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Accuracy of 1995 Return
For purposes of preparing the 1995 return, petitioner
provided Mr. McConnaughy with a hard copy of the records
maintained by an in-house accounting software system used for his
radio business. Petitioner also produced documentation such as
receipts, invoices, bank statements, and payroll ledgers when
requested to do so by Mr. McConnaughy. Petitioner did not
examine or discuss the contents of the return when it was
presented to him for signing on October 15.
Petitioner’s 1995 return reported $876,342 in business
expenses. During the course of the subsequent audit of this
return, petitioner substantiated $637,769 in business expenses.
The parties agreed that petitioner was not entitled to deductions
for the resulting $238,573 difference and was liable for an
additional $17,823 in tax beyond the $10,756 reported on the 1995
return.
The 1995 return lists no single item which accounts for this
disparity. Discrepancies between amounts as reported on the
return and as substantiated exist with respect to a number of the
enumerated expense categories. Car and truck expenses total
$9,000 on the return and $280.32 on the reconstruction. The
return lists $241,874 for taxes and licenses; the reconstruction
includes a category for taxes and licenses of $8,667.65 and a
category for payroll taxes of $99,842.89. Depreciation of
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