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the money laundering scheme, Sam Gilbert Associates, Inc. (SGA),
owned by Sam Gilbert, made payments to petitioner labeled "wages"
on W-2 Forms and withheld taxes therefrom.14 In 1987, petitioner
rendered services to Fort Apache, Inc., and received $17,000
wages, with taxes withheld.
The Internal Revenue Service audited petitioner, first for
1986 and 1987, and then for 1985. During neither audit did
petitioner produce the books and records necessary to
substantiate items of income, gain, loss, or deduction. However,
some documentation was given to respondent during the audits. On
advice of counsel, petitioner did not cooperate with respondent
during the audit for 1986 and 1987. Because of the lack of
records and failure to cooperate by petitioner, respondent used
the bank deposits method to determine petitioner's income for the
3 years at issue.
During these 3 years, petitioner operated three bank
accounts in his and Maxine's names: Safra Bank joint checking
account (hereinafter Safra), Barnett Bank Joint Money Market
Account (hereinafter Barnett money market), and Barnett Bank
joint checking account (hereinafter Barnett joint checking).
Safra was active beginning in December 1985, and closed in July
1987. The other two accounts remained open during the entire 3-
year period. Safra, and to a lesser extent Barnett money market,
14The payroll checks from SGA, while not necessarily for
services rendered, did provide support for petitioner during
1983-86.
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