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usually took $10,000 to $15,000 in Canadian money to exchange on
each trip and stayed in Las Vegas for 3 or 4 days. The banks in
Fargo charged a fee of 5 to 7 percent above the exchange rate but
the casinos charged at the exchange rate. Mr. Beck thought that
a better exchange rate given by the casinos exceeded and
justified the cost of the trips. Beck's Liquors paid for Mr.
Beck's travel to Las Vegas and deducted the expenses on its
Federal income tax returns. Mr. Beck played blackjack only and
"did very well" during the years at issue. He won $1,400 in
1991, $8,300 in 1992, and $12,000 in 1993. He did not report any
gambling winning on his or the corporation's Federal income tax
returns for the years at issue. He did report $20,000 of
gambling winnings on the corporation's 1994 return.
Beck's Liquors maintained corporate accounts at State Bank
of Fargo, Norwest Bank, and Merrill Lynch. Mrs. Beck maintained
a personal account at Gate City Bank. Mr. Beck did not
maintained a personal checking account; he paid for his personal
expenses in cash.
During the years at issue, Mr. Beck kept the books and
records for Beck's Liquors and had the primary responsibility for
operating the store. Beck's Liquors, however, did not maintain a
formal record keeping system for income and expense items. Mr.
Beck kept ledger sheets on the back of a deposit book. The
ledger sheets and cash register tapes were destroyed in July 1993
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