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In 1991, Beck's Liquors paid off a $5,000 loan with cash.
In 1992, Mr. Beck purchased a diamond ring for $10,655 in cash.6
Mr. Beck prepared and filed corporate income tax returns for
Beck's Liquors for tax years 1991, 1992, and 1993. Mr. Beck
prepared and filed his individual income tax return, Form 1040,
for tax year 1991. He did not file individual income tax
returns, Forms 1040, for tax years 1992 and 1993.
II. Audit of Returns
In 1993, the Internal Revenue Service (IRS) reviewed the
records of businesses in the Fargo area to ensure that the
businesses had properly reported cash transaction of $10,000 or
more. A review of the records of a car dealership revealed that
Beck's Liquors purchased a car for approximately $9,000 in cash.
On the basis of that cash transaction, the IRS conducted an audit
of Beck's Liquors returns for 1991 and 1992. Later, the agent
included the return for 1993.
The IRS agent interviewed Mr. Beck. Mr. Beck cooperated
with the agent. He gave the agent his checks, invoices, and cash
register receipts, which were his only records. He did not make
misleading statements to, or give misleading documents to,
respondent's agents.
Because Beck's Liquors had no formal books, the IRS agent
6Mr. Beck remarried in 1994 and gave the ring to his present
wife.
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