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10 to 12 percent, and up to as much as one-third, of ARF’s gross
receipts typically took the form of cash. Petitioner actively
endeavored to increase the proportion of cash sales by
advertising to pay the sales tax with respect to any purchase for
which payment was made in cash.
The cash received by petitioner through ARF was used to pay
both business and personal expenses. Expenditures for employee
wages and purchases from vendors, for instance, were often made
in cash.
During 1993 and 1994, petitioner maintained nine bank
accounts that were used for both business and personal purposes.
In 1993, a total of $480,260 was deposited into these accounts,
including $870 cash. In 1994, the deposits totaled $811,816, of
which $2,900 was cash. Petitioner did not deposit ARF’s cash
receipts in his bank accounts.
Sales invoices prepared by petitioner’s employees at the
time of each appliance sale were forwarded to ARF’s bookkeeper,
Nina Nippe. Petitioner instructed Ms. Nippe, in preparing ARF’s
books and records, to “hold back” 10 to 12 percent of receipts,
primarily those in cash, from the sales journal. Petitioner
indicated to Ms. Nippe that he wished “to get even with the IRS”
for an audit conducted in the late 1970s or early 1980s. Ms.
Nippe complied with this instruction, at times withholding in
excess of 10 to 12 percent when cash sales surpassed that ratio.
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Last modified: May 25, 2011