Manuel and Margaret Karcho - Page 15

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          result of being seized during the execution of a search warrant             
          covering petitioners’ business premises and residence, recorded             
          gross receipts as an amount equal to the daily cash totals                  
          compiled by Mr. Karcho based on daily readings of the token                 
          meters as entered on the Meter Readings Sheets.  The gross                  
          receipts figures so recorded are substantially greater than those           
          recorded in the other set of records.  Moreover, these records              
          illustrate that petitioners were tracking the cash that was not             
          being deposited into Banner’s bank account (or reported to their            
          accountant); that is, the records list, for each business day, an           
          amount corresponding to the total cash figure recorded on the               
          Meter Readings Sheet, the amount deposited into Banner’s bank               
          account, and the difference between these figures, frequently               
          denominated as “net”.4                                                      
               Respondent determined that petitioners had unreported income           
          from Banner by treating the Meter Readings Sheets as an accurate            
          measure of Banner’s gross receipts from arcade game sales.                  
          Specifically, respondent determined Banner had unreported income            
          in each year from arcade game sales equal to the amount by which            

          Banner’s income tax returns.                                                
               4 Certain monthly totals of this daily “net” figure were               
          labeled “pocket money” on one of the seized documents.                      

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Last modified: May 25, 2011