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It is not enough for petitioners to claim that the entries
recording loans to shareholder must have been made in error. The
record makes it abundantly clear that petitioner was ignorant
about financial and accounting concepts when he purchased Mid-
Nebraska’s stock and continuing at least through the audit of
petitioners’ 1993 return. It is also obvious that petitioner
made no effort to acquaint himself with Mid-Nebraska’s financial
records or the accounting entries made on those records or the
data reported on the corporate tax returns.
Petitioner testified that he did not know of what the loans
to shareholder accounts consisted and that he was not even aware
that Mid-Nebraska’s books reflected loans to shareholder until
after York took over the corporation’s business. He testified
further, however, that he did not understand the corporate books
and relied totally on in-house bookkeepers to keep the corporate
books and on outside accountants to prepare the corporate tax
returns. He stated additionally that when he reviewed the
corporate books, he checked only for the amount of premiums he
had written each month.
Petitioner failed to present any testimony from individuals
involved in preparing Mid-Nebraska’s books and tax returns who
could explain the nature of the loans to shareholder accounts
included on Mid-Nebraska’s books or otherwise establish that the
accounting entries were made in error. The failure of a party to
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