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The business records so prepared were then sent by petitioner to
his return preparer for the years at issue, Jerry Butler.
Mr. Butler obtained the data used in preparing petitioner’s
1993 and 1994 returns from the business records supplied by
petitioner. Mr. Butler was not provided with the original
receipts detailing ARF’s sales. When, subsequent to the years in
issue, Mr. Butler noticed discrepancies in certain of
petitioner’s records, he confronted Ms. Nippe and was told at
that time about the withholding of sales. Mr. Butler ceased to
represent petitioner and thereafter sent to the accountant who
apparently had succeeded him in petitioner’s employ a letter
dated March 8, 1997, which included the following explanation:
I was reluctant to do the books since after I
filed the last tax return, Nina, his bookkeeper,
disclosed to me that she conspired with Mr. Clark to
destroy sales slips, not report any cash sales and that
she therefore prepared sales journals that did not
reflect the truthful activities of Appliance Recycling
Factory. I requested that she reconstruct proper
records. She stated that with the destroyed records by
Mr. Clark, his employees and herself that she felt this
was not possible. I am therefore reluctant to perform
any services due to the tax evasion problems. * * *
The 1993 and 1994 tax returns filed by petitioner reflect
gross sales for ARF of $518,673 and $753,782, respectively. Net
profit or loss from the business is shown as $6,744 for 1993 and
($119,808) for 1994. Petitioner then reports total taxable
income of $1,581 in 1993 and a loss of $122,816 in 1994.
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