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entitled to larger expense deductions than the amounts allowed by
respondent.
During the years at issue, Special Occasions and Special O
shared the same bank account, titled in the name of Special
Occasions. The partners of Special Occasions and the
shareholders of Special O failed to keep accurate books and
records of the income and expenses of the two entities. This
problem was compounded by the fact that not only the entities
used the same bank account but also that the books and records
failed to properly track the deposits and expenditures of each
separate entity.
Klyce Day Care did not file partnership information returns
for the tax years 1987 through 1993. Special Occasions did not
file partnership returns for the tax years 1987 through 1991 but
filed returns for 1992 and 1993. Special O filed Forms 1120S,
U.S. Income Tax Return for an S Corporation, for 1991, 1992, and
1993.
Petitioner did not file individual Federal income tax
returns for 1988, 1989, and 1990. However, in the stipulations
referenced earlier, petitioner and respondent agreed to
petitioner's income and certain other related items for these
years, leaving at issue only those items discussed hereafter.
Petitioner's taxable income for these years, respectively, was
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