- 10 -
by writing checks against Fruitland's checking account, plus the
entire amount of the cashier's checks purchased by petitioner
during the taxable year, less the entire amount of cashier's
checks negotiated during the taxable year, less the amount of
income reported as received from Fruitland on petitioners' tax
return in the form of a guaranteed payment. Respondent's
calculation of petitioners' unreported income for each taxable
year may be summarized by the following table:
1987 1988 1989
Personal expenses
from Fruitland's
checking account $30,691 $44,969 $59,454
Cashier's
checks 40,000 109,934 159,910
Negotiated
cashier's checks - - (59,985)
Amount reported on
petitioners' return
as a guaranteed
payment (33,800) (36,800) (34,500)
Unreported income 36,891 118,103 124,879
OPINION
The parties agree that petitioners have unreported income
with respect to each taxable year at issue. A dispute exists,
however, as to the amount of unreported income. Each party has
advanced a particular formula which each contends should be used
to compute the amount of petitioners' unreported income.
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