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letters expressed the terms under which Mr. Crim would prepare
the returns. Every engagement letter specified that Mr. Crim
would prepare the tax returns based solely on the information
provided by the Gilchrists and would not audit the Gilchrists'
records to ascertain the accuracy of the information provided.
The Gilchrists routinely executed the engagement letters and
returned them to Mr. Crim. After receiving the letter, Mr. Crim
would begin to gather information to prepare the return. Each
year, he asked petitioners to provide relevant documentation,
such as deposit slips and bank account records. In addition, at
the end of each year he sent the Gilchrists a questionnaire that
solicited additional information necessary to prepare their
individual return.
In preparing the individual returns, Mr. Crim relied on
Forms 1099, bank statements, and answers provided in the
questionnaire. In preparing the corporate returns, Mr. Crim
determined Door Control's gross income and deductions by
examining Mrs. Gilchrist's handwritten explanations on deposit
slips and check stubs. For each year, Mr. Crim would total Door
Control's deposit slips, subtract receipts that appeared (based
on Mrs. Gilchrist's handwritten notes) to be nontaxable, and
report the remainder as Door Control's gross income. He would
also total check stubs that appeared (based on Mrs. Gilchrist's
handwritten notes) to be deductible and report the resulting
amounts as deductions on the return. The Gilchrists generally
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Last modified: May 25, 2011