Sarkis N. and Baka S. Balabanian - Page 9

                                        - 9 -                                         
          petitioners' check exchange involvement with M&L.  Careswell was            
          unable to reconcile petitioners' deposits with their records and            
          found that the records were inadequate. Therefore, Careswell                
          turned to a bank deposits analysis to reconstruct petitioners'              
          income from all sources, including the involvement with M&L and             
          the jewelry business.                                                       
               Using the bank deposits analysis, Careswell calculated total           
          deposits of $4,898,961 and subtracted nontaxable deposits of                
          $1,148,549 and the income reported by petitioners of $594,374.              
          To that amount he added cash and other income items of $34,646 to           
          arrive at taxable deposits not reported of $3,190,684.  Careswell           
          then made a further reduction of $2,571,129, representing                   
          petitioners' payments and transfers to M&L under the check kiting           
          scheme.  This resulted in net unexplained bank deposits of                  
          $619,555 for 1990.                                                          
               The $2,571,129 amount by which Careswell reduced the                   
          unexplained bank deposits was determined from his check spread              
          analysis of check exchanges with M&L.  Careswell's analysis                 
          reflects $3,263,124 remitted by M&L to petitioners and $2,571,129           
          remitted by petitioners to M&L for a net excess to petitioners of           
          $691,995 for 1990.  Petitioners argue that their unreported                 
          taxable income should be determined using the net difference from           
          the check spread analysis reduced for certain adjustments                   
          asserted by petitioners.                                                    






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  Next

Last modified: May 25, 2011