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sufficient funds to cover the checks because there was always a
large balance.
Business income and expenses for Sand Hill during 1990 were
evenly apportioned between petitioner and Susanna and reported on
two separate Schedules C attached to their 1990 return. To track
expenses incurred by petitioners on Sand Hill's behalf,
petitioner used the check register which showed the various types
and amounts of expenses. Petitioner did not keep copies of bank
deposit slips and did not record the sources of the deposits,
although he did have access to monthly bank statements. When
petitioner was ready to file the income tax return for himself
and Susanna, he simply resorted to his memory to determine what
transactions took place, since Susanna engaged in very few
transactions on a yearly basis which generated commissions.
Petitioner did not consult with Susanna to verify her income, nor
did he search Sand Hill's files. For miscellaneous income,
including interest from banks and brokerage firms, petitioner
relied on Forms 1099.
For petitioners' Federal income tax returns, including the
1990 return, petitioner then prepared a one-page summary of Sand
Hill's income and expenses on his computer and gave it to
petitioners' accountant. The accountant used the summary to
prepare the Paus' tax returns. The one-page summary is the only
record petitioner gave to the accountant. In the summary,
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