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Reaves Livestock reported on their income tax returns for the
years in issue. Reaves Livestock overstated its deductions by
deducting payments to the First Citizens accounts as business
expenses. Mr. Reaves caused amounts payable to Reaves Livestock
to be deposited in the First Citizens accounts. Neither Reaves
Livestock nor Mr. and Mrs. Reaves reported those amounts as
income on the returns they originally filed for 1984, 1985, 1986,
and 1987.
Davis prepared and filed Mr. and Mrs. Reaves' returns for
1984 on April 15, 1985, for 1985 on April 15, 1986, for 1986 in
April 1987, for 1987 on April 15, 1988, and for 1988 on April 17,
1989. Davis first heard about the First Citizens accounts when
Bozeman told him about them in December 1988.
I. Later Events
1. Criminal Investigation of Mr. and Mrs. Reaves
Respondent began a criminal investigation of Mr. and Mrs.
Reaves in December 1988. Mr. and Mrs. Reaves gave Bozeman Reaves
Livestock's Southern National account records, but not the First
Citizens records. Bozeman obtained the First Citizens account
records from First Citizens in response to a summons. Mr. and
Mrs. Reaves gave Bozeman their personal records. Some of those
records did not cover all of the years in issue. Mr. Reaves
voluntarily gave a handwriting exemplar.
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