Dennis C. Gandy - Page 44

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          checking accounts, gave implausible or inconsistent explanations            
          of behavior, concealed their assets and their income, and had               
          numerous dealings in cash.                                                  
               Neither the underreporting of income nor the use of cash is            
          disputed by petitioners.  Petitioners also acknowledge that they            
          kept two sets of ledgers reflecting income from two groups of               
          customers.  Many of the customers’ checks relating to sales                 
          recorded in one group of ledgers were cashed.  The preparers of             
          petitioners’ tax returns were not advised of the cashing of                 
          customers’ checks and, because the tax returns were prepared                
          based on records of bank deposits, receipts from the cashed                 
          checks were not reported.  We are convinced that both petitioners           
          knew that these methods of keeping books and preparing returns              
          would result in underreporting of their income.  As discussed               
          further below, we reject petitioners’ contention that the                   
          proceeds of cashed checks, some of which were used for interest-            
          bearing loans to others and some for their personal living                  
          expenses, were all spent on deductible expenditures.                        
               We are convinced that petitioners’ use of cash was intended            
          to conceal their income and their assets.  Our view in this                 
          regard is based in part on testimony, corroborated by documentary           
          evidence, that Mrs. Gandy instructed employees to negotiate                 
          checks or otherwise engage in cash transactions in amounts                  







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