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the entries that were made by Lavantucksin on the corporate books
for consistency against the entries that were made by
Lavantucksin on petitioner's personal books. The accountants
then prepared the returns by using the journal entries. Neither
Morrisett nor Ricks verified Lavantucksin's entries by examining
the corporate minutes, bank statements, canceled checks, or other
external sources.
D. Transfers by Journal Entries
Petitioner transferred debt between himself and his
corporations in two general circumstances. In one circumstance,
petitioner was indebted to one of his corporations, and the
corporation was going out of business. In this circumstance,
petitioner used journal entries to transfer his indebtedness from
the corporation that was going out of business to another of his
corporations. For instance, petitioner made withdrawals from
Winterchase that were recorded on its books as loans. On
December 31, 1989, when Winterchase was going out of business,
petitioner's accountants transferred petitioner's $98,753 of
indebtedness from Winterchase to Development by making journal
entries on each of the corporation's books.
In another circumstance, one of petitioner's corporations
was indebted to another of his corporations, and the debtor-
corporation was going out of business. In this circumstance,
petitioner "assumed" the latter corporation's indebtedness to the
other corporation. For instance, in late 1990 Development was
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