-8-
$94,000. Towergate was incorporated in 1981 and elected S
corporation status in 1986. During its taxable years ended
October 31, 1989 through 1992, petitioner was president and sole
stockholder of Towergate.
Winterchase
Winterchase Townhomes was a 40-unit townhouse project in
which only 34 units were completed. Winterchase was incorporated
in 1983, and was liquidated on or about September 30, 1990.
During its taxable years ended September 30, 1989 and 1990,
petitioner was president and sole stockholder of Winterchase.
C. The Accountants
Petitioner employed an in-house bookkeeper, Sawat
Lavantucksin (Lavantucksin) to maintain his personal books and
his corporations' books. Under the direction of petitioner,
Lavantucksin prepared the records of the cash transactions and
the monthly bank statements and made the journal entries
recording the amounts the corporations lent to petitioner, the
amounts petitioner repaid to the corporations, petitioner's
alleged assumptions of the corporations' indebtedness, the
transfers of the indebtedness between the corporations, and the
transfers between the corporations and petitioner. Lavantucksin
did not testify at the trial.
Petitioner employed a certified public accountant, Donald
L. Ricks (Ricks), to prepare his personal and corporate returns.
Ricks, or his employee, William Morrisett (Morrisett), checked
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