- 30 -
existence of the Seabrook Properties account, he summonsed the
bank records with respect to that account.
When Mr. Kaply received the bank records for the Indian Head
business savings account, he discovered that, contrary to what
petitioners had told him at the September 1989 meeting, petition-
ers had deposited directly into that account checks that they had
received from clients of Design Consultants. Mr. Kaply then
decided to do an analysis under the bank deposits method to
determine whether petitioners had unreported income for 1987,
and, if so, in what amount. Based on that analysis and his
investigation, Mr. Kaply determined that petitioners had approxi-
mately $750,000 of unreported income for 1987.
On February 14, 1990, Mr. Kaply telephoned Mr. Dennett
(February 1990 telephone call) to schedule another meeting with
petitioners. Mr. Dennett informed Mr. Kaply during the February
1990 telephone call that petitioners wanted Mr. Dennett to meet
alone with Mr. Kaply and that they did not intend to attend
future meetings. When Mr. Kaply advised Mr. Dennett during the
February 1990 telephone call about the amount of income that he
had determined petitioners failed to report for 1987, Mr. Dennett
told Mr. Kaply that he would contact petitioners about meeting
with Mr. Kaply. During the February 1990 telephone call, Mr.
12(...continued)
bank accounts, if any, were maintained by petitioners at Hampton
Co-operative Bank. The record shows only that petitioners
obtained two mortgage loans from that bank.
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