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directed BNP to transfer $100,000 of the $840,000 to the Bank of
America account. Sanrio mistakenly failed to issue a Form 1099
to petitioner for its payment of $840,000, because the payment
was made via a wire transfer rather than through its accounts
payable system. Petitioners and Sanrio never discussed the
issuance of a Form 1099 upon the completion of the transaction.
The BNP account was an interest-bearing account from which
Susanna periodically transferred funds to the Bank of America
account or to a checking account maintained at the Bank of the
West. Except for the $840,000 from Sanrio, petitioners did not
deposit any other business income directly into the BNP account
in 1990; all other deposits in BNP were transfers from other
accounts held by petitioners.
C. Petitioners' Recordkeeping Methods
Despite Susanna's accounting background, petitioner is Sand
Hill's bookkeeper. He alone possessed signature authority over
the Bank of America account. Petitioners used that account to
deposit their commission checks, management fees, and reimbursed
expenses. Whenever the Bank of America account held a
particularly large balance, petitioner would transfer funds via
check into other accounts, especially the BNP account, for the
purpose of accruing greater interest. Petitioner claimed that
when he wrote checks on the Bank of America account for deposit
into another account, he did not verify that it contained
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