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The STRs stated specifically that a financial institution
reporting a suspicious transaction must “Give brief summary of
the suspected violation, explaining what is unusual or irregular
about the transaction.” The STRs issued by the Bank as to
petitioners did not explain why the Bank considered the
transactions either unusual or irregular. The Bank’s practice
was that it would prepare: (1) The currency transaction
reporting form required by 31 U.S.C. sec. 5313 and 31 C.F.R. sec.
103.22 (2000), as to any nonexempt customer who in a single day
transacted business at the Bank involving cash totaling more than
$10,000 and (2) an STR as to any other nonexempt customer who the
Bank perceived was engaging in a “suspicious activity”. The Bank
generally considered exempt customers to be those retail
businesses that dealt with cash in the normal course of business.
The Bank did not consider either petitioners or Nanny’s to be an
exempt customer.
Respondent notified petitioners on April 3, 1990, that he
would be auditing Nanny's 1988 taxable year.4 Two months later,
respondent began auditing petitioners' 1987 through 1989 years.
Immediately before respondent notified petitioners that their
personal returns would be audited, Mr. Barnard reviewed his
records for Bridge Street and Lake Michigan Heights and
4 Respondent’s audit of that year concluded that Nanny’s
income and expenses were reported correctly on its Federal income
tax return.
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Last modified: May 25, 2011