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purchases (unreported gross receipts), and petitioner kept no
records of the unreported gross receipts. At the time petitioner
filed his returns for the years in issue, he knew that the
unreported purchases and the unreported gross receipts were not
reported on his return.
Mr. Dillon, of Acme Tax Service, prepared petitioner's
returns for the years in issue solely from the information
provided by petitioner, which included cash register receipts,
check stubs, cash payouts, a payroll book, a weekly rental book,
and bank statements.
Unreported Gross Receipts
Using the beer, wine, and liquor purchases indicated on the
vendor invoices, the drink prices charged by petitioner for sales
of those beverages, and allowing an adjustment for discretionary
use (i.e., breakage, spillage, and complimentary drinks),
respondent reconstructed petitioner's total gross receipts. From
total gross receipts respondent subtracted reported gross
receipts to arrive at the amount of petitioner's unreported gross
receipts.
1. Purchases
Vendor invoices indicate the following purchases:6
6 During 1988, 1989, and 1990, petitioner purchased Bartyles
and James brand wine coolers. Respondent did not include the
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