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Petitioner's total cash expenditures during 1986 equaled at least
$126,911.
Petitioner filed his 1986 return on or after December 1,
1988. In that return, petitioner reported that he received the
following items of gross income from the payors indicated:
Payors Amount
Mingles, Inc. $3,651.50
Eduardo, Inc. 298.07
Eduardo, Inc. 1,400.00
Britex, Inc. T/A Linea Pitti 457.14
C & I, Inc. T/A Linea Pitti 3,542.86
State and local income
tax refund 258.00
Total 9,607.57
During 1986, petitioner received $26,000 in gross income
from operating a car wash business that his father and he owned
and that was known as Custom Car Salon. Petitioner did not
report any portion of that $26,000 in the return that he filed
for 1986.
Petitioner did not maintain any books or records for 1986
relating to his income-producing activities. In examining
petitioner's taxable year 1986, respondent reconstructed peti-
tioner's income pursuant to the cash expenditures method and
determined in the notice of deficiency (notice) that petitioner
had unreported income of $122,461 for that year.
On May 25, 1989, a Federal grand jury indicted petitioner
on, inter alia, over 50 counts of violating 18 U.S.C. sections
1956(a)(1)(B)(i) and 1957 (1994) involving the laundering of
proceeds of specified unlawful activity and criminally derived
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