- 9 -
1987 1988 1989
Personal expenses
from Fruitland's
checking account 1$30,691 $44,969 $59,454
One-half of the
cashier's checks 20,000 54,967 79,955
One-half of the negotiated
cashier's checks - - 2(29,993)
Amount reported on
petitioners' return (40,548) 3(44,081) (39,860)
Unreported income 10,143 55,855 69,556
1On brief, petitioners incorrectly list $30,961 as the
amount of personal expenses which petitioner paid by writing
checks against Fruitland's checking account in 1987.
Accordingly, unreported income for taxable year 1987 is reduced
by $270.
2On brief, petitioners incorrectly list $29,979 as equal to
one-half of the cashier's checks which were negotiated during
1989. Accordingly, this correction results in a decrease to
unreported income of $14 for taxable year 1989.
3On brief, petitioners erroneously list $59,454 as the
income received from Fruitland and reported on their return.
Accordingly, unreported income for 1988 is increased by $15,373.
Respondent determined that petitioner embezzled the money
which he used to purchase the cashier's checks, and that such
embezzled funds constitute income to petitioners. Respondent
also determined that petitioners' income for the taxable years at
issue is equal to the amount petitioner drew against the
partnership's checking account used to pay for personal living
expenses. Consequently, respondent further determined that
petitioner had unreported income for the taxable years at issue
equal to the amount of personal living expenses petitioner paid
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