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that Mr. Beck lost $19,600 in 1991 and $15,700 in 1992, and won
$3,200 in 1993. Mr. Beck, however, did not have gambling losses
during the years at issue. Rather, he had gambling winnings of
$1,400 in 1991, $8,300 in 1992, and $12,000 in 1993. Mr. Beck
did not report the gambling winnings on his individual returns or
the corporation's returns for the years at issue. Because he
gambled with the corporation's Canadian currency, Mr. Beck
thought that the winnings were taxable to Beck's Liquors.
Therefore, in an attempt to "correct" the omission, he reported
$20,000 of gambling winnings on the corporation's 1994 return.
The winnings, however, are not the income of Beck's Liquors.
Even though Mr. Beck used corporate funds for gambling, the
winnings are Mr. Beck's income and represent his unreported
income in the years at issue. In computing the income of Beck's
Liquors, however, we find that the cash expenditures should not
include gambling losses. Furthermore, the cash winnings
represent a source of cash, and the cash expenditures should be
reduced by $1,400 in 1991, $8,300 in 1992, and $12,000 in 1993.
c. Insurance Payment
The insurance payment was for the vehicle that was destroyed
in the accident in which Mrs. Beck was killed. The vehicle was
owned by Beck's Liquors. Respondent included insurance proceeds
of $6,604 in the gross receipts of Beck's Liquors because,
respondent asserts, there was no business use and Mr. Beck cashed
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