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Petitioners’ computerized bookkeeping system for their
expenses has 153 different account numbers for each of nine
different classes of activity. If an expense was regarded by
petitioners as a personal expense, it would be so identified.
Many of petitioners’ business and personal expenses were
paid for by credit card. Upon receipt of each monthly credit
card bill, petitioners would allocate each charge on the bill
between what they regarded as business and personal expenses.
If an expense was to be treated as a business expense,
petitioners would identify the particular business activity to
which the expense would be allocated.
On their three checking accounts -- one located at a bank in
California, one located at a bank in Oregon, and one located at a
bank in Tahiti -- petitioners wrote checks to pay bills relating
to their business and personal activities. Mrs. Kurzet would
prepare most of the checks to pay both business and personal
bills on a computer located in their residence in Orange,
California.
Petitioners’ Federal Income Tax Returns
Petitioners acknowledge that many errors were made both on
their 1987, 1988, and 1989 Federal income tax returns as
originally filed and as submitted to respondent as proposed
revised returns. Petitioners attribute many of the errors to the
fact that petitioners were not trained accountants, that
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