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The IDR's did ask for specific documents for specific bank
accounts. None of the accounts specifically listed on each of
the IDR's was the Shearson account.
Ms. Davis then specifically asked for and, in January 1990,
received the Shearson account records. When she received and
analyzed the records, she discovered that the majority of the
deposits to the investment account were not transfers or
traceable from petitioner's checking account or any other
account. Thus, she determined that petitioner did not deposit
all of his income into his checking account.
After reviewing the Shearson accounts, Ms. Davis' bank
deposit analysis showed that petitioner had understated his
medical practice income in 1987 by $250,000. She gave this
calculation to Mr. Bruno, asked that he review it with
petitioner, and asked that he identify any nontaxable deposits
she had not previously identified. At that point, Mr. Bruno
attempted to reconcile and explain the difference.
During the period when Mr. Bruno was attempting to reconcile
the $250,000 difference, petitioner did not inform him that,
rather than making deposits in his bank account, he was cashing
checks at Circle Food Store and Liberty Bank, or that he was
exchanging income checks for First Federal bank checks. Instead,
Mr. Bruno continued to work with the incorrect belief that
petitioner deposited all of his income checks into his First
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