Manuel and Margaret Karcho - Page 6

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               The foregoing Daily Income and Cash Receipts records were              
          provided by petitioners to their accountant for purposes of                 
          preparing Banner’s Federal income tax returns covering each of              
          the years in issue.  The returns reported Banner’s gross receipts           
          as equal to the amounts deposited into Banner’s bank account.               
          Reconciliation Sheets                                                       
               Petitioners maintained another set of records during the               
          years in issue, also labeled “Daily Income Report”.  These                  
          records, which for the sake of clarity we shall refer to as the             
          Reconciliation Sheets, generally contained entries, for each                
          business day, under headings labeled “Daily Income”, “Deposit”,             
          “Part-Time”, and “Net Income”.  In contrast with the “Daily                 
          Income” figures recorded on the Daily Income Report/Cash Receipts           
          records described above, which treated the day’s bank deposit as            
          equal to “Daily Income”, the entries under “Daily Income” on the            
          Reconciliation Sheets generally match the total cash figure from            
          the Meter Readings Sheet for the same day.  The entries under               
          “Deposit” generally match the day’s bank deposit.  The entries              
          under “Net Income” reflect the difference; i.e., the amount by              
          which the “Daily Income” entry exceeded the “Deposit” entry, less           
          any amount entered under “Part-Time” (which only occasionally               
          contained an entry).                                                        

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