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These accounting records were prepared based on bank
statements and canceled checks brought to Bruno and Tervalon by
Mrs. McKenna throughout each year.
In preparing the Schedule C for the newspaper business, Mr.
Bruno's firm would rely upon the information on the year-end
financial statement or the trial balance.
To determine the income derived by the newspaper business,
Bruno and Tervalon relied upon the deposits reflected on the
newspaper's bank statements.
In addition to these services, Bruno and Tervalon also
prepared the payroll returns for the newspaper.
Petitioner's Medical Practice and Types of Records Maintained for
That Business
Mr. Bruno's firm did not perform full accounting services
for petitioner's medical practice. Bruno and Tervalon only
performed payroll tax preparation for the medical practice. The
payroll tax returns were handled separately from the income tax
return preparation.
At different times prior to the Internal Revenue Service's
examination, Mr. Bruno had suggested to petitioner that Bruno and
Tervalon perform full accounting services for the medical
practice. Petitioner, however, never retained Bruno and Tervalon
to perform such services. Petitioner told Mr. Bruno that it
would be difficult to use his bank statements to generate the
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