Jerry S. Payne - Page 45

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          Items of Income for 1988                                                    
          Description                                            Amount               
          Conceded Bank Deposits                                 $182,338             
          Funds Relating to $275,000 TexGuarantyBk Loan          17,281               
          Bank Deposits Relating to Legal fees                   12,000               
          Miscellaneous Bank Deposits                            2,950                
          Cash Withdrawals from the Club                         4,699                
          Reported Flow-through Income                           32,526               
          Reported Value of Assets of 2618 Inc                   35,000               
          Value of Stock of 2618 Inc                             570,000              
                                                                                     
                                            Total               $856,794             

          Deductions Allowed for 1988                                                 
          Description                                            Amount               
          Allowed Business Deductions:                                                
               Business Interest                                 $ 32,598             
               Depreciation/Lakeway                              20,770               
               Miscellaneous                                161,234                   
          Allowed Itemized Deductions:                                                
               Mortgage Interest                                 27,397               
               Taxes                                             5,076                
          Nonbusiness Bad Debt Relating to Guaranty              3,000                
                                                                                     
                                            Total               $250,075             

               Based on the above figures, the schedule below compares the            
          total income, deductions, and losses reported on petitioner’s Federal       
          income tax returns for 1987 and 1988 with the corrected amounts             
          therefor based on our findings and reflects large understatements of        
          taxable income and large underpayments of tax on petitioner's 1987          
          and 1988 Federal income tax returns as filed:                               

                                1987                   1988                           
                              Reported Corrected       Reported Corrected             
               Total Income   $241,692  $291,243       $224,303  $856,794             
               Deductions     247,968   107,485        232,646   250,075              
               Income (Loss)  $ (6,276)  $183,758      $ (8,343)  $606,719            





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