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tax basis of the residence by casualty losses sustained and
claimed in prior years.
During respondent’s audit, when petitioner was asked if he
had made any purchase with cash in excess of $10,000, petitioner
incorrectly stated that he had not done so.
On August 17, 1988, respondent’s representative requested
petitioner to provide copies of all bank statements for 1985
through 1988 relating to Cal Ben and to petitioner. In response
to that request, respondent’s representative was provided
documents pertaining only to the two bank accounts at Bay Bank of
Commerce. Respondent's representative was not informed by
petitioner of the Lloyds/Sanwa account.
When he discovered deposits into the Lloyds/Sanwa account,
respondent's representative requested of petitioner records
pertaining to that account, but petitioner refused to provide any
further information.
At the conclusion of respondent’s audit, respondent
determined against petitioners the income tax deficiencies, the
fraud, and the negligence additions to tax set forth above, and
respondent determined that the fraud related only to unreported
sales of Cal Ben and that negligence related to all other
adjustments.
In determining the income tax deficiencies, respondent
allowed as business expense deductions nearly all of the costs
and expenses that were recorded in Cal Ben’s books and records
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Last modified: May 25, 2011