Manuel and Margaret Karcho - Page 14

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               The record in this case amply demonstrates that petitioners            
          maintained two sets of books with respect to the operations of              
          Banner.  One set, provided to their accountant each year for                
          purposes of preparing Banner’s Federal income tax returns,                  
          recorded gross receipts as an amount equal to the deposits made             
          to Banner’s corporate bank account.  These records also purported           
          to provide a breakdown of the daily bank deposit figure into                
          categories by source of income (e.g., “Arcade Game Income”, “Food           
          & Pop Sales”) which, at least in the case of the “Food & Pop                
          Sales”, petitioners have conceded substantially understated gross           
          receipts.3  The other set of records, which came to light as a              

          game income with respect to those months in 1991. In addition,              
          there were no records with respect to food sales for Banner’s               
          1991 taxable year, and as a result respondent did not determine             
          any unreported income with respect to food sales for that year.             
               The parties have reached agreement with respect to the                 
          amount of gross receipts, as well as additional costs of goods              
          sold, attributable to Banner’s food sales in 1987, 1988, 1989,              
          and 1990.  See supra note 1.  Accordingly, the unreported income            
          that remains in dispute concerns arcade game receipts only.                 
               3 The record in this case contains the “Daily Income                   
          Records”, which treat a day’s bank deposit amount as that day’s             
          gross receipts, covering all of the years in issue except 1991.             
          The “Cash Receipts” records in evidence, which purport to break             
          down the bank deposit amount into components such as arcade game            
          and food sales, cover all years except 1990 and 1991.  However,             
          petitioners have stipulated that they provided similar records to           
          their accountant for each year at issue for purposes of preparing           

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