Srichai and Pusadee Rungrangsi - Page 5

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          receipts into the business checking accounts; often they used the           
          receipts to make purchases (such as inventory).                             
               In 1993, petitioners began to experience financial                     
          difficulties resulting in the foreclosure of a rental property.  In         
          contemplation of bankruptcy, on September 15, 1993, petitioner              
          arranged for Ms. Eagatatt to sign and file a Notice To Creditors of         
          Bulk Sale pursuant to the Uniform Commercial Code (the bulk sale            
          notice) in Orange County, California, in which the assets of                
          Stanton Mexicatessen were purportedly transferred to Ms. Eagatatt.          
          (Petitioners received no monetary consideration for this transfer,          
          but the bulk sale notice indicated that Ms. Eagatatt was to assume          
          all liabilities of the restaurant.)  Further, the lease for the             
          land on which the restaurant operated was amended to reflect the            
          transfer to Ms. Eagatatt.                                                   
               On or about September 29, 1993, petitioners filed for                  
          bankruptcy protection from creditors.  The record does not reflect          
          the type of bankruptcy protection petitioners sought.                       
          Preparing and Filing of Tax Returns                                         
               Petitioners' 1992, 1993, and 1994 joint income tax returns,            
          all of which were untimely filed, were prepared by professional             
          accounting firms.  For 1992, petitioners reported on Schedule C,            
          Profit or Loss From Business, a loss of $23,005 from the operation          
          of Stanton Mexicatessen.  Also for 1992, petitioners reported               
          investment interest expenses of $12,221 on Schedule A, Itemized             

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