Martin and Barbara Schachter - Page 6

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   Bank             1985         1986            1987          1988                   
   Bay Bank of Commerce                                                               
        Checking acct     $1,525,661    $1,622,475     $1,437,782     $1,711,269      
        Money market        -0-           -0-            -0-           204,056        
                                                                                     
   Lloyds/Sanwa acct          683,161       764,642        632,943        145,305     
                                                                                     
        Total deposits     $2,208,822    $2,387,117     $2,070,725     $2,060,630     

               Some funds deposited into the Lloyds/Sanwa account were                
          later transferred to Cal Ben’s accounts at Bay Bank of Commerce             
          and were used to purchase inventory and other supplies for Cal              
          Ben.  Those purchases were recorded in Cal Ben's books and                  
          records as purchases.                                                       
               During the years in issue, petitioners used funds deposited            
          into the Lloyds/Sanwa account to purchase tax-exempt bearer bonds           
          in their individual names.  During the years in issue,                      
          petitioners also used funds deposited into the Lloyds/Sanwa                 
          account to pay expenses relating to a personal yacht, a facelift            
          for Barbara Schachter, and carpet and utility expenses for                  
          petitioners' residence.                                                     
               Petitioners knew that funds relating to unreported sales               
          deposited into the Lloyds/Sanwa account had been used to purchase           
          the bonds, and Barbara Schachter generally cashed interest                  
          coupons associated with the bearer bonds.                                   
               In December of 1987, petitioner purchased a 1988 BMW 750IL             
          automobile with cash totaling $72,451.                                      








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Last modified: May 25, 2011