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effectively stopped practicing as of the end of July 1991. In
preparing petitioner's 1991 Federal income tax return, the
accountant used the Washington State excise tax amounts to
determine gross receipts and petitioner's checks to compute
expenses. On the Schedule C attached to his 1991 return,
petitioner reported gross receipts of $888,637, no returns or
allowances, and $562,348 of total business expenses, resulting in
a net profit of $326,289 from his business.
During 1991, petitioner used currency in the following
amounts to purchase Krugerrands from Clackamas Gold & Silver,
Inc., of Clackamas, Oregon, that were reported to the IRS as cash
transactions:
Date Total Purchase Currency
3/18/91 $55,387.50 $19,887.50
3/26/91 54,900.00 19,900.00
5/31/91 74,000.00 70,000.00
In early 1993, as a result of the reported cash transactions
with Clackamas Gold & Silver, the IRS began an audit of
petitioner's 1991 return. Petitioner requested that the audit be
conducted in his accountant's office in Port Angeles, Washington,
where the records were located. In preparation for the audit and
to verify the accuracy of the 1991 return, the accountant
constructed a spreadsheet for 1991. In preparing the
spreadsheet, however, the accountant made errors that resulted in
an understatement of gross receipts in excess of almost $500,000.
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