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administrative summons (the administrative summons) on
petitioners’ accountant, Nancy Crowder, who, in response thereto,
turned over various business and personal records of petitioners.
The records included bank statements, invoices, canceled checks,
and a cash disbursements ledger. Respondent has returned some,
if not all, of the documents obtained pursuant to the
administrative summons.
Amended Returns
On April 13 and 14, 1993, petitioners filed Forms 1040X,
Amended U.S. Individual Income Tax Return, for 1987 and 1988,
respectively (the Forms 1040X). The Forms 1040X were prepared by
accountants retained by Joseph. On the Forms 1040X, petitioners
reported increases in Schedule C net income of $80,214 and
$54,778, for 1987 and 1988, respectively, a capital gain of
$27,944 for 1988, net operating loss deductions of $74,749 and
$85,000 for 1987 and 1988, respectively, and decreases in
interest income of $747 and $288, for 1987 and 1988,
respectively. Following is a comparison of various Schedule C
entries, with respect to Monterey, from the Schedules C attached
to the Forms 1040 and Forms 1040X (the amended Schedules C).
1987
Form 1040 Form 1040X
Income
Gross receipts or sales $442,171 $982,437
Less: Returns and allowances 4,530 --
Less: Cost of goods sold 301,892 644,154
Balance (gross income) 135,749 338,283
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