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From May to September 1999, Agent Wharton spent 14 days at
petitioners’ residence reviewing records and documentation with
respect to the 1993 through 1996 taxable years. This included
more than 20 boxes of travel documentation from petitioners and
their related entities. This documentation included, among other
items, restaurant receipts, hotel receipts, and business cards.
During Appeals consideration, Agent Wharton often did
not receive adequate documentation from petitioners and Ms.
Stephenson in response to questions raised during her
examination. For example, in some cases the only substantiation
Agent Wharton received with respect to the business purpose of
certain travel expenses was business cards.
During her review, Agent Wharton noted that she had several
versions of “general ledgers” and that none completely reconciled
to any of the returns in respondent’s possession. For example,
Agent Wharton determined that in 1995, petitioner frequently
traveled from Lubbock, Texas, to Richardson, Texas, on day trips
with no overnight stays. However, in addition to the actual
travel expenses, petitioner claimed per diem expenses for at
least 100 days. Petitioner also claimed a per diem expense for
time in Hawaii while she waited to have a visa approved for a
trip to Australia. During her review, Agent Wharton found that
petitioners deducted $59,479 on their 1996 Schedule A for “Job
travel: accom. in Dallas”. Petitioners’ 1996 general ledger
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Last modified: November 10, 2007