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As a first step, respondent reviewed copies of third party
checks that petitioner used to purchase cashier’s checks. During
1997 petitioner purchased in excess of $800,000 in cashier’s
checks with cash, and negotiated third party business and
personal checks. Petitioner testified that he purchased the
cashier’s checks to protect his money in case of a bank failure.
He also testified that one of his objectives in using third party
checks to purchase cashier’s checks was to prevent the bank from
reporting cash transactions exceeding $10,000 to the Internal
Revenue Service. Significantly, petitioner failed to provide any
documentation to show that the third party checks used to
purchase cashier’s checks were included in business gross
receipts. Finally, petitioner’s accountant testified that she
had no knowledge of the existence of the cashier’s checks.
Because petitioner presented no evidence to account for the
third party checks, respondent designated checks from cigarette
manufacturers, and not related to other types of income, as
coupon and buy-down receipt checks. Checks totaling $531,605 fit
into that category.
In addition, petitioner’s accountant made a $400,746
accounting entry in petitioner’s October 1997 records with
respect to checks received from cigarette manufacturers.
Respondent accepted that entry as reflecting payments received
from cigarette manufacturers. Because no activity was recorded
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Last modified: May 25, 2011