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1988 some of Mr. Gerdes' checks were returned to Circle Food
Store for non-sufficient funds, or NSF.
Circle Food Store would assess Mr. Gerdes a $15 NSF charge.
Ms. Hebert or another employee of Circle Food Store would usually
go to Mr. Gerdes' office, and he would issue a replacement check
to Circle Food Store, which included the amount of the check and
the NSF fee. At some point in 1988, Circle Food Store stopped
cashing Mr. Gerdes' checks because he refused to pay the NSF
charge, although he would issue another check for the amount of
the overdraft check. Circle Food Store never approached
petitioner and told him that he had to repay the amount he
received from one of Mr. Gerdes' checks.
Petitioner's Cashing of Checks at Liberty Bank
During 1987 petitioner cashed 60 income checks at Liberty
Bank which were written by attorneys or other third parties. The
total amount of these checks was $37,540. During 1988 petitioner
cashed 40 third party checks at Liberty Bank. The total amount
of these check was $23,005.
Petitioner Beverly McKenna's Newspaper Business
On their 1987 and 1988 joint Federal income tax returns,
petitioners filed a second Schedule C for a newspaper business
operated by Beverly McKenna. For 1987 and 1988, the gross income
and deductions were correctly reported.
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