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tax returns for the years in issue:
1989 1990 1991
Gross receipts $70,154 $54,681 $65,582
Cost of goods sold
Purchases/food supplies $21,046 $13,670 $11,640
Cost of labor 5,886 19,534 20,000
Total 26,932 33,204 31,640
Expenses
Officer compensation $13,925 $6,000 $6,000
Rent 2,806 4,800 1,250
Taxes 8,478 9,755 9,163
Interest 90 --- ---
Depreciation 9,749 8,307 9,319
Legal 1,500 2,000 1,100
Accounting 600 1,000 800
Vehicle expense 3,825 3,900 4,125
Maintenance 150 500 1,276
Equipment 125 1,000 700
Miscellaneous 75 350 450
Phone --- 1,000 800
Bank charges --- --- 75
Subscriptions --- --- 110
Insurance --- --- 980
Total 41,323 38,612 36,148
Ordinary income (loss) 1,899 (17,135) (2,206)
Clarence F. Lauth, a relative of Mrs. McGirl, prepared the
corporate tax returns for the years 1987 through 1991 for
compensation. Mr. McGirl provided the information used by Mr.
Lauth to prepare the corporate tax returns. This information was
in the form of a single sheet of paper containing summary figures
of income and expenses (the summary sheet) and a payroll summary;
no breakdown showing how the figures were computed was provided
to Mr. Lauth. Although he told Mr. Lauth that his figures were
accurate, Mr. McGirl simply wrote numbers on the summary sheet
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