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The "Other income" of $21,500 for the year 1990 came from the
settlement of a lawsuit. The joint tax returns made no reference
to any business activity other than the Yogurt Station for all of
the years in issue. On August 4, 1992, Mr. McGirl told Mr. Lauth
that he had unreported income and that the underreporting "had
been going on for some time." During the years in issue, Mr.
McGirl amassed more than $112,000 in savings.
Mr. McAllister's Alleged Loans to Mr. McGirl
It is undisputed that Michael McAllister, a close friend of
Mr. McGirl since childhood, lent him $10,000 sometime during the
years at issue.3 Mr. McGirl issued a $10,000 check to Mr.
McAllister on or about July 7, 1992, a date after Mr. McGirl was
contacted by the Minnesota Department of Revenue (MDR) regarding
a State tax examination of the Yogurt Station. Mr. McGirl
fabricated promissory notes in which he forged Mr. McAllister's
signature and gave them to his own accountant, Steve Brown. Mr.
Brown represented Mr. McGirl before the MDR and the Internal
Revenue Service (IRS). Mr. Brown gave the fabricated promissory
notes to an MDR agent.
Since 1985 and continuing through the years in issue, Mr.
McAllister had significant personal debt, including automobile
loans, home mortgages, and credit cards that were utilized to
3 Mr. McGirl maintains that Mr. McAllister lent him additional
sums of money that eventually made their way into the Yogurt
Station's business checking account and thus should not be
considered gross receipts.
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