petitioner with respect to the types of books_and_records that he should maintain ms rodegeb also informed both petitioner and mr sutton at the date conference that after she concluded the examination of the joint returns of petitioner and ms brodsky for taxable years through she intended to recommend that respondent issue a so-called inadequate records notice inadequate records notice to them which would require that they show respondent that they were keeping adequate books_and_records sometime after the date conference ms rodegeb met with her manager regarding inter alia her recommendation that respondent issue an inadequate records notice to petitioner and ms brodsky the only effect of issuing such a notice would have been to trigger an examination of the joint returns of petitioner and ms brodsky for taxable years after the last year examined by ms rodegeb since ms rodegeb’s manager had already concluded that respondent should examine those joint returns it was decided that respondent would not issue an inadequate records notice to petitioner and ms brodsky at the conclusion of respon- dent’s examination of their joint returns for taxable years through at the conclusion of respondent’s examination of the joint_return of petitioner and ms brodsky respondent did not make any determinations with respect to the gross_receipts reported in schedule c of that return around date respondent assigned another revenue_agent theresa martin ms martin to examine the joint_return of petitioner and ms brodsky in early date ms martin mailed to petitioner and ms brodsky a letter anda written request for documents collectively the date letter the date letter asked petitioner and ms brodsky to provide her with all of the statements checks and bank documents for all of the bank accounts both personal and busi- ness over which one or both of them had signature_authority in response to the date letter petitioner provided ms martin with certain statements and canceled checks with respect to petitioner’s uvw account sometime between the date in early date on which ms martin sent the date letter to petitioner and ms brodsky and the date in date on which ms martin first met with petitioner and ms brodsky date conference petitioner executed a power_of_attorney that authorized mr sutton to represent him with respect to respondent’s examination of the joint_return that petitioner and ms brodsky had filed - al --- sometime after the date conference ms martin wrote mr sutton a letter ms martin’s second letter in which she indicated that she believed that petitioner and or ms brodsky had maintained accounts during in addition to the accounts about which petitioner had previously informed her ms martin explained in ms martin’s second letter why she held that belief and enclosed a second written request for documents with that letter that second request asked petitioner and ms brodsky to provide ms martin within one month all records pertaining to any such additional accounts ms martin received no response to ms martin’s second letter or to her second written request for documents consequently ms martin issued summonses on behalf of respondent to the banks at which she knew or believed petitioner and or ms brodsky had maintained accounts during sometime in date respondent through ms martin decided to commence an examination of the joint_return of petitioner and ms brodsky around that time ms martin mailed mr sutton a letter and a written request for documents for their taxable_year collectively the date letter the date letter asked that petitioner and ms brodsky provide ms martin with all records with respect to the accounts that one or both of them had maintained during ms martin received no response to the date letter consequently ms martin - -- issued summonses on behalf of respondent to the banks at which she knew or believed petitioner and or ms brodsky had maintained accounts during based on certain information contained in the documents that ms martin received as a result of the summonses that respondent issued she concluded that petitioner and or ms brodsky had maintained additional accounts during and that they had failed to disclose to her consequently ms martin issued summonses on behalf of respondent to obtain information with respect to those additional accounts based on certain information contained in the documents that ms martin had received as a result of the summonses that respon- dent issued she prepared a spreadsheet for and that spreadsheet showed each of the deposits that had been made into each of the accounts that ms martin knew petitioner and or ms brodsky had maintained during those years as well as the date and the amount of each such deposit deposits analy- sis after ms martin completed the deposits analy- sis she mailed a copy of it to mr sutton along with another written request for documents and a written request that peti- tioner and ms brodsky identify any item listed in that analysis which they believed to be nontaxable and provide her with records to verify the source of any such item ms martin did not receive any response to those requests thereafter in order to -- - schedule a meeting with petitioner and ms brodsky ms martin attempted several times to reach mr sutton by telephone and also sent him another letter mr sutton did not respond to those telephone calls or that letter sometime in date ms martin received a power_of_attorney authorizing elizabeth schwiff ms schwiff to represent petitioner and ms brodsky with respect to respondent’s examina-- tion of their joint returns for and thereafter ms martin telephoned ms schwiff during that telephone call ms schwiff asked ms martin to mail her copies of all of the requests for documents that ms martin had issued with respect to and the bank statements that ms martin had reviewed for those years regarding accounts that petitioner and or ms brodsky had maintained during those years and the deposits analysis that ms martin had prepared ms martin complied with ms schwiff’s requests sometime after ms martin mailed ms schwiff the copies of all of the documents that ms schwiff had requested ms schwiff informed ms martin that petitioner and ms brodsky intended to organize their records thereafter ms martin had no further contact with ms schwiff sometime between the end of date and the beginning of date respondent received a power_of_attorney authorizing mr dibernardo to represent petitioner and ms brodsky with respect to respondent’s examination of their joint returns for - and mr dibernardo asked ms martin to send him copies of all of the requests for documents that ms martin had issued with respect to and the bank statements that ms martin had reviewed for those years regarding accounts that petitioner and or ms brodsky maintained during those years and the deposits analysis that ms martin had prepared ms martin complied with mr dibernardo’s requests sometime after mr dibernardo began representing petitioner and ms brodsky with respect to respondent’s examination of their joint returns for and ms martin attempted to schedule a conference with petitioner ms brodsky and mr dibernardo ms martin scheduled three separate conferences with petitioner ms brodsky and mr dibernardo each of which petitioner can- celed to days prior to the date on which it was scheduled to take place consequently ms martin issued summonses on behalf of respondent to petitioner and ms brodsky in order to compel them to meet with her ms martin served the summons on peti- tioner at his home and sent a copy to mr dibernardo after having been served with the summons petitioner informed ms martin that he was not able to meet with her on the date stated in the summons and did not suggest another date on which he was able to meet with her ms martin rescheduled the conference date listed in the summons in order to accommodate petitioner pursuant to respondent’s summonses to petitioner and ms - - brodsky they met with ms martin on date date conference at that conference petitioner and ms brodsky made certain statements regarding the sources of certain deposits that were made into one or more of their accounts during and but did not provide any documentation to corroborate those statements after the date conference ms martin asked petitioner and ms brodsky to provide her with documentation to corroborate the statements that they had made at that conference regarding the sources of certain deposits that were made into one or more of their accounts during and ms martin received no documents in response to that request thereafter ms martin scheduled several more conferences with petitioner and ms brodsky all of which they canceled sometime early in respondent through ms martin commenced an examination of the joint_return of petitioner and ms brodsky for asked them for documents relating to that year received no response to that request and issued summonses on behalf of respondent to the banks at which petitioner and or ms brodsky had maintained accounts during sometime in the spring of ms martin’s manager directed her to complete the examination of the and joint returns of petitioner and ms brodsky thereafter respondent transferred responsibility for the examination of the joint_return of petitioner and ms -- - brodsky to another revenue_agent rafael oliveras mr oliveras who completed that examination mr oliveras inter alia reviewed the documents that respondent received in response to the summonses issued to the banks at which petitioner and or ms brodsky had maintained accounts during in connection with his examination of the joint_return of petitioner and ms brodsky mr oliveras had a number of telephonic conferences with their authorized representative representative mr oliveras asked that representative whether during certain of the deposits into the accounts of petitioner and or ms brodsky represented items that are not taxable although the representa-- tive of petitioner and ms brodsky suggested to mr oliveras that there might be certain nontaxable items that representative did not specify which deposits during are nontaxable nor did such representative provide mr oliveras with any documentation or other information showing that certain of such deposits are nontaxable the representative of petitioner and ms brodsky never informed mr oliveras that petitioner had obtained any loans during in addition to working on the examination of the joint_return of petitioner and ms brodsky mr oliveras conducted an examination of form_1065 of mz trading for in connection with that latter examination mr oliveras performed a bank_deposits analysis of mz trading’s bank accounts for and -- - prepared a schedule dated date mr oliveras’ summary of mz trading’s deposits during mr oliveras’ summary of mz trading’s deposits during set forth inter alia mr oliveras’ conclusions with respect to certain information regard- ing each of the deposits that was made into mz trading’s accounts during ie the date the amount and the payor of each such deposit mr oliveras’ summary of mz trading’s deposits during showed total deposits during that year into mz trading’s accounts of dollar_figure and total taxable deposits of dollar_figure that summary also stated in pertinent part the t p did not provide an accurate reconciliation of the receipts received by the partnership mz trading during the period the bank deposit analysis reflects less deposits than the gross_receipts reported on the return mz trading’s form_1065 this is an indication of receipts being shifted to other accounts or kept on hand by the t p based on the bank deposit analysis gross re- ceipts are accepted as reported per sec_61 provisions by letter dated date respondent issued an inade- gquate records notice to petitioner and ms brodsky that letter stated in pertinent part our review of your records shows they do not adequately verify your federal tax_liability you are reguired by law to keep permanent records and supporting documents these records may consist of documents such as invoices bills tapes and receipts or a timely kept account book diary or statement of expenses and supporting receipts paid bills or cancelled checks these must be sufficiently detailed and arranged so that your liability can be -- - accurately reported and verified please send us within the next months an explanation of how you are correcting your recordkeeping to meet the requirements of the law notices of deficiency respondent issued a notice to petitioner and ms brodsky for and and a separate notice to them for in those respective notices respondent determined that petitioner and ms brodsky had unreported schedule c gross_receipts for and in the respective amounts of dollar_figure dollar_figure and dollar_figure in order to make those determinations respondent reconstructed under the bank_deposits method petitioner’s sched- ule c gross_receipts for each of the years and respondent’s bank_deposits analysis respondent used that indirect method of reconstructing those gross_receipts because petitioner and ms brodsky had not maintained adequate books_and_records for those years fach of the notices included schedules in which respondent listed for each of the years at issue respondent’s position regarding the sources of the deposits related to schedule c income into petitioner’s accounts during each such year and the total amount of such deposits during each such year from each such source in reconstructing the income of petitioner and ms brodsky for the years at issue respondent added to the results produced by respondent’s bank_deposits analysis certain addi- - tional amounts such as the amounts that petitioner received when he cashed and did not deposit in whole or in part certain checks or when he used certain checks to purchase certain cash- ier’s checks in the notices respondent disallowed the cost_of_goods_sold claimed in schedules c for and in the respective amounts of dollar_figure dollar_figure and dollar_figure in the notice for and respondent also disallowed for those two years claimed schedule c deductions of dollar_figure and dollar_figure respec-- tively in the notice for and respondent disallowed all of the claimed schedule e rental expenses for and in the amounts of dollar_figure and dollar_figure respectively because it has not been established that they were ordinary and necessary business_expenses or were ex- pended for the purpose designated in addition you have not established an ownership_interest in these properties nor has it been established that you were at risk per sec_465 of the internal_revenue_code xk kek as an alternative ground for disallowing the claimed schedule e rental expenses for and respondent determined that the claimed losses are not allowable per sec_469 of the internal_revenue_code because you did not actively participate in the management of the rental properties and because you have no other passive_income to offset the passive losses in the notice for and respondent also determined that instead of the dollar_figure loss which petitioner and ms - - brodsky reported in their joint_return with respect to the sale of the church street property they have a gain of dollar_figure from that sale all of which must be recognized for respondent made that determination with respect to the sale of the church street property because respondent determined that petitioner and ms brodsky had not established their basis in that property when it was sold ’ in the notice for respondent determined that instead of the dollar_figure gain which petitioner and ms brodsky reported in their joint_return with respect to the sale of the sanchez street property they have a gain from that sale of dollar_figure respondent made that determination because petitioner and ms brodsky had not established their basis in that property when it was sold ’ in the notices respondent further determined that peti- tioner and ms brodsky are liable for each of the years at issue for the fraud_penalty under sec_6663 on the entire amount of the underpayment for each such year of the tax that was required to be shown in the return for each such year in the alternative respondent determined in the notices that petitioner respondent also disallowed in the notice for and a claimed capital_loss_carryover to 3respondent also determined in the notice that peti- tioner and ms brodsky are not entitled to the dollar_figure capital_loss_carryover from that they claimed in their joint_return - - and ms brodsky are liable for each of the years at issue for the accuracy-related_penalty under sec_6662 because of negli- gence or disregard of rules or regulations under sec_6662 b in the notice respondent determined that petitioner and ms brodsky are liable for for the addition_to_tax under sec_6651 because they did not timely file their joint_return and did not show that that failure was due to reasonable_cause amendment to answer and reply to that amendment on date the court had filed respondent’s amend- ment to answer which respondent had lodged on date when respondent filed a motion for leave to file amendment to answer respondent affirmatively alleged in the amendment to answer inter alia that in addition to the amount of the cost_of_goods_sold claimed in the schedule c and disallowed in the notice for petitioner is not entitled for that year to dollar_figure of the remaining amount of the cost_of_goods_sold claimed in that schedule c on date petitioner submitted a document entitled notice of objection’ in which petitioner replied to certain affirmative allegations in respondent’s amendment to answer the court had that document filed as a reply to the amendment to answer petitioner’s reply to respondent’s amendment to answer - - in that reply petitioner denied various affirmative allegations made by respondent in the amendment to answer but did not deny any of the affirmative allegations in that amendment to answer regarding the additional dollar_figure of the cost_of_goods_sold for that petitioner and ms brodsky claimed in the schedule c and that respondent alleged in respondent’s amendment to answer should be disallowed opinion evidentiary issues the first evidentiary issue involves certain entries listed in three separate workpapers prepared by certain of respondent’s employees respondent’s workpapers one for each of the years at issue each of those workpapers shows for each of those years certain information that is listed under various headings with respect to each of the deposits into petitioner’s accounts including each of the payments against the balances due on petitioner’s credit accounts one such heading is payor we shall refer to the persons listed in respondent’s workpapers under the heading payor as payors ms martin prepared the respective workpapers for and and one or more of respondent’s other employees prepared the workpapers for ms martin and one or more of respon- dent’s other employees prepared respondent’s workpapers by using information contained in certain documents that respondent -- - received in response to the summonses that respondent issued to petitioner’s banks those documents included copies of the statements of petitioner’s accounts the deposit slips showing deposits into petitioner’s bank accounts and the checks deposited into petitioner’s bank accounts or used to make payments against the balances due on petitioner’s credit ac-- counts at the further trial in this case petitioner offered respondent’s workpapers into evidence and sought to rely on certain entries in those workpapers in order to establish the identity of the persons who petitioner claims were the payors of certain deposits into petitioner’s accounts respondent objected under rule of the federal rules of evidence fre the so- called best evidence rule to the admission into evidence of those entries listed in respondent’s workpapers under the heading payor for which the underlying documents establishing the respective payors listed in such entries are not part of the record in this case respondent’s evidentiary objection respondent indicated at the further trial that because peti- tioner notified respondent only several days prior to the date of the further trial that petitioner might offer respondent’s workpapers as exhibits in this case respondent had not had an opportunity to compare the entries in respondent’s workpapers with the stipulations and evidence introduced at the trial and to - - be introduced at the further trial in order to determine the entries to which respondent would object and the entries to which respondent would not object at the further trial in this case respondent requested and the court granted additional time in order for respondent to identify for the court the entries in respondent’s workpapers to which respondent was objecting the court advised the parties at the further trial that it would reserve ruling on the admissibil- ity of the entries in respondent’s workpapers to which respondent was objecting until respondent had the opportunity to identify such entries and that it would admit conditionally any testimony which the parties elicited at the further trial with respect to respondent’s workpapers subject_to the court’s ruling on the admissibility of the entries in such workpapers to which respon- dent was objecting at the conclusion of the further trial in this case respondent had not had the opportunity to review respondent’s workpapers in order to identify the entries in such workpapers to which respondent was objecting consequently the court permitted respondent to identify in respondent’s opening brief any such entries and allowed the parties to present argu- ments on brief with respect to the admissibility of the entries in respondent’s workpapers to which respondent was objecting it is our understanding that of the entries in respon- dent’s workpapers which relate to deposits that petitioner - contends remain at issue in this case respondent objects under fre to of them the material entries that are the subject of respondent’s evidentiary objection fre provides to prove the content of a writing recording or photograph the original writing recording or photograph is required except as otherwise provided in these rules or by act of congress for purposes of fre through entitled contents of writings recordings and photo- graphs an original of a writing is defined as the writing itself or any counterpart intended to have the same effect by a person executing or issuing it fre for those purposes a duplicate of a writing is defined as a counterpart produced by the same impression as the original or by other equivalent technigues which accurately reproduces the original fre a duplicate is admissible to the same extent as an original unless a genuine question is raised as as indicated above respondent objects to the admission of only those entries in respondent’s workpapers for which the underlying documents establishing the respective payors listed in such entries are not part of the record in this case respondent indicates on brief that respondent objects to of the entries that relate to deposits that petitioner contends remain at issue in this case however three of those entries listed payors which the parties stipulated and with respect to which the underlying documents establishing the identities of such payors are part of the record we construe and shall treat respondent’s evidentiary objection as pertaining to only of the entries which relate to deposits that petitioner contends remain at issue in this case respondent also objects under fre to certain other entries in respondent’s workpapers that do not pertain to any of the deposits that petitioner contends remain at issue we shall not specifically address those other entries -- - to the authenticity of the original or in the circumstances it would be unfair to admit the duplicate in lieu of the origi- nal fre the material entries that are the subject of respondent’s evidentiary objection are not originals or counterparts within the meaning of fre nor are they duplicates within the meaning of fre rather those entries reflect information that certain of respondent’s employees obtained by reviewing certain other documents obtained pursuant to respon- dent’s summonses to petitioner’s banks unless the federal rules of evidence or an act of congress provides an exception to fre that is applicable to the material entries that are the subject of respondent’s evidentiary objection such entries are not admissible petitioner relies on two exceptions to fre to support his position that the material entries that are the subject of respondent’s evidentiary objection are admissible to prove the identity of the payors during the years at issue of certain items that were deposited into petitioner’s accounts the first exception on which petitioner relies is fre which provides the original is not required and other evidence of the contents of a writing recording or photograph is admissible if-- original in possession of opponent ata time when an original was under the control of the party against whom offered that party was put on -- - notice by the pleadings or otherwise that the contents would be a subject of proof at the hear- ing and that party does not produce the original at the hearing the advisory committee’s notes accompanying fre explain the purpose of the exception to fre found in fre as follows basically the rule requiring the production of the original as proof of contents has developed as a rule_of preference if failure to produce the original is satisfactorily explained secondary evidence is admissible the instant rule specifies the circum- stances under which production of the original is excused it is petitioner’s position that respondent was in control of the originals of the documents i e checks and money order which certain of respondent’s employees reviewed in preparing the material entries that are the subject of respon- dent’s evidentiary objections and which listed the names of the payors during the years at issue of certain items that were deposited into petitioner’s accounts according to petitioner because respondent was in control of those originals fre permits the use of other evidence ie certain entries in respondent’s workpapers to prove the identity of those payors we disagree the originals of the documents that identify the payors during the years at issue of the items that relate to the mate- all but one of the items in question that were deposited into petitioner’s accounts and that relate to the material entries that are the subject of respondent’s evidentiary objec- tion were checks of some type and one of those items was a money order -- - rial entries that are the subject of respondent’s evidentiary objection are the items themselves ie the checks and the money order themselves see 860_f2d_500 ndollar_figure lst cir certain of respondent’s employees prepared the material entries that are the subject of respon- dent’s evidentiary objection by using copies which respondent received after having issued summonses to petitioner’s banks of microfiche of such checks and money order which microfiche those banks maintained for purposes of fre through those copies of such microfiche constitute duplicates and not origi- nals see id pincite on the record before us we find that respondent was never in control as required by fre of the originals of the documents that identify the payors during the years at issue of the items that relate to the material entries that are the subject of respondent’s evidentiary objection ’ we further find on the instant record that petitioner has not satisfactorily on the instant record we also have a question about whether petitioner satisfies the requirement under fre that respondent have been put on notice that the contents of respondent’s workpapers were to be a subject of proof at the further trial in this case in this connection respondent indicated at the further trial that petitioner did not notify respondent until date less than one week before the further trial in this case began that petitioner might offer respondent’s workpapers as exhibits in this case and that respon- dent did not have an opportunity to determine which entries in those workpapers are otherwise established by the stipulations and evidence introduced at the trial and to be introduced at the further trial and which entries he would object to at the further trial --- - explained his failure to produce the originals of the checks and the money order that relate to the material entries that are the subject of respondent’s evidentiary objection or the duplicates ie copies of the microfiche of such checks and money order which microfiche petitioner’s banks maintained if petitioner had obtained such originals and offered them at trial they would have been admissible see fre if petitioner had obtained such duplicates and offered them at trial they would have been admissible to the same extent as the originals see fre in either event petitioner would not have had to resort to secondary evidence consisting of the material entries in respondent’s workpapers that are the subject of respondent’s evidentiary objection in order to estab- lish who the checks and the money order in question showed the payors of such checks and money order to be on the record before us we find that fre does not permit petitioner to use those entries to prove the identity of the payors of the checks and the money order in question the second exception to fre on which petitioner relies is fre which provides the contents of voluminous writings recordings or photographs which cannot conveniently be examined in court may be presented in the form of a chart summary or calculation the originals or duplicates shall be made available for examination or copying or both by other parties at a reasonable_time_and_place the court may order that they are produced in court petitioner claims that under fre the material entries that are the subject of respondent’s evidentiary objection are admis-- -- - sible to prove the identity of the payors during the years at issue of certain items that were deposited into petitioner’s accounts that is because according to petitioner the docu- ments that showed those payors are voluminous and could not have been conveniently examined by the court we disagree only of the entries in respondent’s workpapers relate to deposits that petitioner contends remain at issue in this case respondent objects to only of those entries see supra note respondent does not object to the remaining entries because the payors listed in those entries are established by other evidence in the record without regard to the entries in respondent’s workpapers of the material entries that are the subject of respondent’s evidentiary objection only actually list payors it appears that instead of relying on those material entries that are the subject of respondent’s evidentiary objection petitioner could have established the identity of the payors listed in those entries by offering into evidence the originals or the duplicates of checks and money order we believe that we could have conveniently examined at the further trial the originals or the duplicates of those checks and money order in the instant case we do not believe and in any event petitioner has failed to show that those originals or one material entry that is the subject of respondent’s evidentiary objection does not show the payor of the deposit relating to that entry instead of the name of the payor the words unable to locate appear with respect to a deposit of dollar_figure made into petitioner’s equity line account on date -- - those duplicates would have been voluminous on the record before us we find that petitioner has failed to establish that the documents that certain of respondent’s employees reviewed in preparing the material entries that are the subject of respon- dent’s evidentiary objection are voluminous and could not have been conveniently examined in court on that record we find that fre does not permit petitioner to use those entries to show the payors of the checks and the money order in question although petitioner does not advance any argument under fre we believe that that rule is applicable in resolving respondent’s evidentiary objection fre provides contents of writings recordings or photographs may be proved by the testimony or deposition of the party against whom offered or by that party’s written admission without accounting for the nonproduction of the original on the record before us we find that the material entries that are the subject of respondent’s evidentiary objection constitute respondent’s written admission that those entries reflect the information contained in the documents used to create such entries ' on that record we also find that other entries in respondent’s workpapers to which respondent objects under fre constitute respondent’s written admission that those entries reflect the information contained in the documents used to create such entries '8tn this connection we note that respondent does not contend that the information contained in those entries is inaccurate nor do we question on the record before us the accuracy of such information -- - on the record before us we find that the material entries that are the subject of respondent’s evidentiary objection are admissible under fre and we overrule respondent’s eviden- tiary objection to those entries on that record we also overrule respondent’s evidentiary objection to other entries in respondent’s workpapers which do not pertain to any of the deposits that petitioner contends remain at issue in this case accordingly we admit respondent’s workpapers into evidence and make them part of the record in this case we also admit uncon- ditionally into the record in this case the testimony elicited by the parties at the further trial with respect to such workpapers the next evidentiary issue before us involves petitioner’s new position on brief as to the purpose for which he offered into the record at the further trial mr oliveras’ summary of mz trading’s deposits during mr oliveras’ summary mr oliveras prepared that summary in connection with respondent’s examination of mz trading’s form_1065 for mr oliveras’ summary set forth inter alia mr oliveras’ conclusions with respect to certain information regarding each of the deposits that was made into mz trading’s accounts during ie the date the amount and the payor of each such deposit as well as the following statements of mr oliveras mr oliveras’ state- ments the t p did not provide an accurate reconciliation of the receipts received by the partnership during the period the bank deposit analysis reflects less deposits than the gross_receipts reported on the return this is an -- - indication of receipts being shifted to other accounts or kept on hand by the t p based on the bank deposit analysis gross_receipts are accepted as reported per sec_61 provisions at the further trial respondent objected under fre to the admission into the record of mr oliveras’ summary respondent further objected to the admission of mr oliveras’ summary because respondent claimed that mr oliveras’ statements are hearsay at the further trial in this case in response to respon- dent’s evidentiary objections to mr oliveras’ summary peti- tioner clarified that he was not offering mr oliveras’ summary into the record for the truth of its content but rather for the limited purpose that it was a document prepared by mr oliveras on that limited basis we admitted mr oliveras’ summary into evidence and made it part of the record in this case on brief petitioner asks us to allow him to change the purpose for which he offered mr oliveras’ summary into evidence and to reconsider our evidentiary ruling with respect to that summary although not altogether clear petitioner appears to take the position on brief that mr oliveras’ summary should be admitted into the record for the truth of its contents rather than for the limited purpose for which petitioner requested that that summary be admitted into the record at the further trial in this case petitioner seeks on brief to have mr oliveras’ summary admitted into the record for the truth of its contents in order to establish through mr oliveras’ statements on the second page of that summary that there were substantial deposits to - -- petitioner’s line of credit account that had been included in mz trading company’s partnership taxable_income we shall not allow petitioner to change on brief the purpose for which he offered mr oliveras’ summary at the further trial in this case even if we were to admit mr oliveras’ summary into the record for the truth of its contents that summary does not establish as facts what petitioner contends it establishes petitioner relies on the following statements of mr oliveras that appear at the bottom of the second page of mr oliveras’ summary the bank deposit analysis reflects less deposits than the gross_receipts reported on the return this is an indication of receipts being shifted to other accounts or kept on hand by x mz trading according to petitioner the foregoing statements establish that certain deposits into one or more of petitioner’s accounts were included in mz trading’s taxable_income for we disagree the statements of mr oliveras on which petitioner relies show only that mr oliveras believed that because the bank_deposits analysis that he performed for with respect to mz trading showed less deposits of mz on brief petitioner also relies on mr oliveras’ summary in order to support petitioner’s contention that during he made a capital_contribution of approximately dollar_figure to mz trading mr oliveras’ summary does not support petitioner’s contention mr oliveras’ summary identifies two amounts i1 ée dollar_figure and dollar_figure as capital contributions that summary does not identify who made such capital contributions or when such capital contributions were made even if we were to admit mr oliveras’ summary into the record for the truth of its contents that summary does not establish that during petitioner made a capital_contribution of approximately dollar_figure to mz trading -- - trading than gross_receipts reported in its form_1065 it was possible that some of mz trading’s gross_receipts for were deposited into bank accounts other than mz trading’s bank account s or that mz trading did not deposit some of those gross_receipts the statements of mr oliveras in mr oliveras’ summary on which petitioner relies do not establish that any of mz trading’s gross_receipts for were shifted or deposited into any of petitioner’s accounts during that year issues relating to the burden_of_proof it is petitioner’s position that respondent has the burden of proving that for each of the years and each of the deposits into petitioner’s accounts that remains at issue is taxable in support of that position petitioner asserts sec_7522 requires the notice_of_deficiency to contain a description of the basis for the commis-- sioner’s tax determinations respondent’s notices of deficiency are based on the bank_deposits analysis and do not contain a detailed description of the deposits specific items of deposit must be relied on to prove whether the deposits are nontaxable which requires the presentation of different evidence to prove specific items not in the notices of deficiency at the same time respondent is the party objecting to the presen- tation of the documents that it prepared detailing the specific deposits therefore it is respondent who should have the burden_of_proof on these specific deposit issues as they are new matters within rule a united_states tax_court rules_of_practice and procedure and pursuant to the holding of shea v commissioner 112_tc_14 sec_7522 requires that a notice_of_deficiency de- scribe the basis for the tax_deficiency a new_matter is raised when the basis or the theory on which the commissioner of inter- nal revenue commissioner relies was not stated or described in -- - the notice_of_deficiency and the new basis or the new_theory requires the presentation of different evidence 112_tc_183 93_tc_500 the rule for determining whether the commissioner has raised a new_matter is consistent with and supported by the statutory requirement in sec_7522 that the notice_of_deficiency describe the basis for the commissioner’s determination this rule also provides a reasonable method for enforcing the requirements of sec_7522 shea v commissioner supra in the notice for and and in the notice for respondent determined that petitioner had unreported schedule c gross_receipts for each of the years at issue in making those determinations respondent reconstructed under the bank_deposits method petitioner’s schedule c gross_receipts for each of those years each of the notices included schedules in which respon- dent listed for each of the years at issue respondent’s position regarding the sources of the deposits into petitioner’s accounts during each such year and the total amount of such deposits during each such year from each such source in reconstructing the income of petitioner for the years at issue respondent added to the results produced by respondent’s bank_deposits analysis certain additional_amounts such as the amounts that petitioner received when he cashed and did not deposit in whole or in part certain checks or when he used certain checks to purchase certain although respondent issued the notice for and to petitioner and ms brodsky for convenience when referring to that notice we shall refer only to petitioner cashier’s checks on the record before us we find that as required by sec_7522 the notices describe the basis for respondent’s determination to increase petitioner’s gross_receipts for each of the years at issue the bank_deposits method that respondent used in order to determine whether petitioner had unreported gross_receipts for each of those years assumes that all money deposited into a taxpayer’s bank account during a given period constitutes taxable_income although the commissioner must take into account any nontaxable source or deductible expense of which the commissioner has knowledge 102_tc_632 dilleo v commissioner 96_tc_858 affd 959_f2d_16 2d cir thus bank_deposits are prima facie evidence of income clayton v commissioner supra pincite the taxpayer has the burden of proving that the bank_deposits were derived from nontaxable sources see id or constitute income that he previously reported see 591_f2d_1243 9th cir 70_tc_1057 respondent is not required to prove a likely source of a taxpayer’s bank_deposits 87_tc_74 in support of respondent’s determinations in the notices that remain at issue with respect to petitioner’s schedule c gross_receipts for and respondent is not relying on a basis or a theory that is not described in the notices respondent relied in the notices at trial and at -- - further trial and relies on brief on the bank_deposits method of reconstructing income we conclude that respondent is not relying on a new basis or a new_theory in support of respondent’s determinations in the notices that remain at issue with respect to petitioner’s schedule c gross_receipts for and we further conclude that the evidence required to prove that for each of those years the total amount of deposits into petitioner’s accounts from each source that remains at issue is or is not taxable to petitioner is the same evidence required to prove that the total amount of each deposit into petitioner’s accounts that remains at issue is or is not taxable to him on the record before us we reject petitioner’s position that respondent has the burden of proving that each of the deposits that remains at issue for each of the years and is taxable on that record we find that petitioner has the burden of proving that each of those deposits was derived from a nontaxable source or constitutes income which he previ- ously reported see rule a calhoun v united_states supra clayton v commissioner supra pincite it is also petitioner’s position that respondent has the burden_of_proof with respect to the affirmative allegations in respondent’s amendment to answer that in addition to the amount of the cost_of_goods_sold claimed in the schedule c for and disallowed in the notice for that year petitioner is not enti- tled for that year to dollar_figure of the remaining amount of the cost_of_goods_sold claimed in that schedule c we need not decide -- - whether petitioner’s position is correct that is because pursuant to rule c petitioner is deemed to have admitted inter alia each of the affirmative allegations in respondent’s amendment to answer relating to the claimed cost_of_goods_sold for rule c provides that where a reply is filed every affirmative allegation set out in the answer and not expressly admitted or denied in the reply is deemed to be admitted in the instant case petitioner filed a reply to respondent’s amendment to answer which expressly denied certain of the affir- mative allegations in that amendment to answer that reply did not expressly deny or admit the affirmative allegations in respondent’s amendment to answer relating to the additional_amount of the claimed cost_of_goods_sold for that respondent alleged therein should be disallowed we find that pursuant to rule c petitioner is deemed to have admitted the affirma-- tive allegations in respondent’s amendment to answer relating to the cost_of_goods_sold for we conclude that except for the fraud_penalty under section where a reply is not filed the affirmative allegations in the answer are deemed to be denied unless the commissioner within days after the expiration of the time for filing the reply files a motion that specified allegations in the answer be deemed admitted rule c such a motion may be granted unless the required reply is filed within the time directed by the court id 22in fact petitioner’s reply to respondent’s amendment to answer did not contain any statement addressing any of the affirmative allegations in respondent’s amendment to answer relating to the claimed cost_of_goods_sold for - - a on which respondent has the burden_of_proof sec_7454 rule b petitioner has the burden_of_proof on the determinations in the notices that remain at issue see rule a 290_us_111 in this connection with respect to the deductions claimed by petitioner deductions are strictly a matter of legislative grace and petitioner bears the burden of proving that he is entitled to any deductions claimed 503_us_79 the court’s evaluation of evidence in the record on which the parties rely both petitioner and respondent rely on certain testimonial and documentary_evidence to support their respective positions on the various issues in this case testimonial evidence at the trial respondent called ms rodegeb and ms martin as witnesses and petitioner called himself and mr dibernardo as witnesses at the further trial respondent called no witnesses and petitioner called himself dan j jordan mr jordan ms rodegeb ms martin mr raja mr syelsky mr vulis mr dubrovsky mr sutton mr oliveras and mr guterman as wit-- nesses we note initially that throughout much of the examination of certain of petitioner’s witnesses at the further trial peti- tioner’s counsel asked leading questions to which respondent objected on numerous occasions the pervasiveness of such leading questions during the examination of certain of peti- - 7jl1- tioner’s witnesses was such that the court reminded petitioner’s counsel on a number of occasions that the leading nature of the guestions asked impacted the court’s evaluation of the testimony of such witnesses the testimony of ms rodegeb ms martin and mr oliveras we found ms rodegeb ms martin and mr oliveras to be credible petitioner’s testimony based on our observation of petitioner both at the trial and at the further trial including our observation of his demeanor we did not find him to be credible in addition we found petitioner’s testimony to be general vague conclusory implau- sible inconsistent and or evasive in certain material respects mr dibernardo’s testimony we found the testimony of mr dibernardo to be largely irrelevant to our resolving any of the issues in this case mr jordan’s testimony the testimony of mr jordan a certified_public_accountant who we concluded qualified as an accounting expert on behalf of petitioner consisted of his direct testimony including his expert report and an addendum to that report and his testimony 23tn violation of the court’s date order peti- tioner did not proffer the addendum to mr jordan’s expert report to the court until date the first day of the further trial in this case and did not provide a copy of that addendum to respondent until about minutes before that addendum was marked for identification at that further trial mr jordan continued - on voir dire cross-examination redirect examination and recross--examination we evaluate the opinions of experts in light of the qualifi- cations of each expert and all other evidence in the record see 480_f2d_171 9th cir affg 54_tc_493 97_tc_496 we have broad discretion to evaluate the overall cogency of each expert’s analysis 838_f2d_330 9th cir quoting 783_f2d_906 9th cir affg in part and revg in part on another issue t c memo we are not bound by the formulae and opinions proffered by an expert especially when they are contrary to our own judgment 813_f2d_837 7th cir affg 85_tc_56 538_f2d_927 2d cir affg tcmemo_1974_285 instead we may reach a decision based on our own analysis of all the evidence in the record silverman v commis-- sioner supra pincite the persuasiveness of an expert’s opinion depends largely upon the disclosed facts on which it is based 337_f2d_432 7th cir affg tcmemo_1963_244 while we may accept the opinion of an expert in its entirety see 74_tc_441 we may be selective in continued prepared the addendum to his expert report on the day before the first day of the further trial in this case -- - the use of any portion of such an opinion see 86_tc_547 furthermore we may reject the opinion of an expert in its entirety 523_f2d_1308 8th cir affg 62_tc_684 parker v commissioner supra pincite in preparing his expert report and the addendum to that report mr jordan had no personal knowledge about any facts with respect to the items reported in a the joint returns of petitioner and ms brodsky for the years at issue and b mz trading’s form_1065 for the accounts of a petitioner and or ms brodsky during the years at issue and b mz trading during including any deposits into and withdrawals from those accounts and a the personal dealings and business transactions of petitioner and or ms brodsky during the years at issue and b the transactions of mz trading during during his testimony mr jordan acknowledged that he accepted as facts certain representations that petitioner whom we did not find to be credible had made to him petitioner’s representations and accepted as accurate certain documents which we did not find to be credible that petitioner had provided to him petitioner’s documents and that he based his analysis opinions and conclu- sions upon those representations and those documents petiioner did not provide mr jordan with general ledgers books of account receipts or other business records of petitioner we note that certain of petitioner’s representations and petitioner’s documents on which mr jordan relied are not part of the record in this case -- uvw and mz trading or he provided him with a few documents that purported to be such types of records which the court did not find to be credible and reliable according to mr jordan at least certain of his conduct in performing his analysis and reaching his opinions and conclusions was not acceptable conduct for him as an accountant and the accounting profession would not find such conduct to be acceptable mr jordan also admitted during his testimony that if he had not relied upon petitioner’s representations and petitioner’s documents he would have reached opinions and conclusions different from those that he had reached in his expert report and the addendum to that report on the record before us we did not find any of mr jordan’s testimony including his analysis opinions and conclusions to be reliable or helpful in understanding the evidence determining the facts in dispute or resolving the issues to which his testimony related mr raja’s testimony we found the testimony of mr raja to have been based largely upon his general business practices with petitioner as opposed to his personal knowledge of the facts with respect to a particular transaction or activity about which he testified for for example mr jordan relied on a document that mr dibernardo had prepared and that purported to be general ledger pages showing deposits during into mz trading’s bank account of its receipts mr dibernardo did not prepare those pages which are not part of the instant record until sometime after respondent commenced the examination of mz trading’s form_1065 for - - example mr raja testified that he recognized a certain cash- ier’s check payable to macy’s however mr raja later admitted that when he testified about that cashier’s check he was making an assumption that petitioner used that check to purchase certain goods for resale from macy’s mr raja testified that he made that assumption because m p electronics and petitioner had purchased that type of merchandise from macy’s on other occa- sions we also found mr raja’s testimony to be vague and or inconsistent at times mr syelsky’s testimony although generally we found mr syelsky to be credible at times we found his testimony to be inconsistent and or evasive mr vulis’ testimony although generally we found mr vulis to be credible at times we found his testimony to be general vague and or conclusory in addition we found mr vulis’ testimony to have been sometimes based on his general business practices with petitioner as opposed to his personal knowledge of the facts with respect to a particular transaction or activity about which he testified mr dubrovsky’s testimony based on our observation of mr dubrovsky at the further trial including our observation of his demeanor we did not find him to be credible we also found mr dubrovsky’s testimony to be general vague conclusory and or inconsistent in certain material respects -- - mr sutton’s testimony we do not believe that mr sutton had personal knowledge of the facts surrounding the items which were reported in the joint returns of petitioner and ms brodsky for the years at issue and about which he testified at the further trial in this case in this connection mr sutton acknowledged that certain of the items that were reported in the joint returns for and were based upon summary documents that he did not prepare in addition mr sutton misrepresented during his testimony what documents he had shown to respondent’s counsel and one of respon- dent’s revenue agents sometime during the week before the further trial in this case it was only upon questioning by respondent’s counsel and by the court that mr sutton acknowledged that he had made such a misrepresentation mr guterman’s testimony based on our observation of mr guterman at the further trial including our observation of his demeanor we did not find him to be credible in addition although mr guterman claimed to have personal knowledge with respect to each of the matters about which he testified we have serious reservations about that claim mr guterman admitted that his testimony with respect to at least one document was based upon the representations of petitioner as to that document and not on his personal knowl- edge documentary_evidence the record contains a considerable number of documents ’ in large measure however the record is devoid of any general ledgers books of account receipts or other records supporting petitioner’s claims which the court finds to be credible we infer from petitioner’s failure to produce credible records to substantiate his claims with respect to the issues that remain in this case on which he has the burden_of_proof that such records do not exist and that if such records do exist they do not substantiate those claims see 6_tc_1158 affd 162_f2d_513 10th cir unreported income in the notices respondent determined that petitioner has the court admitted certain of those documents into the record only for a limited purpose for example the court admitted into evidence copies of the front sides of certain checks only as copies of the front sides of such checks and not to show that those checks were in fact negotiated or if negoti- ated that those checks were deposited and or cashed by the payees listed on the copies of the front sides of those checks for example petitioner claims that during the years at issue certain of the deposits into petitioner’s accounts includ- ing certain of the payments against the balances due on peti- tioner’s credit accounts were nontaxable loans or advances however the record contains no credible documentary_evidence to support those claims such as promissory notes the principle that we may infer from the failure of a party who has the burden_of_proof on a given matter to offer evidence that exists regarding such a matter that such evidence would not have been favorable to that party’s position regarding that matter is so well established that hereinafter we shall not cite the case law supporting that principle --- - unreported schedule c gross_receipts for each of the years at issue by reconstructing such gross_receipts for each of those years pursuant to the bank_deposits method in reconstructing petitioner’s income for each of the years at issue respondent added to the results produced by respondent’s bank deposit analysis certain additional_amounts such as the amounts that petitioner received when he cashed and did not deposit in whole or in part certain checks or when he used certain checks to purchase certain cashier’s checks we address first what we understand to be petitioner’s contention that respondent’s bank_deposits analysis for each of the years at issue is inherently flawed in support of that contention petitioner points out that respondent has conceded as nontaxable certain deposits into petitioner’s accounts during each of those years including certain payments against the balances due on petitioner’s credit accounts during each such year which respondent had determined in the notices to be taxable on the record before us we find respondent’s bank_deposits analysis for each of the years at issue to be reasonable although respondent was required in performing respondent’s bank_deposits analysis for each of those years to take into account any nontaxable source or deductible expense of which respondent had knowledge clayton v commissioner t c pincite dileo v commissioner t c pincite petitioner was generally uncooperative during the course of the examination of the joint - jq - returns for the years at issue in that inter alia he provided respondent with relatively little documentation and other infor- mation in this connection after ms martin completed the deposits analysis she mailed a copy of it to mr sutton along with another written request for documents and a written request that petitioner and ms brodsky identify any item listed in that analysis which they believed to be nontaxable and provide her with records to verify the source of any such item ms martin did not receive any response to those requests thereaf- ter ms martin unsuccessfully attempted to meet with petitioner and ms brodsky and ms martin was forced to issue summonses to them in order to compel them to meet with her after reschedul- ing the date of the meeting stated in respondent’s summonses in order to accommodate petitioner ms martin met with petitioner and ms brodsky on date although petitioner and ms brodsky made certain statements at that meeting regarding the sources of certain deposits that were made into one or more of their accounts during and they did not provide any documentation to corroborate those statements after the novem- ber conference ms martin asked petitioner and ms brodsky to provide her with documentation to corroborate the statements that they had made at that conference regarding the sources of certain deposits that were made into one or more of their ac-- counts during and ms martin received no documents in response to that request thereafter ms martin scheduled several more conferences with petitioner and ms brodsky all of -- - which they canceled mr oliveras asked the representative of petitioner and ms brodsky with respect to respondent’s examina-- tion of their joint_return whether there were any nontaxable sources for any of the deposits reflected in the deposits analy- sis prepared by respondent with respect to although that representative suggested to mr oliveras that there might be certain nontaxable items that representative did not specify which deposits are nontaxable nor did such representative provide mr oliveras with any documentation or other information showing that certain of such deposits are not taxable as described in the court’s order dated date petitioner remained generally uncooperative in working with respondent in the stipulation process in preparing this case for the scheduled trial on date it was not until the court intervened at the request of respondent’s counsel that petitioner finally participated in the stipulation process with respondent’s counsel on date after the trial in this case took place and after petitioner filed in mid-date a motion to open the record and a motion for leave to allow offer of proof petitioner provided certain documentation and information to respondent that he had not previously provided which enabled respondent to conclude that certain deposits into petitioner’s accounts that remained at issue including certain payments against the balances due on petitioner’s credit ac- mr oliveras completed respondent’s examination of the joint_return of petitioner and ms brodsky after ms martin had commenced and worked on that examination counts are not taxable on the record before us we reject petitioner’s contention that respondent’s bank_deposits analysis for each of the years at issue is inherently flawed we turn now to the specific deposits that remain at issue for each of the years and including any pay- ments against the balances due on petitioner’s credit accounts that remain at issue for each of those years petitioner contends that each of the deposits at issue is not taxable because each such deposit constitutes one of the following personal loan business loan to uvw reimbursement for certain expenses advance to purchase a personal item for an acquaintance rental payment attributable to konstantin reingatch mr reingatch income of loan to or reimburse- ment with respect to mz trading or repayment of a loan alleged personal loans petitioner contends that of the following total deposits including total payments against the balance due on petitioner’s equity line account the amounts set forth below represented personal loans to him petitioner did not raise as an issue in petitioner’s further trial memorandum presented no evidence at trial and at further trial and makes no argument on brief as to certain amounts of unreported income determined for and that petitioner placed in dispute in the petition and that respondent has not conceded we conclude that petitioner has abandoned contesting those amounts of unreported income see 91_tc_524 ndollar_figure - - date of total amount of deposit account deposit alleged loan alleged lender petitioner’s uvw dollar_figure dollar_figure mr dubrovsky and account ms dubrovsky petitioner’s equity big_number big_number mr ferrer line account petitioner’s equity big_number big_number amuke business line account association petitioner’s uvw big_number big_number mr averbach account petitioner’s equity big_number big_number mr syelsky line account petitioner’s equity big_number big_number roman kirdan line account with respect to the date deposit in question of dollar_figure petitioner contends that dollar_figure of that deposit which we have found was derived from a dollar_figure check from mr dubrovsky and ms dubrovsky represented a personal loan to him in support of that contention petitioner relies on his self-serving testimony mr dubrovsky’s testimony and certain checks from petitioner to mr dubrovsky that petitioner contends represented repayments of the alleged dollar_figure loan based on the court’s evaluation of the testimony of petitioner and of mr dubrovsky we are not required to and we shall not rely on their testimony regarding the date deposit in question see 877_f2d_624 7th cir affg tcmemo_1987_295 440_f2d_688 9th cir affg per curiam tcmemo_1969_159 although petitioner claims that the dollar_figure check in question was from mr dubrovsky the record shows that the payors of that check were mr dubrovsky and ms dubrovsky wwe note that the various checks that petitioner contends represented repayments of the alleged dollar_figure loan total dollar_figure - - tokarski v commissioner t c pincite as for the checks that petitioner claims represented repayments by him to mr dubrovsky of the alleged dollar_figure loan on the instant record we find that petitioner has failed to carry his burden of showing the purpose of those checks on the record before us we find that petitioner has failed to carry his burden of establishing that dollar_figure of the date deposit in question repre- sented a personal loan from mr dubrovsky with respect to the date deposit at issue of dollar_figure petitioner contends that that deposit which we have found was derived from a dollar_figure cashier’s check issued by great western bank represented a personal loan from mr ferrer in support of his contention that mr ferrer’s funds were used to purchase that cashier’s check petitioner relies on his self- serving testimony on which we are not required to and we shall 4the principle that we are not required to rely on testi- mony even if uncontradicted that we find to be inter alia not credible questionable unreasonable general and or vague is so well established that hereinafter we shall not cite the case law supporting that principle petitioner could have issued those checks which total dollar_figure to mr dubrovsky for purposes other than as repayments of the alleged dollar_figure loan in this connection petitioner failed to offer into evidence any credible documentary_evidence to establish that dollar_figure of the date deposit in question represented a personal loan from mr dubrovsky and ms dubrovsky and that the checks from petitioner to mr dubrovsky on which petitioner relies represented repayments of the alleged dollar_figure loan we infer from petitioner’s failure to proffer any such documentary_evidence that any such evidence does not exist and that if any such evidence does exist it would not have substan- tiated petitioner’s position with respect to dollar_figure of the date deposit in question - - not rely on the record before us we find that petitioner has failed to carry his burden of establishing that the date deposit at issue represented a personal loan from mr ferrer with respect to the date deposit at issue of dollar_figure petitioner contends that that deposit which we have found was derived from two checks from amuke business association totaling dollar_figure represented a personal loan from amuke business assuming arguendo that petitioner had established that mr ferrer’s funds were used to purchase the dollar_figure great western bank cashier’s check in question on the instant record we find that petitioner has failed to carry his burden of showing that that cashier’s check represented a loan to petitioner from mr ferrer to support his contention that that check represented a loan petitioner relies on his self-serving testimony and the testimony of mr vulis we are not required to and we shall not rely on petitioner’s testimony although mr vulis testi- fied that mr ferrer made a dollar_figure loan to petitioner and although we found mr vulis to be credible on that point his testimony does not establish the date of that loan nor does his testimony show that the dollar_figure great western bank cashier’s check that was used to make the date deposit at issue represented the loan from mr ferrer to which mr vulis was referring in his testimony as stated above the only evidence in the record as to whether that deposit was made with the proceeds of a dollar_figure loan from mr ferrer is petitioner’s self- serving testimony on which we are not required to and we shall not rely we note that petitioner did not call mr ferrer as a witness and did not offer into evidence any credible documentary_evidence regarding the alleged loan from mr ferrer we infer from petitioner’s failure to call mr ferrer that mr ferrer’s testimony would not have been favorable to petitioner’s conten- tion that the dollar_figure great western bank cashier’s check that was used to make the date deposit at issue represented a loan from mr ferrer we infer from petitioner’s failure to proffer any credible documentary_evidence regarding the alleged dollar_figure loan from mr ferrer that any such evidence does not exist and that if any such evidence does exist it would not have substantiated petitioner’s position regarding that alleged loan - - association that he later repaid in support of that contention petitioner relies on his self-serving testimony on which we are not required to and we shall not rely ’ on the record before us we find that petitioner has failed to carry his burden of establishing that the date deposit at issue represented a personal loan from amuke business association with respect to the date deposit at issue of dollar_figure petitioner contends that dollar_figure of that deposit which we have found was derived from a dollar_figure check from commonwealth enterprises dated date represented a personal loan from mr averbach who along with mr ferrer participated with mr vulis in operating amuke group in support of that conten- tion petitioner relies on his self-serving testimony on which we are not required to and we shall not rely on the record swe note that when questioned about the two checks total- ing dollar_figure from amuke business association to petitioner mr vulis who at all relevant times was familiar with the activities of that association was unable to recall the purpose for which amuke business association issued those checks petitioner failed to offer into evidence any credible documentary_evidence regarding the alleged dollar_figure loan from amuke business association we infer from petitioner’s failure to proffer any such documentary_evidence that any such evidence does not exist and that if any such evidence does exist it would not have substantiated petitioner’s position regarding that alleged loan swe note that petitioner did not call mr averbach as a witness and did not elicit any testimony from mr vulis who at all relevant times was associated with commonwealth enterprises with respect to the purpose for which commonwealth enterprises issued the dollar_figure check to petitioner nor did petitioner offer into evidence any credible documentary_evidence regarding the continued - - before us we find that petitioner has failed to carry his burden of establishing that dollar_figure of the date deposit at issue represented a personal loan from mr averbach with respect to the date deposit at issue of dollar_figure petitioner contends that that deposit which we have found was derived from a dollar_figure check from mr syelsky repre- sented a personal loan from mr syelsky in support of that contention petitioner relies on his self-serving testimony and mr syelsky’s testimony we are not required to and we shall not rely on petitioner’s testimony mr syelsky testified that he lent dollar_figure to petitioner although mr syelsky was unable to remember whether he had made that loan to petitioner in continued alleged dollar_figure loan from mr averbach we infer from peti- tioner’s failure to call mr averbach and to elicit any such testimony from mr vulis that their testimony would not have been favorable to petitioner’s position with respect to that alleged loan we infer from petitioner’s failure to proffer any credible documentary_evidence regarding the alleged dollar_figure loan from mr averbach that any such evidence does not exist and that if any such evidence does exist it would not have substantiated peti- tioner’s position regarding the alleged dollar_figure loan from mr averbach on brief respondent raises a question as to how mr syelsky could have issued a dollar_figure check to petitioner in date since during that month mr syelsky was involved in bankruptcy proceedings that he had commenced earlier during and had represented to the bankruptcy court on date that he had only dollar_figure in assets however the parties stipulated that mr syelsky gave petitioner his dollar_figure check that was used to make the date deposit at issue to the extent that respondent is arguing that we should disregard that stipulation we decline to do so because we do not find it to be clearly contrary to the facts that we have found are established by the record see cal--maine foods inc v commissioner t c pincite - - or he testified that the only transactions in which he had engaged with petitioner consisted of a dollar_figure loan and a dollar_figure advance moreover as discussed supra note the parties stipulated that mr syelsky gave petitioner his dollar_figure check that was used to make the date deposit at issue based on mr syelsky’s testimony with respect to a dollar_figure loan to petitioner which we found to be credible and that stipula- tion we are persuaded that mr syelsky lent dollar_figure to peti- tioner that was used to make the date deposit at issue on the record before us we find that the date deposit at issue represented a personal loan from mr syelsky with respect to the date deposit at issue consisting of a dollar_figure cash payment against the balance due on petitioner’s equity line account petitioner contends that that deposit represented a personal loan from roman kirdan mr kirdan for the purchase of electronic equipment such as tvs and vcrs petitioner also contends inconsistently that the dollar_figure used to petitioner contends that the source of the date deposit at issue was mr kirdan who petitioner claims operated fast-west at all relevant times and who used that business’ bank account to withdraw the funds used in making that deposit however the parties stipulated and we have found that on date petitioner deposited dollar_figure into petitioner’s equity line account as a payment against the balance due on that account and that the sources of that payment were east-west and mr guterman to the extent that petitioner is arguing that we should disregard that stipulation we decline to do so because we do not find it to be clearly contrary to the facts that we have found are established by the record see cal-maine foods inc v commissioner supra pincite -- - make the date deposit at issue was from hast--west and that those funds represented a gross receipt of mz trading in support of his contentions petitioner relies on his self-serving testimony and mr guterman’s testimony we are not required to and we shall not rely on petitioner’s testimony regarding the date deposit at issue based on the court’s evaluation of mr guterman’s testimony we are not required to and we shall not rely on his testimony with respect to that deposit on the record before us we find that petitioner has failed to carry his burden of establishing that the date deposit at issue represented either a personal loan from mr kirdan or a gross receipt of mz trading that it reported in its form_1065 for alleged business loans to uvw petitioner contends that of the following total deposits including total payments against the balance due on petitioner’s equity line account and total cash that he received in connec-- tion with three of those deposits the amounts set forth below represented business loans to him petitioner failed to call mr kirdan as a witness we infer from petitioner’s failure to call mr kirdan that his testimony would not have been favorable to petitioner’s position regarding the date deposit at issue petitioner also failed to offer into evidence any credible documentary_evidence to establish that the date deposit represented either a personal loan to petitioner from mr kirdan to purchase elec-- tronic equipment or a gross receipt of mz trading we infer from petitioner’s failure to proffer any such documentary_evidence that any such evidence does not exist and that if it does exist it would not have substantiated either of petitioner’s inconsis-- tent positions with respect to that deposit -- -- amount date of total of cash amount of deposit account deposit received alleged loan alleged lender petitioner’s dollar_figure --- dollar_figure mr kroma uvw account petitioner’s big_number --- dollar_figure amuke business equity line association account petitioner’s big_number dollar_figure big_number amuke business equity line association account petitioner’s big_number big_number amuke organiza-- uvw account tions petitioner’s big_number --- big_number mr vulis uvw account petitioner’s big_number big_number amuke organiza-- equity line tions account petitioner’s big_number --- big_number mr syelsky uvw account petitioner’s big_number --- big_number commonwealth uvw account enterprise sec_1 petitioner’s big_number --- big_number amuke organiza-- equity line tions account petitioner contends that the date on which the dollar_figure check was deposited into petitioner’s uvw account was date however the record shows that a dollar_figure check from commonwealth enterprises was deposited into petitioner’s uvw account on date and not on date we presume that petitioner’s reference to date was unintentional although the record does not establish that the difference between the amount of the alleged loan claimed by petitioner dollar_figure and the amount of the date payment against the balance due on petitioner’s equity line account dollar_figure was cash received by petitioner petitioner appears to take that position and respondent does not dispute it petitioner also contends that a dollar_figure cashier’s check payable to him that was issued by home savings of america and that he cashed on date represented a business loan from mr reingatch with respect to the date deposit at issue of dollar_figure petitioner contends that that deposit which we have found was derived from a dollar_figure check from mr kroma repre- - -- sented a business loan from mr kroma in support of that contention petitioner relies on his self-serving testimony a copy of the front side of the purchaser’s copy of a dollar_figure bank of america cashier’s check dated date that peti- tioner purchased and that was payable to mr kroma which peti- tioner claims was a repayment of the alleged dollar_figure loan and a copy of the front side of a dollar_figure check dated date that was payable to mr kroma which petitioner contends was a payment of months’ interest on that alleged loan we are not required to and we shall not rely on petitioner’s testimony regarding the alleged dollar_figure loan from mr kroma moreover on the instant record we are not satisfied that mr kroma re- ceived the proceeds of the dollar_figure bank of america cashier’s check dated date and the dollar_figure check dated date that is because the record contains only the front sides we note that petitioner did not call mr kroma as a wit- ness with respect to the date deposit at issue we infer from petitioner’s failure to call mr kroma that mr kroma’s testimony would not have been favorable to petitioner’s position with respect to that deposit we also note that peti- tioner did not offer into evidence any credible documentary_evidence regarding the date deposit at issue we infer from petitioner’s failure to offer any such documentary_evidence that any such evidence does not exist and that if any such evidence does exist it would not have substantiated petitioner’s position with respect to the alleged loan from mr kroma assuming arguendo that petitioner had established that mr kroma received the proceeds of the dollar_figure bank of america cashier’s check dated date and the dollar_figure check dated date on the instant record we find that petitioner has failed to carry his burden of showing that the proceeds of those two checks constituted a repayment of the alleged dollar_figure loan in guestion and months’ interest on that alleged loan respec-- continued --- - of those checks on the record before us we find that peti- tioner has failed to carry his burden of establishing that the date deposit represented a business loan from mr kroma with respect to the date deposit in question of dollar_figure petitioner contends that dollar_figure of that deposit which we have found was derived from amuke business association represented a business loan from that association petitioner failed to raise as an issue in petitioner’s further trial memo- randum that dollar_figure of the date deposit in question represented a business loan from amuke business association accordingly pursuant to the court’s date order we shall not address that matter continued tively see our discussion supra note for example mr kroma could have endorsed both the dollar_figure cashier’s check and the dollar_figure check to petitioner who in turn deposited and or cashed them in this connection the record shows that on date petitioner deposited into one of petitioner’s accounts a bank of america cashier’s check for dollar_figure that was payable to marcel feldberg assuming arguendo that petitioner’s further trial memoran- dum had raised as an issue that dollar_figure of the date deposit in question represented a business loan from amuke business association on the instant record we find that peti- tioner has failed to carry his burden of establishing that that amount did in fact represent such a loan on that record we have found that the date deposit was made with a dollar_figure bank of america cashier’s check payable to star electronics that petitioner purchased with inter alia a dollar_figure check dated date from amuke business association according to petitioner the dollar_figure check represented a business loan that amuke business association made to him for the purchase of certain jewelry from star electronics but that purchase did not continued - -- with respect to the date transaction at issue consisting of a dollar_figure deposit and dollar_figure in cash that petitioner received petitioner contends that that deposit and that cash which we have found were derived from a dollar_figure check from amuke business association represented a business loan from that association with respect to his purchase of certain cigarette lighters on date when he tendered dollar_figure to carvey’s discount in support of that contention petitioner relies on his self-serving testimony a document entitled commer- continued occur and he repaid amuke business association dollar_figure as evidenced by a check dated date to support petitioner’s contentions petitioner relies on his self-serving testimony and on an entry in a statement for petitioner’s equity line account which shows that on date a check for dollar_figure was drawn on that account date withdrawal we are not required to and we shall not rely on petitioner’s testimony regarding the date deposit in question on the instant record we find that petitioner has failed to carry his burden of showing that amuke business association received the date withdrawal that is reflected in a statement for petitioner’s equity line account even if petitioner had made such a showing we find on the record before us that petitioner has failed to carry his burden of establishing that that withdrawal represented a repayment to amuke business association of a business loan that it had made to petitioner we note that petitioner did not elicit any testimony from mr vulis regarding petitioner’s contention that amuke business association made a dollar_figure business loan to petitioner on date we infer from petitioner’s failure to elicit any such testimony with respect to the alleged business loan that any such testimony would not have been favorable to petitioner’s position regarding that alleged loan we also note that petitioner did not offer into evidence any credible documentary_evidence supporting his position that dollar_figure of the date deposit in question represented a business loan from amuke business association we infer from petitioner’s failure to proffer any such documentary_evidence that any such evidence does not exist and that if any such evidence does exist it would not have substantiated petitioner’s position regarding that alleged loan - - cial invoice dated date that shows amuke group of companies under the heading importer exporter and the sale of inter alia big_number lighters for dollar_figure and a copy of the front side of the purchaser’s copy of a dollar_figure bank of america cashier’s check dated date that was payable to carvis discount we are not required to and we shall not rely on the testimony of petitioner regarding the alleged dollar_figure business loan moreover we find that the document entitled commercial invoice does not show that petitioner or uvw was involved in the purchase of the lighters reflected in that document and that amuke business association lent money to petitioner to purchase such lighters nor do we find that the copy of the front side of the purchaser’s copy of the dollar_figure bank of america cashier’s check dated date that was payable to carvis discount ’ establishes petitioner’s position with respect to the we note that mr vulis testified that he had no recollec- tion of the purpose of the dollar_figure check from amuke business association to petitioner we also note that petitioner did not offer into evidence any credible documentary_evidence showing that the dollar_figure check from amuke business association repre- sented a business loan from that association we infer from petitioner’s failure to proffer any such documentary_evidence that any such evidence does not exist and that if any such evidence does exist it would not have substantiated petitioner’s position with respect to that alleged loan we are not satisfied from that copy inter alia that carvis discount deposited and or cashed the dollar_figure bank of america cashier’s check payable to it dated date for example carvis discount could have endorsed that cashier’s check to petitioner who in turn deposited and or cashed it in this regard as noted above the record shows that on date petitioner deposited into petitioner’s uvw account a dollar_figure bank of america cashier’s check that was payable to marcel feldberg continued -- - alleged dollar_figure business loan from amuke business association on the record before us we find that petitioner has failed to carry his burden of establishing that the date transac-- tion at issue represented a business loan from amuke business association with respect to the date transaction at issue consisting of a dollar_figure deposit and dollar_figure in cash that petitioner received petitioner contends that that deposit and that cash which we have found were derived from a dollar_figure check from amuke group represented a business loan from that organization for the purchase of certain candy in support of that contention petitioner relies on his self-serving testimony on which we are not required to and we shall not rely on the record before continued assuming arguendo that the record had established that carvis discount deposited and or cashed the dollar_figure bank of america cashier’s check payable to it on that record we find that petitioner has failed to carry his burden of establishing that carvis discount received the proceeds of that check in connection with the purchase of certain cigarette lighters with respect to which amuke business association allegedly lent petitioner dollar_figure we note that petitioner failed to elicit from mr vulis who at all relevant times was involved in the operations of amuke group any testimony with respect to the alleged dollar_figure loan from amuke group we infer from petitioner’s failure to elicit any such testimony that any such testimony would not have been favorable to petitioner’s position regarding that alleged loan we also note that petitioner did not offer into evidence any credible documentary_evidence supporting his position regarding the alleged dollar_figure loan from amuke group we infer from peti- tioner’s failure to proffer any such documentary_evidence that any such documentary_evidence does not exist and that if any such evidence does exist it would not have substantiated peti- tioner’s position with respect to that alleged loan -- - us we find that petitioner has failed to carry his burden of establishing that the date transaction at issue repre- sented a business loan from amuke group with respect to the date deposit at issue of dollar_figure petitioner contends that that deposit which we have found was derived from a dollar_figure check from commonwealth enter- prises represented a business loan from mr vulis in support of that contention petitioner relies on mr vulis’ general and conclusory testimony regarding the general business practice between commonwealth enterprises and petitioner namely gener- ally commonwealth enterprises advanced petitioner the funds needed for petitioner to purchase merchandise that he had located on its behalf and that it wanted to acquire for resale we are not persuaded by that testimony of mr vulis on which petitioner relies that the dollar_figure check from commonwealth enterprises represented a business loan from mr vulis on the record before us we find that petitioner has failed to establish that the date deposit at issue represented a business loan from commonwealth enterprises we note that petitioner failed to question mr vulis specifically with respect to the alleged dollar_figure loan at issue we infer from petitioner’s failure to elicit any such testimony that any such testimony would not have been favorable to peti- tioner’s position regarding that alleged loan we also note that petitioner failed to introduce any credible documentary_evidence showing that the dollar_figure check from commonwealth enterprises represented a business loan from mr vulis we infer from petitioner’s failure to offer any such documentary_evidence that any such documentary_evidence does not exist and that if any such evidence does exist it would not have substantiated peti- tioner’s position with respect to that alleged loan - - with respect to the date transaction at issue consisting of a dollar_figure deposit and dollar_figure in cash that petitioner received petitioner contends that that deposit and that cash which we have found were derived from a dollar_figure check from amuke group represented a business loan from that organization for the purchase of certain water filters in support of that conten- tion petitioner relies on the testimony of mr vulis mr vulis identified the dollar_figure check from amuke group and testified that that check represented a loan to petitioner for the purchase of water filters we found that testimony of mr vulis to be credible on the record before us we find that petitioner has satisfied his burden of showing that the date transaction at issue represented a business loan from amuke group with respect to the date deposit in question of dollar_figure petitioner contends that dollar_figure of that deposit which we have found was derived from a dollar_figure check from mr syelsky represented a business loan from mr syelsky in support of that contention petitioner relies on his self-serving testimony and the testimony of mr syelsky and of mr vulis we are not required to and we shall not rely on petitioner’s testimony regarding the dollar_figure alleged loan mr syelsky testified that the dollar_figure check that he issued to petitioner constituted a business loan which mr vulis guarantied and the proceeds of which petitioner was to use to purchase certain candy on behalf of mr syelsky mr syelsky further testified that after he - issued the dollar_figure check to petitioner he canceled his order for the candy in question and requested petitioner to repay the dollar_figure loan according to mr syelsky because petitioner did not have the money with which to repay that loan mr vulis repaid it pursuant to mr vulis’ guaranty of that loan mr vulis confirmed during his testimony at the further trial that he paid dollar_figure to mr syelsky on petitioner’s behalf we found the testimony of mr syelsky and of mr vulis with respect to the alleged dollar_figure business loan from mr syelsky to petitioner to be credible on the record before us we find that the peti- tioner has satisfied his burden of establishing that dollar_figure of the date deposit in guestion represented a business loan from mr syelsky with respect to the date deposit at issue of dollar_figure petitioner contends that that deposit which we have found was derived from a dollar_figure check from commonwealth enter- prises represented a business loan from commonwealth enterprises for the purchase of certain unspecified merchandise in support of that contention petitioner relies on the general and conclusory testimony of mr vulis with respect to the general business practice of commonwealth enterprises and petitioner namely generally commonwealth enterprises advanced petitioner the funds needed for petitioner to purchase merchandise that he had located on its behalf and that it wanted to acquire for resale we are not persuaded by that testimony of mr vulis on which petitioner relies that the dollar_figure check from commonwealth -- -- enterprises represented a business loan from commonwealth enter- prises on the record before us we find that petitioner has failed to carry his burden of establishing that the date deposit at issue represented a business loan from common- wealth enterprises with respect to the date deposit of dollar_figure petitioner contends that that deposit which we have found was derived from a dollar_figure check from amuke group represented a business loan from amuke group for the purchase of certain cordless telephones petitioner failed to raise as an issue in petitioner’s further trial memorandum that the date deposit in question represented a business loan from amuke group accordingly pursuant to the court’s date order we shall not address that matter we note that petitioner failed to question mr vulis specifically with respect to the alleged dollar_figure loan at issue we infer from petitioner’s failure to elicit any such testimony that any such testimony would not have been favorable to peti- tioner’s position regarding that alleged loan we also note that petitioner failed to offer into evidence any credible documentary_evidence showing that the dollar_figure from commonwealth enterprises represented a business loan from that company we infer from petitioner’s failure to proffer any such documentary_evidence that any such documentary_evidence does not exist and that if any such evidence does exist it would not have substantiated petitioner’s position with respect to that alleged loan assuming arguendo that petitioner’s further trial memoran- dum had raised as an issue that the date deposit repre- sented a business loan from amuke group we find on the record before us that petitioner has failed to establish that that deposit constituted a business loan from that organization to support his position on that matter petitioner relies on his self-serving testimony on which we are not required to and we shall not rely we note that petitioner did not elicit any continued - with respect to the dollar_figure cashier’s check issued by home savings of america cashed by petitioner on date petitioner contends that that check represented a business loan from mr reingatch in support of that contention petitioner relies on his self-serving testimony and three checks in the respective amounts of dollar_figure dollar_figure and dollar_figure which he issued to mr reingatch and which he contends represented repayments of the alleged dollar_figure business loan from mr reingatch we are not required to and we shall not rely on petitioner’s testimony regarding the dollar_figure cashier’s check in question on the instant record we are not persuaded that mr reingatch provided the funds used to purchase that cashier’s check and that the three checks from petitioner to mr reingatch which total dollar_figure represented repayments of the alleged dollar_figure business loan from mr reingatch on the record before us we find that -4 continued testimony from mr vulis regarding the dollar_figure check from that organization that petitioner contends represented a business loan from it we infer from petitioner’s failure to elicit any such testimony that any such testimony would not have been favorable to petitioner’s position with respect to that alleged business loan we also note that petitioner did not offer into evidence any credible documentary_evidence establishing that the date deposit of dollar_figure represented a business loan from amuke group we infer from petitioner’s failure to proffer any such documentary_evidence that any such documentary_evidence does not exist and that if any such documentary_evidence did exist it would not have substantiated petitioner’s position with respect to that alleged loan according to petitioner mr reingatch was deceased as of the time of the further trial in this case petitioner could have issued the three checks to mr continued petitioner has failed to satisfy his burden of establishing that the dollar_figure cashier’s check issued by home savings of america and payable to him represented a business loan from mr reingatch alleged reimbursements petitioner contends that during dollar_figure of the deposits into petitioner’s accounts including payments against the balances due on petitioner’s credit accounts and cash received in connection with certain of those deposits represented reimburse- ments from mz trading for certain expenses that he had paid on its behalf according to petitioner dollar_figure of the dollar_figure at and the balance of issue related to checks from mz trading that total amount at issue dollar_figure related to five checks from mr guterman continued reingatch for purposes other than as repayments of a loan in this connection petitioner failed to offer into evidence any credible documentary_evidence such as a promissory note showing that the dollar_figure cashier’s check issued by home savings of america and payable to petitioner represented a business loan from mr reingatch we infer from petitioner’s failure to proffer any such evidence that any such documentary_evidence does not exist and that if it does exist it would not have substan- tiated petitioner’s position regarding that check with respect to the checks from mz trading totaling dollar_figure petitioner contends in the alternative that those checks represented nontaxable returns of his capital in mz trading on the instant record we find that petitioner has failed to carry his burden of showing that mz trading issued those checks to him as returns of his capital therein nor has petitioner estab- lished on the record before us his adjusted_basis in his partner- ship interest in mz trading immediately before he received each of those checks see sec_731 -petitioner failed to offer into evidence any credible documentary_evidence supporting his position with respect to the continued with respect to the checks totaling the dollar_figure at issue the only evidence in the record about the purpose of any of those checks is petitioner’s self-serving testimony as to of them and mr guterman’s testimony as to of those checks we are not required to and we shall not rely on their testimony regarding those checks on the record before us we find that petitioner has failed to carry his burden of establishing that during dollar_figure of the deposits into petitioner’s accounts including payments against the balances due on petitioner’s credit accounts and cash received in connection with certain of those deposits represented reimbursements from mz trading for certain expenses that he had paid on its behalf alleged advances to purchase personal items petitioner contends that the individuals shown below ad- vanced him the following amounts that were part of the following deposits including the payment against the balance due on continued dollar_figure at issue we infer from petitioner’s failure to proffer any such documentary_evidence that any such evidence does not exist and that if it does exist it would not have substantiated petitioner’s position with respect to those deposits with respect to the five checks from mr guterman totaling dollar_figure petitioner testified that he never purchased anything for mr guterman we presume that petitioner wants us to infer from that testimony that the dollar_figure in checks that he received during from mr guterman represented reimbursements by mr guterman for certain expenses that petitioner had paid on behalf of mz trading even if we had believed petitioner’s testimony that he never purchased anything for mr guterman we would not draw any such inference from any such testimony in any event we are not required to and we shall not rely on petitioner’s testimony that he never purchased anything for mr guterman petitioner’s equity line account shown below date of amount of al- alleged payor of deposit account total deposit leged advance alleged advance petitioner’s dollar_figure dollar_figure mr dubrovsky uvw account petitioner’s big_number mr reingatch equity line account petitioner’s big_number big_number mr dubrovsky uvw account with respect to the date deposit of dollar_figure petitioner contends that dollar_figure of that deposit which we have found was derived from a dollar_figure money order from mr dubrovsky represented an advance from mr dubrovsky for the purchase at cost of a facsimile machine for mr dubrovsky in support of that contention petitioner relies on his self-serving testimony on which we are not required to and we shall not rely ’ on the record before us we find that petitioner has failed to carry his burden of establishing that dollar_figure of the date deposit represented an advance from mr dubrovsky for the pur- chase of a facsimile machine on mr dubrovsky’s behalf with respect to the date deposit of dollar_figure petitioner contends that dollar_figure of that deposit represented an advance from mr reingatch for the purchase at cost of a walkman we note that the record does not establish through credi- ble documentary_evidence that petitioner purchased a facsimile machine for mr dubrovsky furthermore petitioner did not guestion mr dubrovsky about whether mr dubrovsky had advanced dollar_figure to petitioner for the purchase of a facsimile machine we infer from petitioner’s failure to do so that any such testimony would not have been favorable to petitioner’s position regarding that alleged advance in any event we would not have been required to rely on any of mr dubrovsky’s testimony with respect to the alleged dollar_figure advance in question for mr reingatch’s daughter in support of that contention petitioner relies on his self-serving testimony on which we are not required to and we shall not rely on the record before us we find that petitioner has failed to satisfy his burden of establishing that dollar_figure of the date deposit represented an advance from mr reingatch for the purchase of a walkman for mr reingatch’s daughter with respect to the date deposit of dollar_figure petitioner contends that dollar_figure of that deposit which we have found was derived from a dollar_figure check from s j co represented an advance from mr dubrovsky for the purchase at cost of a television for mr dubrovsky in support of that contention petitioner relies on his self-serving testimony on which we are not required to and we shall not rely on the record before - the record contains no credible documentary_evidence showing that any portion of the date deposit of dollar_figure was made with funds received from mr reingatch or that peti- tioner purchased a walkman for mr reingatch’s daughter we infer that no such documentary_evidence exists and that if any such evidence does exist it would not have substantiated peti- tioner’s claims regarding the alleged dollar_figure advance in question although the record establishes that during and as of the time of the further trial in this case mr dubrovsky was a part owner of s j co the record does not disclose whether mr dubrovsky owned any part of that company on date we note that when guestioned about the dollar_figure check in question mr dubrovsky did not remember any such check the record contains no credible documentary_evidence showing that petitioner purchased a television for mr dubrovsky we infer that no such documentary_evidence exists and that if any such evidence does exist it would not have substantiated petitioner’s claim that dollar_figure of the date deposit of dollar_figure represented an advance from mr dubrovsky for the purchase of a television for mr dubrovsky us we find that petitioner has failed to carry his burden of establishing that dollar_figure of the date deposit repre- sented an advance from mr dubrovsky for the purchase of a television on his behalf alleged rental payments petitioner contends that the following deposits consisting of payments against the balance due on petitioner’s equity line account and the following cash that he received in connection with one of those deposits which we have found were derived from two checks issued by first marin realty inc first marin are not taxable date of de- payor of amount posit item deposited amount of deposit negotiated for cash first marin dollar_figure dollar_figure first marin big_number --- according to petitioner the two checks that first marin issued to him that were the source of the foregoing deposits and cash represented rent paid on mr reingatch’s house that peti- tioner collected pursuant to a power_of_attorney on behalf of mr reingatch while mr reingatch was out of the united_states and that petitioner used to make payments on mr reingatch’s mortgage loan in support of those contentions petitioner relies on his self-serving testimony on which we are not re- quired to and we shall not rely on the record before us we petitioner failed to offer into evidence any credible documentary_evidence to support his contentions regarding the checks issued to him by first marin such as a power_of_attorney from mr reingatch authorizing petitioner to act on mr continued find that petitioner has failed to carry his burden of establish- ing that the date transaction at issue and the date deposit at issue represented rent on mr reingatch’s house that petitioner used to pay mr reingatch’s mortgage loan alleged items of mz trading petitioner contends that the following deposits consisting of payments during against the balance due on petitioner’s equity line account represented certain gross_receipts of mz trading that mz trading had reported in its form_1065 for certain loans to mz trading or a reimbursement with respect to a transaction of mz trading date of deposit amount of deposit payor dollar_figure commonwealth enterprise sec_4 big_number mr vuli sec_4 big_number east-west big_number mr vuli sec_5 big_number east-west big_number east-west big_number commonwealth enterprises big_number east-west big_number mr kirdan ‘prior to the trial in this case respondent conceded that dollar_figure of the dollar_figure deposit is not taxable to petitioner we shall sometimes refer to the foregoing deposits as alleged mz trading-related deposits continued reingatch’s behalf with respect to mr reingatch’s funds and canceled checks showing that petitioner made any payments on mr reingatch’s mortgage loan we infer from petitioner’s failure to proffer any such documentary_evidence that any such evidence does not exist and that if it does exist it would not have substan- tiated petitioner’s position with respect to the two checks issued to him by first marin in support of petitioner’s claims regarding the alleged mz trading-related deposits petitioner relies on his self-serving testimony mr guterman’s testimony mr jordan’s testimony including his expert report and the addendum to that report mz trading’s purported transaction summary and mr oliveras’ summary of mz trading’s deposits during we are not re- guired to and we shall not rely on the testimony of petitioner and of mr guterman regarding those alleged deposits based on the court’s evaluation of the testimony of mr jordan we also are not required to and we shall not rely on his testimony including his expert report and the addendum to that report regarding certain of the alleged mz trading-related deposits the testimony of petitioner of mr guterman and of mr jordan with respect to certain of the alleged mz trading-related deposits referred to and relied on mz trading’s purported transaction summary mz trading’s purported transaction summary is a handwritten document dated date most if not all of which petitioner and mr guterman prepared which listed a series of transactions in which petitioner claims mz trading engaged during for each transaction listed in mz ‘litn violation of the court’s date order which required each party to submit to the court and to serve on the opposing party a copy of any expert report on or before date petitioner did not proffer the addendum to mr jordan’s expert report to the court until date the first day of the further trial in this case and did not provide a copy of that addendum to respondent until about minutes before it was marked for identification at that further trial on the record before us we find that respondent was prejudiced by that viola- tion by petitioner of the court’s date order trading’s purported transaction summary entries appeared under columns headed cost sold profit and expenses numbers and handwriting that is largely illegible appeared in that purported summary under each of those columns we are not satisfied that mz trading’s purported transaction summary is a credible document reflecting transactions in which mz trading engaged during at trial we admitted mz trading’s pur- ported transaction summary into the record solely for the limited purpose that it was a document which showed what the preparers of that document claimed to be transactions of mz trading during based on the court’s evaluation of mz trading’s purported transaction summary including the court’s evaluation of the testimony of petitioner and of mr guterman both of whom prepared most if not all of that pur- ported summary and both of whom we did not find to be credible we are not required to and we shall not rely on it with respect to petitioner’s reliance on mr oliveras’ summary of mz trading’s deposits during in support of his position regarding the alleged mz trading-related deposits as we stated above even if we were to have admitted that summary into the record for the truth of its content it does not establish petitioner’s claim that certain of mz trading’s gross_receipts for which it reported in its form_1065 for and which petitioner claims were not deposited during that year into mz trading’s bank account were deposited into petitioner’s equity line account we turn now to petitioner’s contentions with respect to each of the alleged mz trading-related deposits with respect to the first such deposit at issue on date of dollar_figure petitioner contends that that deposit which we have found was derived from a dollar_figure check from commonwealth enterprises represented a gross receipt of mz trading that mz trading re- ported in its form_1065 for and that relates to mz trading trade number a transaction for the purchase of shoes reflected in mz trading’s purported transaction summary less ship- ping costs in support of that contention petitioner relies on mr guterman’s testimony on which we are not required to and we shall not rely on the record before us we find that peti- tioner has failed to carry his burden of establishing that that tn considering petitioner’s contentions with respect to each of the alleged mz trading-related deposits we shall not restate that we are not required to and we shall not rely on mr jordan’s testimony including his expert report and the addendum to that report and mz trading’s purported transac-- tion summary nor shall we restate that mr oliveras’ summary of mz trading’s deposits during does not establish petitioner’s claim that certain of mz trading’s gross_receipts for which it reported in its form_1065 for and which petitioner claims were deposited during that year into mz trading’s bank account were deposited into certain of petitioner’s accounts mr vulis who at all relevant times was associated with commonwealth enterprises did not recall the purpose of the dollar_figure check that commonwealth enterprises issued to petitioner petitioner failed to offer into evidence any credible documentary_evidence that supports petitioner’s contention that the purpose of the dollar_figure check from commonwealth enterprises was to pay mz trading for a transaction relating to shoes we infer from petitioner’s failure to proffer any such documentary_evidence that any such evidence does not exist and that if it does exist it would not have substantiated petitioner’s position with respect to the date deposit at issue deposit represented a gross receipt of mz trading that it re- ported in its form_1065 for with respect to the date alleged mz trading- related deposit at issue of dollar_figure petitioner contends that that deposit which we have found was derived from a dollar_figure check from mr vulis represented a loan to mz trading for the purchase of beer petitioner failed to raise the date alleged mz trading-related deposit of dollar_figure as an issue in petitioner’s further trial memorandum accordingly pursuant to the court’s date order we shall not address that matter with respect to the date alleged mz trading- related deposit at issue of dollar_figure petitioner contends that that deposit which we have found was derived from a dollar_figure check from east-west represented a gross receipt of mz trading assuming arguendo that petitioner had raised as an issue in petitioner’s further trial memorandum the date alleged mz trading-related deposit of dollar_figure on the instant record we find that petitioner has failed to carry his burden of showing that that deposit represented a loan from mr vulis to mz trading petitioner relies on mr guterman’s testimony to support that contention on which we are not required to and we shall not rely we note that petitioner did not question mr vulis specifically about the dollar_figure loan that he allegedly made to mz trading we infer from petitioner’s failure to elicit any such testimony from mr vulis that any such testimony would not have been favorable to petitioner’s position regarding that alleged loan petitioner failed to offer into evidence any credible documentary_evidence supporting his position that the dollar_figure check from mr vulis represented a loan to mz trading we infer from petitioner’s failure to proffer any such documen- tary evidence that any such evidence does not exist and that if it does exist it would not have substantiated petitioner’s position with respect to that alleged loan for that it reported in its form_1065 for and that relates to trade number a transaction for candies reflected in mz trading’s purported transaction summary in support of that contention petitioner relies on his self-serving testi- mony and mr guterman’s testimony on which we are not required to and we shall not rely on the record before us we find that petitioner has failed to carry his burden of establishing that the date alleged mz trading-related deposit at swe note that the testimony of petitioner and of mr guterman that the dollar_figure check from east-west was a gross receipt of mz trading relating to trade number reflected in mz trading’s purported transaction summary is inconsistent with their testimony regarding the date alleged mz trading- related deposit petitioner and mr guterman testified that the dollar_figure check from east-west that was used to make the date alleged mz trading-related deposit of dollar_figure repre- sented a gross receipt of mz trading for the transaction for candies shown as trade number in mz trading’s purported transaction summary and that the date alleged mz trading-related deposit of dollar_figure represented a loan for that alleged transaction in addition to the internal inconsistencies in the respective testimony of petitioner and of mr guterman their testimony is contradicted by certain entries for trade number reflected in mz trading’s purported transaction summary which show what appear to be the amount dollar_figure under the column headed cost and the amount dollar_figure under the column headed sold petitioner failed to call as a witness mr kirdan who petitioner contends operated east-west at all relevant times and failed to offer into evidence any credible documentary_evidence regarding the date alleged mz trading-related deposit we infer from petitioner’s failure to call mr kirdan that his testimony would not have been favorable to petitioner’s position regarding that deposit we infer from petitioner’s failure to proffer any credible documentary_evidence regarding the date alleged mz trading-related deposit that any such evidence does not exist and that if it does exist it would not have substantiated petitioner’s position regarding that alleged deposit issue represented a gross receipt of mz trading for that it reported in its form_1065 for that year with respect to the date alleged mz trading-related deposit at issue of dollar_figure petitioner contends that that deposit which we have found was derived from a dollar_figure check from mr vulis represented a loan to mz trading relating to trade number a transaction for candies reflected in mz trading’s purported transaction summary according to petitioner on date the day after the date alleged mz trading-related deposit a dollar_figure check payable to pnh international in new york was posted on petitioner’s equity line account in order to acquire on behalf of mz trading the candies reflected in that purported summary in support of those conten- tions petitioner relies on his self-serving testimony and the testimony of mr guterman on which we are not required to and we shall not rely as for the evidence showing a dollar_figure check payable to pnh international in new york on petitioner’s eguity line account on date the only evidence in the record with respect to that check except for petitioner’s testimony 1s a copy of the statement for petitioner’s equity line account the copy of that statement in the record does not establish the payee or the purpose of the dollar_figure check which was ’see our discussion supra note we note that when asked at the further trial in this case mr vulis was unable to remember the purpose of the dollar_figure check that was used to make the date alleged mz trading-related deposit of dollar_figure posted on that statement on date ’ on the record before us we find that petitioner has failed to carry his burden of establishing that the date alleged mz trading-related deposit at issue represented a loan to mz trading with respect to the date alleged mz trading-related deposit at issue of dollar_figure petitioner contends that that deposit which we have found was derived from a dollar_figure check from fast--west represented a gross receipt of mz trading that mz trading reported in its form_1065 for and that related to a transaction for miller beer miller beer transaction in support of that contention petitioner relies on his self-serving testimony and mr guterman’s testimony on which we are not required to and we shall not rely on the record before us we find that petitioner has failed to carry his burden of estab- lishing that the date alleged mz trading-related deposit ‘petitioner failed to offer into evidence any credible documentary_evidence establishing his contentions with respect to the date alleged mz trading-related deposit at issue we infer from petitioner’s failure to proffer any such documentary_evidence that any such evidence does not exist and that if it does exist it would not have substantiated petitioner’s position with respect to that deposit petitioner failed to call as a witness mr kirdan and failed to offer into evidence any credible documentary_evidence in support of his position with respect to the date alleged mz trading-related deposit of dollar_figure we infer from petitioner’s failure to call mr kirdan that his testimony would not have been favorable to petitioner’s position regarding that deposit we infer from petitioner’s failure to proffer any credible documentary_evidence regarding the date alleged mz trading-related deposit of dollar_figure that any such evidence does not exist and that if it does exist it would not have substan- tiated petitioner’s position with respect to that deposit at issue represented a gross receipt of mz trading for that it reported in its form_1065 for that year with respect to the date alleged mz trading-related deposit at issue of dollar_figure petitioner contends that that deposit which we have found was derived from a dollar_figure check from bast-west represented a gross receipt of mz trading relating to the balance for the miller beer transaction to which petitioner claims the date alleged mz trading-related deposit of dollar_figure pertained and a gross receipt of mz trading relating to trade number a transaction for lollipop candies reflected in mz trading’s purported transaction summary both of which mz trading reported in its form_1065 for in support of that contention petitioner relies on his self-serving testimony and mr guterman’s testimony on which we are not required to and we shall not rely on the record before us we find that petitioner has failed to carry his burden of establishing that the date alleged mz trading-related deposit at issue represented gross_receipts of mz trading for that it reported in its form_1065 for that year petitioner failed to call as a witness mr kirdan who petitioner claims operated east-west at all relevant times and failed to offer into evidence any credible documentary_evidence in support of his position with respect to the date alleged mz trading-related deposit at issue we infer from petitioner’s failure to call mr kirdan that his testimony would not have been favorable to petitioner’s position regarding that deposit we infer from petitioner’s failure to proffer any credible documentary_evidence regarding the date mz trading-related deposit that any such evidence does not exist and that if it does exist it would not have substantiated peti- tioner’s position with respect to that deposit with respect to the date alleged mz trading-related deposit at issue of dollar_figure petitioner contends that that de- posit which we have found was derived from a dollar_figure check from commonwealth enterprises represented a reimbursement for the shipping of candies to mr ivenin relating to mz trading trade number reflected in mz trading’s purported transaction summary ’ in support of that contention petitioner relies on his self-serving testimony on which we are not required to and we shall not rely on the record before us we find that the nature of the alleged transaction number reflected in mz trading’s purported transaction summary is not legi- ble petitioner failed to offer into evidence any credible documentary_evidence regarding the date alleged mz trading-related deposit at issue we infer from petitioner’s failure to proffer any such documentary_evidence that any such evidence does not exist and that if it does exist it would not have substantiated petitioner’s position with respect to that deposit petitioner questioned mr vulis about the dollar_figure check from commonwealth enterprises that was the source of the date alleged mz trading-related deposit at issue mr vulis testified as follows with respect to that check a x tt’s a check drawn on commonwealth enter-- prise sic checkbook i have very bad copy but it’s for dollar_figure i guess q and was payable to whom a to mr brodsky qo for what purpose a well as far as i can recall looking at that check it says j b percent big_number which means jelly-beans percent out of dollar_figure continued petitioner has failed to carry his burden of establishing that the date alleged mz trading-related deposit at issue represented a reimbursement for the shipping of candies to a mr ivenin relating to a transaction of mz trading with respect to both the august and date alleged mz trading-related deposits of dollar_figure and dollar_figure respectively petitioner contends that those deposits which we have found were derived from east-west and from mr kirdan respectively represented gross_receipts of mz trading that it reported in its form_1065 for and that related to trade number a transaction for coffee reflected in mz trading’s purported transaction summary continued q and so what does that represent a that to the best of my ability to recall it it’s just after the deal was concluded it was a distri- bution q distribution of what a of the entire funds of the initial investment plus most probably interest and or profit the foregoing testimony of mr vulis regarding the dollar_figure check from commonwealth enterprises that was the source of the date alleged mz trading-related deposit at issue does not support petitioner’s contention that that deposit represented a reim- bursement for the cost of shipping certain candies to a mr ivenin relating to a transaction of mz trading ’detitioner contends that the dollar_figure received from east- west was paid_by check as was the dollar_figure received from mr kirdan the record does not support petitioner’s contention we have found that the dollar_figure received from east-west and the dollar_figure received from mr kirdan were paid in cash with respect to the date alleged mz trading- related deposit at issue of dollar_figure petitioner relies on his self-serving testimony and mr guterman’s testimony on which we are not required to and we shall not rely ’ on the record before us we find that petitioner has failed to carry his burden of establishing that the date alleged mz trading- related deposit at issue represented a gross receipt of mz trading for that it reported in its form_1065 for that year with respect to the date alleged mz trading- related deposit of dollar_figure as noted above prior to the trial in this case respondent conceded that dollar_figure of that deposit is not taxable to petitioner prior to that trial petitioner conceded that the remaining dollar_figure of the date alleged mz trading-related deposit of dollar_figure constituted a taxable commission to him petitioner reaffirmed at the further trial in this case that he had made that concession despite his concession petitioner contends on brief that no portion of the date alleged mz trading-related deposit is taxable to him on the record before us we conclude that petitioner petitioner failed to call as a witness mr kirdan regard- ing the date alleged mz trading-related deposit at issue we infer from petitioner’s failure to call mr kirdan that his testimony with respect to that deposit would not have been favorable to petitioner’s position with respect to that alleged deposit petitioner also failed to offer into evidence any credible documentary_evidence in support of his position regarding the date alleged mz trading-related deposit we infer from petitioner’s failure to proffer any such documen- tary evidence that any such evidence does not exist and that if it does exist it would not have substantiated petitioner’s contention with respect to that deposit conceded that he is taxable on dollar_figure of that deposit and that that concession taken together with respondent’s concession of dollar_figure of that deposit leaves no portion of the date alleged mz trading-related deposit that remains at issue in this case alleged repayments of loans petitioner contends that dollar_figure of the date deposit of dollar_figure and the entire date deposit at issue of dollar_figure represented repayments of certain loans that he had made to certain individuals with respect to the date deposit of dollar_figure petitioner contends that dollar_figure of that deposit constituted a repayment by mr reingatch of a loan that petitioner had made to him in support of that contention petitioner relies on his self-serving testimony on which we are not required to and we shall not rely petitioner also relies on a copy of the front side of a dollar_figure check dated date that was signed by petitioner and payable to mr reingatch petitioner claims that that check represented the dollar_figure that he lent mr reingatch although we are satisfied from the copy of the front side of the date check on which petitioner relies that that check was negotiated we are not satisfied from that copy inter alia that even if we had not concluded that prior to the trial in this case petitioner conceded dollar_figure of the date alleged mz trading-related deposit on the instant record we find that petitioner has failed to carry his burden of establish- ing that dollar_figure of that deposit is not taxable to him mr reingatch deposited and or cashed that check for example mr reingatch could have endorsed the check in question to petitioner who in turn deposited and or cashed it nor are we satisfied from the instant record what the purpose of the date check was assuming arguendo that we had found on the instant record that mr reingatch deposited and or cashed the dollar_figure check in question the only evidence in the record supporting petitioner’s position that that check represented a loan to mr reingatch is petitioner’s self-serving testimony on which we are not required to and we shall not rely ’ on the record before us we find that petitioner has failed to carry his burden of establishing that dollar_figure of the date deposit represented a repay- ment by mr reingatch of a loan that petitioner had made to him with respect to the date deposit at issue of dollar_figure petitioner contends that that deposit which we have found was derived from a dollar_figure check from mr guterman repre- sented a repayment by mr guterman of a loan that petitioner had made to mr guterman’s wife in support of that contention petitioner relies on his self-serving testimony on which we are petitioner failed to offer into evidence any credible documentary_evidence showing that he lent dollar_figure to mr reingatch in or at any other time prior to the date on which petitioner claims mr reingatch repaid that alleged loan we infer from petitioner’s failure to proffer any such documentary_evidence that any such evidence does not exist and that if any such evidence does exist it would not have substantiated peti- tioner’s position with respect to dollar_figure of the date deposit at issue not required to and we shall not rely ’ on the record before us we find that petitioner has failed to carry his burden of establishing that the date deposit at issue repre- sented a repayment of a loan that petitioner had made to mr guterman’s wife claimed cost_of_goods_sold in the notice for and and the notice for respondent disallowed for those three years claimed schedule c cost_of_goods_sold of dollar_figure dollar_figure and dollar_figure respec-- tively petitioner contends that respondent erred in disallowing dollar_figure and dollar_figure of claimed schedule c cost_of_goods_sold for and respectively petitioner failed to question mr guterman about why he made the dollar_figure payment to petitioner which was the source of the date deposit at issue even if petitioner had gquestioned mr guterman about that payment we would not have been required to rely on mr guterman’s testimony petitioner failed to call mr guterman’s wife regarding petitioner’s allega- tion that he lent her dollar_figure we infer from petitioner’s failure to call mr guterman’s wife that her testimony would not have been favorable to petitioner’s position petitioner failed to offer into evidence any credible documentary_evidence showing that he lent dollar_figure to mr guterman’s wife prior to the date on which petitioner claims mr guterman repaid that alleged loan we infer from petitioner’s failure to proffer any such documen- tary evidence that any such evidence does not exist and that if any such evidence does exist it would not have substantiated petitioner’s position with respect to the date deposit at issue petitioner also argues that respondent failed to sustain respondent’s burden_of_proof with respect to the additional dollar_figure of the cost_of_goods_sold for that respondent alleged should be disallowed in respondent’s amendment to answer continued in order to compute gross_income gross_receipts are reduced by cost_of_goods_sold sec_1_61-3 income_tax regs a taxpayer must show his entitlement to the cost_of_goods_sold claimed and keep sufficient records to substantiate such cost see sec_1_6001-1 income_tax regs see also rule a in support of petitioner’s position with respect to the cost_of_goods_sold at issue petitioner contends that the following canceled checks cashier’s checks and credit card charges represented amounts paid to the payees shown below in order to acquire certain merchandise for resale in uvw’s business continued we disagree we have found that pursuant to rule c peti- tioner is deemed to have admitted the affirmative allegations in that amendment to answer relating to the claimed cost_of_goods_sold for petitioner did not raise as an issue in petitioner’s further trial memorandum presented no evidence at trial and at further trial and makes no argument on brief as to certain amounts of claimed cost_of_goods_sold disallowed for and that petitioner placed in dispute in the petition and that respondent has not conceded we conclude that petitioner has abandoned contesting those disallowed amounts of claimed cost_of_goods_sold see rybak v commissioner t c pincite n date description payee amount check drawn on petitioner’s uvw ac- fashions store dollar_figure count check drawn on petitioner’s uvw ac- fashions store count check drawn on petitioner’s uvw ac- fashions store big_number count check drawn on petitioner’s uvw ac- fashions store count bank of america cashier’s check circuit city big_number charge on acct carvis discount big_number no charge on acct carvis discount big_number no bank of america cashier’s check macy’s california big_number check drawn on petitioner’s uvw ac- cash big_number count bank of america cashier’s check m p electronics big_number check drawn on petitioner’s uvw ac- m p electronics big_number count bank of america cashier’s check macy’s california big_number in support of petitioner’s contention regarding the forego- ing items petitioner relies on his self-serving testimony on which we are not reguired to and we shall not rely petitioner also relies on the testimony of mr raja ’ based on the court’s evaluation of mr raja’s testimony we are not required to and we shall not rely on his testimony regarding the items listed above we found mr raja’s testimony to have been based largely on his general business practices with petitioner as opposed to petitioner failed to offer into evidence any credible documentary_evidence such as receipts invoices or any other credible business records of uvw that establishes petitioner’s position regarding the claimed cost_of_goods_sold at issue for and we infer from petitioner’s failure to proffer any such documentary_evidence that any such evidence does not exist and that if it does exist it would not have substantiated petitioner’s position regarding that claimed cost_of_goods_sold -- - his personal knowledge of the facts with respect to a particular transaction or activity about which he testified we also found mr raja’s testimony to be vague and or inconsistent at times on the record before us we find that petitioner has failed to carry his burden of establishing that in computing his gross_income from uvw’s business he is entitled to reduce gross_receipts by the respective amounts of cost_of_goods_sold to which he claims he is entitled for and claimed schedule c deductions in the notice for and respondent disallowed for those two years claimed schedule c deductions of dollar_figure and dollar_figure respectively petitioner contends that he is entitled to the following amounts of schedule c deductions for interest and telephone expenses that respondent disallowed in the notice for and petitioner did not raise as an issue in petitioner’s further trial memorandum presented no evidence at trial and at further trial and makes no argument on brief as to certain amounts of claimed schedule c deductions disallowed for and that petitioner placed in dispute in the petition and that respondent has not conceded we conclude that petitioner has abandoned contesting those disallowed amounts of claimed schedule c expenses see rybak v commissioner supra pincite n although petitioner raised as an issue in petitioner’s further trial memorandum that he is entitled to certain schedule c deductions for petitioner indicates on brief that there are no schedule c deductions in dispute for that year claimed claimed telephone year interest_deduction expense deduction dollar_figure dollar_figure dollar_figure dollar_figure petitioner further contends for the first time in petitioner’s further trial memorandum and on brief that he is entitled to a schedule c deduction for for his payment in that year of an alleged loan guaranty of dollar_figure sec_162 generally allows a deduction for ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying_on_a_trade_or_business the determination of whether an expenditure satisfies the requirements for deductibility under sec_162 is a question of fact 320_us_467 in general an expense is ordinary if it is considered normal usual or customary in the context of the particular business out of which it arose 308_us_488 ordinarily an expense is necessary if it is appropriate and helpful to the operation of the taxpayer's trade_or_business 383_us_687 83_tc_356 affd 777_f2d_662 11th cir sec_212 allows a deduction for ordinary and necessary expenses paid_or_incurred during the taxable_year inter alia tn petitioner’s further trial memorandum and on brief petitioner claims that he deducted the dollar_figure payment at issue for in schedule c of the joint_return for that year the record does not support petitioner’s claim the joint_return of petitioner and ms brodsky does not claim any dollar_figure deduction relating to an alleged payment on a loan guaranty in schedule c or anywhere else in that return -- - for the production_or_collection_of_income sec_163 generally allows a deduction for all interest_paid or accrued during the taxable_year on indebtedness how- ever in the case of a taxpayer other than a corporation sec_163 generally disallows any deduction for personal_interest the term personal_interest is defined to mean any interest allowable as a deduction under chapter of the code other than inter alia interest_paid or accrued on indebtedness properly allocable to a trade_or_business other than the trade or busi- ness of performing services as an employee any investment_interest and any interest which is taken into account under sec_469 in computing income or loss from a passive_activity of the taxpayer sec_163 a b and c the term investment_interest means in general any interest allowable as a deduction under chapter of the code which is paid_or_accrued on indebtedness properly allocable to property_held_for_investment see d a investment_interest does not include inter alia any interest which is taken into account under sec_469 in computing income or loss from a passive_activity of the taxpayer sec_163 b although investment_interest and interest which is taken into account under sec_469 in computing income or loss from a passive_activity of the taxpayer are excepted from the definition of the term personal_interest the deductibility of the first two types of interest 1s subject_to certain other limitations see sec_163 a sec_166 allows a taxpayer to deduct any business debt which becomes wholly or partially worthless during the taxable_year sec_166 d a sec_166 also allows a tax- payer who guaranties a debt and makes a payment pursuant to that guaranty to deduct that payment provided that the taxpayer satisfies the requirements of sec_1_166-9 income_tax regs claimed interest deductions petitioner contends that he is entitled to deduct for and interest payments that he made on petitioner’s equity line account during those years in the amounts of dollar_figure and dollar_figure respectively petitioner also contends that he is entitled to deduct for interest of dollar_figure that he claims he paid on an alleged business loan from mr kroma with respect to the interest payments on petitioner’s equity line account that are at issue we have found that petitioner paid interest in the respective amounts of dollar_figure and dollar_figure on that account during and prior to the filing of petitioner’s opening brief petitioner took the posi- tion that he is entitled to deduct percent of those interest payments because he incurred these expenses in conducting his business on brief petitioner contends that he is entitled to deduct all of the interest payments that he made during and on petitioner’s equity line account because that account was used primarily for business and the production_of_income we infer and we conclude from petitioner’s argument that he used petitioner’s equity line account primarily for business and the production_of_income that petitioner concedes that he used that account at least partially for personal purposes in support of his contention that he used petitioner’s equity line account primarily for business and the production_of_income petitioner relies on his self-serving testimony on which we are not required to and we shall not rely assuming arguendo that petitioner had established that he used peti- tioner’s equity line account primarily for business and the production_of_income on the instant record we find that peti- tioner has failed to carry his burden of showing that he is entitled to deduct the respective amounts of interest payments on petitioner’s equity line account that he made during and in this connection we find on that record that petitioner has failed to establish the portion if any of petitioner’s equity line account that he used during and for busi- ness and or income-producing activities and to allocate the interest payments at issue for purposes of applying sec_163 and h and see sec_1_163-8t temporary income_tax regs fed reg date with respect to the dollar_figure of alleged interest that remains at issue petitioner contends that his dollar_figure check dated date which was payable to mr kroma drawn on petitioner’s equity line account and signed by petitioner petitioner’s date check represented a payment of months’ interest ona dollar_figure loan from mr kroma to uvw in support of that conten-- tion petitioner relies on his self-serving testimony on which we are not required to and we shall not rely we have found that petitioner has failed to carry his burden of establishing that mr kroma made a dollar_figure loan to uvw that mr kroma received the proceeds of petitioner’s date check and that even if mr kroma had received the proceeds of that check those proceeds represented months’ interest on the alleged dollar_figure loan from mr kroma to uvw on the record before us we find that petitioner has failed to carry his burden of establishing that he is entitled under sec_163 to deduct for and interest payments of dollar_figure and dollar_figure respectively that he made during those years on petitioner’s equity line account and for the claimed interest payment of dollar_figure claimed telephone expense deductions petitioner contends that he is entitled to deduct for and certain telephone expenses that he paid during those years during and petitioner maintained separate home telephone lines one of which was supposed to be used for personal purposes and one of which was supposed to be used for business purposes and separate cellular telephone lines one of which was supposed to be used for personal purposes and one of which was supposed to be used for business purposes with respect to petitioner’s home telephone lines petitioner claims that he is entitled to deduct for and telephone ex- penses of dollar_figure and dollar_figure that he paid during those respective years which he contends are the amounts of telephone expenses for his home telephone line that was supposed to be used for business purposes with respect to petitioner’s cellular telephone lines petitioner claims that he is entitled to deduct for and telephone expenses of dollar_figure and dollar_figure that he paid during those respective years which he contends are the amounts of telephone expenses for his cellular telephone line that was supposed to be used for business purposes with respect to the home telephone expenses at issue for and the only dispute between the parties with respect to the deductibility of those expenses is whether petitioner who we have found paid those expenses during those years has estab- lished that those expenses are ordinary and necessary expenses paid in carrying on his schedule c business petitioner contends that they are in support of that contention petitioner relies on his self-serving testimony on which we are not required to and we shall not rely on the instant record we find that petitioner has failed to carry his burden of showing that the telephone expenses of dollar_figure and dollar_figure that he paid during and respectively for his home telephone lines repre- sented expenses paid solely for his home telephone line that was supposed to be used for business purposes even if petitioner had made such a showing on the instant record we find that petitioner has failed to carry his burden of showing that he used his home telephone line that was supposed to be used for business purposes solely in carrying on his schedule c business and not for personal purposes on the record before us we find that petitioner has failed to carry his burden of establishing that the home telephone expenses of dollar_figure and dollar_figure that he paid during and respectively constitute ordinary and necessary business_expenses paid in carrying on his schedule c business with respect to the cellular telephone expenses at issue for and the disputes between the parties with respect to the deductibility of those expenses are whether petitioner who we have found paid those expenses during those years has estab- lished that he paid those expenses during those years in carrying on his schedule c business and that he satisfies the substantiation requirements of sec_274 as to the parties’ first dispute petitioner relies on his self-serving testimony to support his contention that the cellular telephone expenses at issue are ordinary and necessary expenses paid in carrying on his schedule c business we are not required to and we shall not rely on that testimony on the instant record we find that petitioner has failed to carry his burden of showing that the telephone expenses of dollar_figure and dollar_figure that he paid during and respectively for his cellular telephone lines represented expenses paid solely for his cellular telephone line that was supposed to be used for business purposes even if petitioner had made such a showing on the instant record we find that petitioner has failed to carry his burden of showing that he used his cellular telephone line that was supposed to be used for business purposes solely in carrying on his schedule c business and not for personal purposes on the record before us we find that petitioner has failed to carry his burden of establishing that the cellular telephone expenses of dollar_figure and dollar_figure that he paid during and respectively consti- tute ordinary and necessary business_expenses paid in carrying on his schedule c business as to the parties’ second dispute with respect to the cellular telephone expenses at issue which we address only because we assume arguendo that petitioner had established that the cellular telephone expenses at issue constitute ordinary and necessary expenses paid in carrying on his schedule c business as pertinent here sec_274 operates to disallow any deduction otherwise allowable under sec_162 with respect to any listed_property unless the taxpayer satisfies the substantiation requirements of sec_274 the term ' sec_274 provides in pertinent part sec_274 disallowance of certain entertainment etc bxpenses d substantiation regquired --no deduction or credit shall be allowed--- with respect to any listed_property as de- fined in sec_280f unless the taxpayer substantiates by adequate_records or by sufficient evidence corroborating the taxpayer’s own statement a the amount of such expense or other item b the time and place of the use of the facility or property c the business_purpose of continued listed_property is defined in sec_280f to include cellular telephones sec_280f a v although as required by sec_274 petitioner substantiated the respective amounts of the cellular telephone expenses that he paid during and on the instant record we find that petitioner has failed to show that he satisfies the remaining substantiation requirements of sec_274 and the regula- tions thereunder petitioner did not introduce into evidence adequate_records to satisfy those requirements consequently petitioner may satisfy those requirements only by introducing into the record in this case sufficient evidence corroborating his own statements sec_274 sec_1_274-5t tempo- rary income_tax regs fed reg date as discussed above petitioner relies on his self-serving testi- mony to support his contention that the cellular telephone expenses at issue constitute ordinary and necessary expenses paid in carrying on his schedule c business we are not required to and we shall not rely on that testimony on the instant record we find that petitioner has failed to carry his burden of intro- ducing into the record in this case sufficient evidence corrobo- rating his statements with respect to his alleged business use of his cellular telephone lines during and on the record before us we find that petitioner has failed to carry his burden of establishing that he satisfies all of the substantiation scontinued the expense or other item requirements of sec_274 on the record before us we find that petitioner has failed to carry his burden of establishing that he is entitled under sec_162 to deduct for and any of the telephone expenses that he paid during those years claimed bad_debt deduction petitioner contends that he is entitled to deduct for the dollar_figure payment that he made to commonwealth enterprises which he claims he made pursuant to an alleged loan guaranty according to petitioner he guarantied a dollar_figure loan from mr vulis to mp electronics and the dollar_figure check dated date which was payable to commonwealth enterprises drawn on petitioner’s uvw account and signed by petitioner uvw’s decem-- ber check represented petitioner’s payment of that loan pursuant to his guaranty in support of his contentions petitioner relies on his self-serving testimony on which we are not required to and we shall not rely on the instant re s although not altogether clear it appears that petitioner contends in the alternative to deducting the telephone expenses at issue for and under sec_162 that those expenses are deductible under sec_212 on the instant record we find that petitioner has failed to carry his burden of showing that the respective telephone expenses that he paid during and are ordinary and necessary expenses paid during those years for the production_or_collection_of_income on the record before us we find that petitioner has failed to carry his burden of establishing that he is entitled under sec_212 to deduct for and any of the telephone expenses that he paid during those years 3petitioner failed to offer into evidence any credible documentary_evidence to establish that mr vulis made a loan to continued cord we find that petitioner has failed to carry his burden of showing that uvw’s date check was paid pursuant to a guaranty that petitioner provided on a loan from mr vulis to mp electronics on the record before us we find that petitioner has failed to carry his burden of establishing that he is enti- tled for to a dollar_figure deduction under sec_166 for the payment of a loan guaranty continued mp electronics and that petitioner was a guarantor on any such loan we infer from petitioner’s failure to proffer any such documentary_evidence that any such evidence does not exist and that if it does exist it would not have substantiated peti- tioner’s position with respect to uvw’s date check we also note that when mr raja was questioned about the claimed loan and guaranty in question he gave inconsistent testimony we further note that when mr vulis was questioned about uvw’s date check he had no recollection of either that check or the name mp electronics nor could mr vulis recall whether commonwealth enterprises had entered into any transac- tions with mr raja sec_4assuming arguendo that petitioner had established that uvw’s date check was paid to satisfy his guaranty of a loan from mr vulis to m p electronics on the record before us we find that petitioner has failed to carry his burden of establishing that he satisfies the requirements of sec_1_166-9 income_tax regs and that therefore he is entitled under sec_166 to a business_bad_debt deduction for with respect to that payment although not altogether clear it appears that petitioner contends in the alternative to deducting the dollar_figure payment under sec_166 that that payment is deductible under sec_162 on the instant record we find that petitioner has failed to carry his burden of showing that the dollar_figure payment at issue is an ordinary_and_necessary_expense paid during in carrying on his schedule c business on the record before us we find that petitioner has failed to carry his burden of establishing that he is entitled under sec_162 to a deduction for for the dollar_figure payment at issue claimed capital_loss church street property in the notice for and respondent determined that instead of the dollar_figure loss which petitioner and ms brodsky reported in their joint_return with respect to the sale of the church street property they have a gain of dollar_figure all of which they must recognize for respondent made those determinations because petitioner had not established his basis in the church street property at the time of its sale in petitioner contends on brief that in he sold a percent interest in the church street property for dollar_figure that his basis in that property at the time of that sale was dollar_figure and that he realized a capital_loss of dollar_figure on that sale ’ -respondent also disallowed in the and notice a claimed capital_loss_carryover to that was attributable to the dollar_figure loss that petitioner and ms brodsky claimed for s6tn the schedule d petitioner and ms brodsky claimed a dollar_figure basis in the church street property as of the date of the sale of that property s’petitioner contends in the alternative that because there are no documents establishing that petitioner was in fact a legal owner of the church street property at the time of its sale in petitioner is not obligated or required to report any capital_gain or loss on the sale of that property on the record before us we reject petitioner’s alternative contention that he was not a legal owner of the church street property we have found on that record that at least during part of and until the date of the sale of the church street property petitioner owned an interest in that property although the extent of that interest is not disclosed by credible_evidence in the record in this connection in addition to other evidence in the record the and joint returns filed by petitioner continued the gain from the sale_or_other_disposition of property is the excess of the amount_realized over the adjusted_basis of the property provided in sec_1011 for determining gain and the loss is the excess of the adjusted_basis provided in that section for determining loss over the amount_realized sec_1001 a petitioner must establish his adjusted_basis in the church street property for purposes of determining the gain or the loss that he realized and must recognize on its sale o’neill v commis- si271_f2d_44 9th cir affg tcmemo_1957_ see 283_us_223 as pertinent here petitioner’s adjusted_basis in determining the gain or the loss from the sale of the church street property is his basis in that property determined under sec_1012 adjusted as provided in sec_1016 see sec_1011 and continued and ms brodsky support that finding petitioner and ms brodsky included schedule e in each of those returns in each such schedule e they reported the church street property as rental property in the schedule e they claimed rental expenses with respect to that property in the schedule e they listed the church street property as a rental property and in the schedule d they claimed a capital_loss with respect to that property we find that the and returns contain admissions by petitioner and ms brodsky that one or both of them had an ownership_interest in the church street property at least during part of and until the date of the sale of that property those admissions may not be overcome without cogent evidence that they are wrong see fre d 412_f2d_800 3d cir affg per curiam tcmemo_1968_126 92_tc_312 sswith respect to the adjustments to basis under sec_1016 that are required by sec_1011 petitioner testified at the continued his basis in the church street property is the cost of such property sec_1012 petitioner contends that the copies of the front sides of two checks totaling dollar_figure dated may and date respec-- tively which show that they were payable to markfel realty petitioner’s two checks to markfel realty represented peti- tioner’s cost_basis in the church street property we are not persuaded by those copies which the court admitted into the record in this case solely as the front sides of those two checks that they are the front sides of two checks that scontinued trial in this case that the church street property was land that was to be developed petitioner also described the church street property in petitioner’s answering brief as a vacant lot however in the and joint returns filed by petitioner and ms brodsky they reported the church street property as rental property petitioner also took the position that the church street property was rental property at the further trial in this case and in petitioner’s opening brief if we were to accept petitioner’s position at the trial that the church street property was land to be developed and not rental property on the instant record we find that petitioner has failed to carry his burden of showing what if any adjustments to basis under sec_1016 petitioner is required to make under sec_1011 in order to determine his adjusted_basis in that property if we were to accept petitioner’s position in schedules e of the and joint returns and at the further trial that the church street property was rental property and not land to be developed on the instant record we find that petitioner has failed to carry his burden of showing the decrease required by sec_1016 in his basis in that property determined under sec_1012 e the cost for depreciation allowed_or_allowable whichever is greater under sec_167 see 26_tc_804 although we are satisfied from the copy of the front side of petitioner’s check to markfel realty dated date that that check was negotiated we are not satisfied from that copy or continued markfel realty negotiated on the instant record we find that petitioner has failed to carry his burden of establishing his basis in the church street property within the meaning of sec_1012 and his adjusted_basis in that property within the meaning of sec_1011 on the record before us we find that petitioner has failed to carry his burden of establishing continued from any other evidence in the record that markfel realty depos- ited and or cashed that check nor do we know from the record the date on which that check was negotiated for example markfel realty could have endorsed that check to petitioner who in turn deposited and or cashed it we are not satisfied from the copy of the front side of petitioner’s check to markfel realty dated date or from any other evidence in the record that that check was ever negotiated assuming arguendo that we had been persuaded that peti- tioner’s two checks to markfel realty were negotiated by markfel realty on the instant record we find that petitioner has failed to carry his burden of showing that those checks represented funds paid_by petitioner with respect to the church street property we have found that during the course of petitioner’s dealings with markfel realty petitioner invested in several real properties and that any checks which petitioner wrote to markfel realty were for one or more of the following purposes initial respective investments in certain real properties respective increases in his investment interests in certain real properties and or respective payments of his proportionate share of any expenditures with respect to such interests assuming arguendo that we had found that the copies of the front sides of peti- tioner’s two checks to markfel realty were negotiated by markfel realty petitioner could have paid the proceeds of those checks to markfel realty with respect to real properties other than the church street property even if we had been satisfied from the instant record that the copies of the front sides of petitioner’s two checks to markfel realty were negotiated by markfel realty and that the proceeds of those checks were paid to markfel realty with respect to the church street property petitioner could have paid those proceeds in order to invest in to increase his investment in and or to pay his proportionate share of any expenditures with respect to that property that he is entitled to the capital_loss that he claimed for with respect to the sale of the church street property and that he is not required to recognize for that year the gain of dollar_figure that respondent determined in the notice for and dollar_figure claimed capital_gain sanchez street property in the notice for respondent determined that instead of the dollar_figure gain that petitioner and ms brodsky reported in their return with respect to the sale of the sanchez street property they have a gain from that sale of dollar_figure all of which they must recognize for respondent made that deter- mination because petitioner and ms brodsky had not established their basis in the sanchez street property when it was sold in the joint_return petitioner and ms brodsky re- ported that they sold their interest in the sanchez street property for dollar_figure that their adjusted_basis in that property at the time of that sale was dollar_figure and that they realized a gain of dollar_figure on that sale on brief petitioner abandons the position that he and ms brodsky took in the joint_return instead petitioner advances the following contentions on brief with respect to the 71on the record before us we further find that petitioner has failed to carry his burden of establishing that he is enti- tled to the capital_loss_carryover to that he claimed in the joint_return and that respondent disallowed respondent also determined in the notice as respon- dent had determined in the and notice that petitioner and ms brodsky are not entitled to the dollar_figure capital_loss_carryover from that they claimed in their joint_return we sustain that determination see supra note sanchez street property joseph dubrovsky testified that petitioner in- vested dollar_figure in in property located on el camino del mar san francisco mr dubrovsky testified that he returned dollar_figure of petitioner’s investment to him on date ' therefore petitioner’s adjusted_basis was dollar_figure at that point in time thereafter it is unclear whether there was a sale or like-kind_exchange for the property located pincite sanchez street what is clear is joseph dubrovsky testified that all the owners of el camino del mar remained the owners of sanchez street including petitioner edward sutton the tax_return_preparer testified that his records reflected a pur- chase price of dollar_figure for sanchez street in which would be the cost_basis joseph dubrovsky testi- fied that petitioner was a owner of the property edward sutton the tax_return_preparer reported that petitioner’s gain on a sale of the property in petitioner contends in the alternative that because there are no documents establishing that petitioner was in fact a legal owner of the sanchez street property at the time of its sale in petitioner is not obligated or required to report any capital_gain or loss on the sale of that property on the record before us we reject petitioner’s contention that he was not a legal owner of the sanchez street property we have found on that record that at least during the period beginning in and ending on the date of the sale of the sanchez street property in petitioner and ms brodsky owned an interest in that property although the extent of that interest is not disclosed by credible_evidence in the record in this connection in addition to other evidence in the record the and joint returns filed by petitioner and ms brodsky support that finding petitioner and ms brodsky included schedule e in each of those returns in each such schedule e they reported the sanchez street property as rental property and they claimed rental expenses with respect to that property in schedule d and form_4797 that petitioner and ms brodsky included in the joint_return they claimed a capital_gain with respect to the sanchez street property we find that the and joint returns contain admissions by petitioner and ms brodsky that they had an ownership_interest in the sanchez street prop- erty at least during the period beginning in and ending on the date of the sale of that property in those admissions may not be overcome without cogent evidence that they are wrong see fre d waring v commissioner f 2d pincite estate of hall v commissioner t c pincite was dollar_figure ' however at trial mr sutton testified that the property was not sold until if petitioner sold his interest in the property in for dollar_figure then with an adjusted_basis of dollar_figure petitioner would have a gain of dollar_figure however petitioner did not receive any cash or proceeds on any sale petitioner only reported a gain as a result of being relieved from the assumption of the debt by the buyer ‘contrary to petitioner’s claim on brief mr dubrovsky did not testify that he distributed dollar_figure to petitioner on date as a return of petitioner’s investment in the camino prop- erty mr dubrovsky testified that he distributed dollar_figure to petitioner on date as a return of petitioner’s investment in that property the record contains a copy of a check dated date from mr dubrovsky to petitioner in the amount of dollar_figure which petitioner negotiated although we are not re- quired to and we shall not rely on mr dubrovsky’s testimony to establish the purpose of that check the parties do not dispute that the dollar_figure check from mr dubrovsky to petitioner repre- sented a distribution with respect to the camino property even if we were to rely on mr dubrovsky’s testimony and or accept the parties’ agreement as to the purpose of that check neither that testimony nor that agreement establishes petitioner’s basis in the sanchez street property contrary to petitioner’s claim on brief petitioner and ms brodsky reported the sale of the sanchez street property in the joint_return mr sutton did not prepare that return or calculate the gain on the sale of that property that they reported in that return and dollar_figure was the gross_sales price not the gain that they reported from that sale in that return although not altogether clear it appears from the foregoing excerpt that petitioner takes the position on brief that he held a 10-percent ownership_interest in the sanchez street property since the date of the purchase of that property that his basis at all times in that ownership_interest was dollar_figure and that that property a was sold in for dollar_figure as reported in the joint_return or b in the alternative was sold in for an undisclosed amount in support of petitioner’s position regarding his ownership_interest and basis in the sanchez street property petitioner relies on the testimony of mr dubrovsky on which we are not required to and we shall not rely in support of petitioner’s alternative position regarding the sale of the sanchez street property petitioner relies on the testimony of mr sutton based on the court’s evaluation of mr sutton’s testimony we are not required to and we shall not rely on his testimony regarding the sale of the sanchez street property on the instant record we find that petitioner has failed to carry his burden of establishing his basis in the sanchez street property within the meaning of sec_1012 and his adjusted_basis in that property within the meaning of sec_1011 we further find on that record that petitioner has failed to carry his burden of establishing that he did not sell his inter- est in that property in for dollar_figure on the record before us we find that petitioner has failed to carry his burden of establishing that he is not required to recognize for the gain of dollar_figure that respondent determined in the notice claimed schedule e deductions because petitioner does not dispute that the sanchez street property was rental property on the instant record we find that petitioner has failed to carry his burden of showing the decrease required by sec_1016 in his basis in that property determined under sec_1012 ie the cost for depreciation allowed_or_allowable whichever is greater under sec_167 see reithmeyer v commissioner t c pincite on the instant record we find that petitioner has failed to carry his burden of showing in the alternative that the sanchez street property was sold in -- - in the notice for and respondent disallowed for all of the claimed schedule e expenses with respect to the church street property and the sanchez street property and for all of the claimed schedule e expenses with respect to the sanchez street property respondent made that determina- tion because inter alia it has not been established that the claimed schedule e expenses were ordinary and necessary busi- ness expenses or were expended for the purpose desig- nated nor has it been established that you were at risk per sec_465 of the internal_revenue_code xk kek as an alternative ground for disallowing the claimed schedule e expenses for and respondent determined that the claimed losses are not allowable per sec_469 of the internal_revenue_code because you did not actively participate in the management of the rental properties and because you have no other passive_income to offset the passive losses with respect to dollar_figure of the claimed schedule e expenses an additional ground set forth by respondent in the notice for and for disallowing all of the claimed schedule e expenses for those years was that petitioner and ms brodsky had not established an ownership_interest in the church street property and the sanchez street property on the record before us we reject that ground on that record we have found that at least during part of and until the date of the sale of the church street property petitioner owned an interest in that property although the extent of that interest is not disclosed by credible_evidence in the record we have further found on the record before us that at least during the period beginning in and ending on the date of the sale of the sanchez street property in petitioner and ms brodsky owned an interest in that property although the extent of that interest is not disclosed by credible_evidence in the record for relating to the church street property petitioner contends that he has substantiated those expenses in support of that contention petitioner relies on a copy of the front side of a check for dollar_figure dated date that was payable to markfel realty and that petitioner signed petitioner’s date check to markfel realty we are not satis-- fied from that copy that that check was ever negotiated let alone negotiated by markfel realty even if we were to find that petitioner’s date check to markfel realty was negotiated by markfel realty on the instant record we find that petitioner has failed to carry his burden of showing that that check represented an amount that petitioner paid in for expenses relating to the church street property on the record before us we find that petitioner has failed to carry his burden of establishing that he is entitled to deduct for any of the claimed schedule e expenses relating to the church street prop- petitioner makes no argument on brief as to dollar_figure of the disallowed claimed schedule e expenses for relating to the church street property that petitioner placed in dispute in the petition and that respondent has not conceded we conclude that petitioner has abandoned contesting dollar_figure of the claimed schedule e expenses for that respondent disallowed in the notice for and see rybak v commissioner t c pincite n assuming arguendo that we had been satisfied from the copy of the front side of petitioner’s date check to markfel realty that that check was negotiated we are not satis-- fied from that copy or from any other evidence in the record that markfel realty deposited and or cashed that check nor do we know from the record the date on which that check was negotiated for example markfel realty could have endorsed that check to peti- tioner who in turn deposited and or cashed it -- - erty with respect to the claimed schedule e expenses for and relating to the sanchez street property petitioner contends that respondent conceded prior to the further trial that peti- tioner had substantiated the total_amounts of expenses with respect to that property that were paid during those respective years petitioner claims that respondent’s counsel made that concession during a meeting held less than a week before the further trial in this case meeting in question which peti- tioner’s counsel martin a schainbaum mr sutton respondent’s counsel and mr oliveras attended at the meeting in question respondent’s counsel and mr oliveras reviewed certain documents petitioner’s documents that petitioner’s representatives brought to that meeting which petitioner contends substantiate the total_amounts of expenses relating to the sanchez street property that were paid during and respectively during the testimony of mr sutton at the further trial in this case petitioner attempted to introduce into the record because we have found that petitioner has failed to carry his burden of establishing that he is entitled to deduct for any of the claimed schedule e expenses relating to the church street property petitioner does not have a loss for that year relating to that property assuming arguendo that we had found that petitioner did have a loss for relating to the church street property we find on the record before us that petitioner has failed to carry his burden of establishing the amount with respect to which he was at risk under sec_465 for that property for that year see sec_465 and b we further find on that record that petitioner has failed to carry his burden of estab- lishing that any loss relating to the church street property for did not constitute a passive_activity_loss under sec_469 for that year see sec_469 c petitioner’s documents for the purpose of establishing that respondent through respondent’s counsel conceded prior to the further trial that petitioner had substantiated the total_amounts of expenses relating to the sanchez street property that were paid during and respectively and that the only issue remaining for the further trial with respect to those expenses was the extent of petitioner’s ownership_interest in that prop- erty ’ petitioner’s documents consisted primarily of bank statements and canceled checks from two different bank accounts ’ as well as a spreadsheet prepared by mr sutton ona date not disclosed by the record that purported to summarize the on brief petitioner changes the position that he took at the further trial regarding the purpose for admitting peti- tioner’s documents into evidence petitioner claims on brief that those documents substantiate the total_amounts of expenses with respect to the sanchez street property that were paid during and respectively petitioner does not claim on brief as he contended at the further trial that petitioner’s documents establish that respondent conceded at the meeting in question that petitioner had substantiated that those amounts of expenses were paid we do not know why petitioner abandons on brief the purpose that he advanced at the further trial for the admission of petitioner’s documents into the record in this regard it is noteworthy that mr sutton testified at the further trial that neither respondent’s counsel nor mr oliveras stated at the meeting in question that petitioner’s documents established that petitioner was entitled to deduct the claimed schedule e expenses for and relating to the sanchez street property olthe first set of bank statements and canceled checks were statements and checks dated between date and date with respect to an account owned by mr dubrovsky and two other individuals who were identified on such statements and such checks as anatoly kosoy mr kosoy and simon khachatrian the second set of bank statements and canceled checks were statements and checks dated between date and date with respect to an account owned by mr kosoy and an association identified as the sanchez st association information set forth in those statements and checks respondent objected to petitioner’s attempt to establish through peti- tioner’s documents that respondent conceded prior to the further trial that petitioner had substantiated the total_amounts of expenses relating to the sanchez street property that were paid during and respectively as grounds for that objec- tion respondent’s counsel indicated that any such attempt would prejudice respondent that was because in order to refute petitioner’s position that respondent’s counsel made such a concession at the meeting in question respondent’s counsel would have to testify at the further trial and consequently would be prohibited under the applicable rules of professional responsi- bility see rule g from representing respondent at the further trial thereby leaving respondent with no counsel to represent respondent at that further trial the court did not admit petitioner’s documents into the record because in violation of the court’s date order petitioner did not provide those documents to respondent on or before date ' the court found that petitioner had not shown good cause for that violation of the court’s date order and the court found that admitting peti- tioner’s documents into the record would cause substantial prejudice to respondent assuming arguendo that the court had admitted petitioner’s petitioner first provided those documents to respondent on or about date -- - documents into evidence we find that those documents do not show that respondent conceded at the meeting in question that peti- tioner substantiated the total_amounts of expenses relating to the sanchez street property that were paid during and respectively we further find that petitioner’s documents do not establish such amounts and consequently we reject petitioner’s position on brief that those documents substantiate the total amount of expenses relating to the sanchez street property that were paid during and respectively although peti- tioner’s documents establish that certain amounts were paid during and respectively and although it appears that some of those amounts were paid with respect to the sanchez street property we find that petitioner’s documents do not establish that any of the amounts reflected in those docu- ments were paid_by petitioner' and that all of those amounts constitute deductible expenses as opposed to expenditures eg capital improvements that must be capitalized ’ 3tn this connection all of the canceled checks that are included in petitioner’s documents were drawn on accounts owned by persons other than petitioner and were signed by individuals other than petitioner on the instant record we find that petitioner has failed to carry his burden of showing that any of his funds were deposited during and into the bank accounts on which those checks were drawn or that he otherwise provided during those years the funds to pay certain of any expenditures relating to the sanchez street property 104tn support of his position that he is entitled to deduct for and the respective claimed schedule e expenses relating to the sanchez street property petitioner relies inter alia on mr dubrovsky’s testimony that petitioner was liable for his share of the expenses on the sanchez street property we are not required to and we shall not rely on mr dubrovsky’s testimony in this connection mr dubrovsky gave conflicting continued on the record before us we find that petitioner has failed to carry his burden of establishing that he is entitled to deduct any of the claimed schedule e expenses for and relating to the sanchez street property fraud_penalty under sec_6663 respondent determined that petitioner is liable for each of continued testimony regarding the method by which the expenditures relating to the sanchez street property were paid mr dubrovsky ini- tially testified that all of the investors in the sanchez street property gave him money which he deposited into a bank account and that he paid the expenses relating to that property from that account mr dubrovsky later testified that the rent collected from the sanchez street property was used to pay all of the expenses relating to that property in this regard petitioner and ms brodsky claimed in each of the and schedules e with respect to the sanchez street property a total amount_of_deductions excluding depreciation that exceeded the total amount of rent that they reported even if we were to rely on mr dubrovsky’s testimony that petitioner was liable for his share of the expenses on the sanchez street property that testimony does not establish the extent of petitioner’s ownership in that property the amount if any of expenditures relating to that property for which petitioner was responsible during those years and that petitioner paid the expenditures that he and ms brodsky claimed in the and schedules e with respect to that property rbecause we have found that petitioner has failed to carry his burden of establishing that he is entitled to deduct any of the claimed schedule e expenses for and relating to the sanchez street property petitioner does not have a loss for either of those years relating to that property assuming arguendo that we had found that petitioner did have a loss for and relating to the sanchez street property we find on the record before us that petitioner has failed to carry his burden of establishing the amount with respect to which he was at risk under sec_465 for that property for those years see sec_465 and b we further find on that record that petitioner has failed to carry his burden of establishing that any loss relating to the sanchez street property for and did not constitute a passive_activity_loss under sec_469 for those years see sec_469 c the years at issue for the fraud_penalty under sec_6663 on the entire amount of the underpayment for each of those years sec_6663 imposes a penalty equal to percent of the portion of any underpayment that is attributable to fraud for purposes of sec_6663 if the commissioner establishes that any portion of an underpayment is attributable to fraud the entire underpayment is to be treated as attributable to fraud except with respect to any portion of the underpayment that the taxpayer establishes by a preponderance_of_the_evidence is not attributable to fraud sec_6663 in order for the fraud_penalty to apply the commissioner must prove by clear_and_convincing evidence sec_7454 rule b that an underpay- ment exists and that some portion of such underpayment is attrib- utable to fraud 99_tc_202 underpayment to prove the existence of an underpayment the commissioner may not rely on a taxpayer’s failure to carry his or her burden_of_proof with respect to the underlying deficiency 94_tc_654 92_tc_661 the commissioner must prove only that an underpayment exists and not the precise amount of such underpayment dibleo v commissioner t c pincite petzoldt v commissioner supra pincite when an allegation of fraud is intertwined with reconstructed unreported income as it is in the present case the commissioner may satisfy the burden of establishing an underpayment by either proving a likely source of the unreported income or disproving the nontaxable source s that the taxpayer alleges for the unreported income parks v commissioner supra pincite on the instant record we find that respondent has estab- lished by clear_and_convincing evidence a likely source of petitioner’s unreported income for each of the years at issue viz the various schedule c and other income-producing activi- ties in which petitioner engaged during each of those years ’ on the record before us we find that respondent has established by clear_and_convincing evidence that there was an underpayment of petitioner’s tax for each of the years through fraudulent intent to prove fraudulent intent the commissioner must prove by clear_and_convincing evidence that the taxpayer intended to evade tax which he or she believed to be owing by conduct intended to conceal mislead or otherwise prevent the collection of such tax 889_f2d_910 9th cir affg norman v commissioner tcmemo_1987_265 parks v commissioner supra pincite the existence of fraud is a question of fact to be resolved upon consideration of the entire record dileo v commissioner supra pincite gajewski v commissioner petitioner’s failure to contest certain amounts of unre- ported income determined for and certain amounts of claimed cost_of_goods_sold disallowed for and and certain amounts of claimed schedule c expenses disallowed for and which we have found constitutes an abandonment by petitioner of those items also establishes by clear and convinc-- ing evidence that an underpayment exists for each of the years at issue t c affd without published opinion 578_f2d_1383 8th cir fraud is never presumed or imputed and should not be found in circumstances which create at most only suspicion 743_f2d_309 5th cir affg tcmemo_1984_25 petzoldt v commissioner supra pincite direct evidence of the requisite fraudulent intent is seldom available petzoldt v commissioner supra pincite 80_tc_1111 consequently the commissioner may prove fraud by circumstantial evidence toussaint v commissioner supra pincite rowlee v commissioner supra pincite see 544_f2d_883 5th cir affg tcmemo_1975_368 the courts have identified a number of badges_of_fraud from which fraudulent intent may be inferred including consistent and substantial_understatement of income failure to maintain adequate_records incomplete and erroneous information provided to tax_return_preparer or bookkeeper destruction of books_and_records implausible explanation of behavior failure to cooperate with tax authorities and lack of credibility of the taxpayer’s testimony see bradford v commis- sioner f 2d 9th cir affg tcmemo_1984_601 parks v commissioner supra pincite in addition the taxpayer’s background and the context of the events in question may be considered circumstantial evidence of fraud 465_f2d_299 7th cir affg tcmemo_1970_274 niedringhaus v commissioner supra pincite although no single factor is necessarily sufficient to establish fraud the existence of several indicia constitutes persuasive circumstantial evidence of fraud bradford v commis-- sioner supra pincite petzoldt v commissioner supra pincite in support of respondent’s position that petitioner intended to evade tax for each of the years at issue which he believed to be owing by conduct intended to conceal mislead or otherwise prevent the collection of such tax respondent relies on the following factors petitioner’s consistent and substantial_understatement of income for the years at issue petitioner’s failure to maintain adequate books_and_records petitioner’s failure to cooperate with respondent’s agents during the examina-- tion of the years at issue including his lack of credibility in certain of his dealings with those agents although we agree with respondent that the factors on which respondent relies to prove fraudulent intent are present in the instant case based on our examination of the entire record before us we find that petitioner’s actions raise only a suspi- cion albeit a strong suspicion of fraud for each of those years see toussaint v commissioner supra pincite petzoldt v commissioner supra pincite we are not persuaded by clear_and_convincing evidence that petitioner’s actions of substantially underreporting his income for each of the years at issue and failing to maintain adequate books_and_records for each of those years were attributable to his fraudulent intent to evade tax when he filed the joint_return for each such year as opposed to his negligence and his disregard of tax rules and regulations nor are we persuaded by clear_and_convincing evidence that petitioner’s actions of failing to cooperate with respondent’s agents and his lack of credibility in certain of his dealings with those agents as well as with the court were attributable to petitioner’s fraudulent intent to evade tax when he filed the joint_return for each of the years at issue as opposed to his desire to conceal his negligence and his disregard of tax rules and regulations based on our examination of the entire record before us we find that respondent has failed to carry respon- dent’s burden of establishing by clear_and_convincing evidence that petitioner intended to evade tax for each of the years at issue which he believed to be owing by conduct intended to conceal mislead or otherwise prevent the collection of such tax on the record before us we find that petitioner is not liable for any of the years at issue for the fraud_penalty under sec_6663 accuracy-related_penalty under sec_6662 a respondent determined in the alternative to the fraud_penalty under sec_6663 that petitioner is liable for each of the years at issue for the accuracy-related_penalty under sec_6662 because of negligence or disregard of rules or regulations under sec_6662 b sec_6662 imposes an accuracy-related_penalty equal to percent of the underpayment resulting from inter alia negligence or disregard of rules or regulations sec_6662 b for purposes of sec_6662 the term negli- gence includes any failure to make a reasonable attempt to comply with the code and the term disregard includes any careless reckless or intentional disregard sec_6662 negligence has also been defined as a lack of due care or failure to do what a reasonable person would do under the circumstances 963_f2d_907 6th cir affg tcmemo_1991_179 91_tc_686 affd 893_f2d_656 4th cir failure to maintain adequate books_and_records or to substantiate items properly constitutes negligence sec_1_6662-3 income_tax regs the accuracy-related_penalty under sec_6662 does not apply to any portion of an underpayment if it is shown that there was reasonable_cause for such portion and that the taxpayer acted in good_faith sec_6664 the determination of whether the taxpayer acted with reasonable_cause and in good_faith depends on the pertinent facts and circumstances including the taxpayer’s efforts to assess his or her proper tax_liability the knowledge and experience of the taxpayer and the reliance on the advice of a professional such as an accountant sec_1 b income_tax regs in the case of claimed reliance on the accountant who prepared the taxpayer’s tax_return the taxpayer must establish that correct information was provided to the accountant and that the item incorrectly omitted claimed or reported in the return was the result of the accountant’s error 70_tc_158 petitioner contends that he is not liable for the accuracy- related penalty under sec_6662 because he relied on mr sutton who prepared the joint returns of petitioner and ms brodsky for and and on mr dibernardo who prepared their joint_return for to whom he provided all of his financial information on the instant record we reject that contention on that record we find that petitioner has failed to carry his burden of establishing that he provided correct and complete information to mr sutton and mr dibernardo in connection with their return preparation on his behalf and that any item incorrectly omitted claimed or reported in the joint returns for the years at issue was the result of the error of one of those return preparers on the instant record we also find that petitioner failed to maintain adequate books_and_records and to substantiate properly items claimed on the joint returns for the years at issue on the record before us we find that petitioner has failed to carry his burden of showing that the underpayment for each of the years at issue was not due to negligence or disregard of rules or regulations and that he acted with reasonable_cause and in good_faith with respect to the underpayment for each of those years on that record we find that petitioner has failed to carry his burden of establishing that he is not liable for each of the years at issue for the accuracy-related_penalty under sec_6662 addition_to_tax under sec_6651 a respondent determined that petitioner is liable for for the addition_to_tax under sec_6651 because respondent did not receive the joint_return of petitioner and ms brodsky until date sec_6651 imposes an addition_to_tax for failure_to_file timely a tax_return the addition_to_tax does not apply if the failure is due to reasonable_cause and not to willful ne- glect sec_6651 petitioner contends that respondent erred in determining that he is liable for for the addition_to_tax under sec_6651 because he had reasonable_cause for not timely filing the joint_return for that year according to petitioner reason- able cause existed because at the time that he was preparing that joint_return he was engaged in his various business activi- ties respondent was conducting an examination of his joint returns for through he was in the process of changing representatives during the course of that examination ’ or sutton who was shown on the joint returns of peti- tioner and ms brodsky for and as return preparer represented petitioner with respect to respondent’s examination of those years and certain prior years in date respondent received a power_of_attorney authorizing ms schwiff to represent petitioner and ms brodsky with respect to respon- dent’s examination of their taxable years and some- time between the end of date and the beginning of date respondent received a power_of_attorney authorizing mr dibernardo who was shown in the joint_return of petitioner and ms brodsky for as return preparer to represent petitioner and ms brodsky with respect to respondent’s examination of their continued and one or more of his representatives advised him not to file the joint_return for until the conclusion of the examination of taxable years through and he was caring for his sick mother in support of his position regarding the late filing of the joint_return in question petitioner relies on his self- serving testimony on which we are not required to and we shall not rely ’ even if we had believed the excuses offered by petitioner for his failure_to_file timely that return on the record before us we find that those excuses are not adequate to show reasonable_cause for petitioner’s failure_to_file timely ’ continued taxable years and swith respect to petitioner’s claim that he relied on one or more of his representatives who advised him not to file the joint_return until after the completion by respondent of the examination of certain prior taxable years petitioner did not guestion mr sutton and mr dibernardo or call ms schwiff as a witness regarding what they advised him with respect to the filing of that return we infer from petitioner’s failure to guestion mr sutton and mr dibernardo and to call ms schwiff in that regard that their testimony would not have been favorable to petitioner’s contention that one or more of them advised him not to file the joint_return until after the conclusion of respondent’s examination of certain prior taxable years we also note that mr dibernardo first met petitioner in sometime prior to the date date on which respondent received the joint_return in question with respect to petitioner’s claim that he did not file timely the joint_return because he was caring for his sick mother petitioner testified that his mother passed away on date however respondent did not receive the joint_return until date petitioner did not explain how his caring for his sick mother contributed to his not filing the joint_return until almost months after she died see 469_us_241 on the record before us we find that petitioner has failed to satisfy his burden of establishing that he had reasonable_cause for his failure_to_file timely the joint_return in guestion on that record we find that petitioner is liable for for the addition_to_tax under sec_6651 we have given due consideration to all of the parties’ contentions and arguments even though we have not addressed each of them herein to reflect the foregoing the concessions of respondent and the matters abandoned by petitioner decision will be entered under rule