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Cal Ben’s 1985 through 1988 Forms 1065, U.S. Partnership
Return of Income, were prepared by Burton Propp (Propp), a
certified public accountant. The gross receipts figures reported
by Propp on Cal Ben's partnership tax returns were taken from
reported sales recorded in Cal Ben's sales journal.
Propp was given no information relating to Cal Ben's
unreported sales, nor was he given any information relating to
payments received from customers that were deposited into the
Lloyds/Sanwa account. Propp was not told nor otherwise informed
of the existence of the Lloyds/Sanwa account. As a result, total
sales receipts of Cal Ben and the taxable income of petitioners
relating to petitioner's 50-percent partnership interest in Cal
Ben were underreported on Cal Ben’s partnership and on
petitioners’ individual Federal income tax returns
Petitioner understood that he was legally obligated to pay
income taxes on his share of Cal Ben’s net partnership profits.
The schedule below sets forth Cal Ben's gross sales as
reported on Cal Ben’s partnership tax returns for the years at
issue, unreported sales as stipulated by the parties, and Cal
Ben’s corrected gross sales:
Cal Ben's Gross Sales
Year Reported Unreported Corrected
1985 $1,486,450 $ 667,862 $2,154,312
1986 1,562,228 660,536 2,222,764
1987 1,455,416 507,766 1,963,182
1988 1,679,209 116,784 1,795,993
Total $6,183,303 $1,952,948 $8,136,251
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Last modified: May 25, 2011