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subpoenaed the Wilsons and their records concerning their payment
of rent to petitioner. The Wilsons admitted at that time that
they had lied in their earlier statement to Agent Lurvey. On
June 10, 1987, petitioner met with Agent Lurvey. At this meeting,
petitioner presented the agent with a handwritten "Rental Income"
schedule representing that it reflected all of his rental income.
Petitioner failed to report on this schedule that he received
rental income from his tenants at 1739 Swift, even though he knew
he had.
2. Insurance Business
Petitioner also operated an independent insurance agency in
Ventura County, California, during the years in issue.
Petitioner's insurance agency represented various companies,
including Dairyland Insurance Co. (Dairyland), Republic Insurance
Co. (Republic), Progressive, Civil Service Employees Insurance,
and Blue Shield.
Petitioner deposited the cash receipts from his insurance
business into his ACB account. Petitioner failed to maintain any
general ledger or other accounting record for his insurance
business and did not maintain separate personal and business bank
accounts. In preparing his Federal income tax returns for 1984,
1985, and 1986, petitioner determined the gross receipts for his
business from the Forms 1099 that were provided to him by the
companies for which he sold insurance. The parties have
stipulated that petitioner failed to report at least $45,347,
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