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proprietorship, “Westside Residential”, whose principal business
is shown as “Residential Home Care”. The trust Schedule C
reports gross receipts of $140,928 and expenses of $161,561,
including depreciation of $4,150, for a net loss of $20,633. A
schedule of depreciation shows that the trust owned five
vehicles, with a “cost/basis” of $25,000 (the depreciable
property). The trust also reported interest of $112.
Trust’s Operations
From April 7, 1995, until September 10, 1997, the trust
maintained a bank account at North Valley Bank, account No.
15-631244 (the trust account). Michael is shown on account
documents as “manager” with respect to the trust, and he is
listed as a person with signature authority with respect to the
trust account. He signed checks drawn on the account during
1995.
Commencement of Respondent’s Examinations
Gil Akers is a revenue agent employed by respondent.
Mr. Akers was assigned to examine both the trust 1995 return and
the Carey 1995 return. He conducted those examinations
simultaneously. Mr. Akers’s initial contact with Michael in
connection with Mr. Akers’s examination of the Carey 1995 return
was by letter to Michael dated April 28, 1998, to make an
appointment to meet and discuss that examination. Mr. Akers’s
initial contact with a representative of the trust in connection
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