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During the audit process, Agent Koczergo calculated that
$552,594.68 in deposits was made to petitioners' bank accounts,
and from that amount she made the following
adjustments/reductions: $122,776.85 for transfers between
accounts; $82,387 for the gross receipts reported by petitioners;
$27 for interest and $18 for dividends reported by petitioners;
$12,535 for disability payments received by petitioners; and $875
for sales tax paid. After subtracting the total of those amounts
from the $552,594.68 in deposits, Agent Koczergo calculated and
proposed net bank deposits and unreported gross receipts of
$333,975.83.
Following the audit and during the pretrial portion of this
case, Agent Koczergo was informed of additional nontaxable
transfers that would increase the total from $122,776.85 to
$131,901.37 and correspondingly reduce the net bank deposits and
proposed unreported income from $333,975.83 to $324,851.31.
Respondent determined unreported gross receipts of $333,976 in
the notice of deficiency and now concedes that the correct
amount, in accord with Agent Koczergo's revised calculations,
should be $324,851.
With respect to the cost of goods sold reported by
petitioners, Agent Koczergo was unable to reconcile that amount
to the records (vendor ledger sheets and canceled checks)
provided by petitioners. Accordingly, she reconstructed
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