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authority to offer reasonable discounts, such as 5 or 10 percent,
in order to close sales but would seek the consent of Mrs.
Ishizaki if a buyer requested a more excessive allowance. When
an order was placed, either petitioner or a salesperson would
write up a sales order reflecting the final price, and the order
would go to Mrs. Ishizaki for processing and placement on the
production schedule.
Subsequent payment from customers for purchased pieces was
often remitted in the form of checks payable to Privilege House.
During 1995, certain checks received by Privilege House from
customers were cashed at banks and check-cashing facilities,
rather than deposited into the corporation’s bank account. The
total amount of checks so cashed was approximately $191,800. The
funds obtained thereby were then used in significant part for
personal expenses of the Ishizakis. The proceeds of the cashed
checks were reported on neither Privilege House’s 1995 corporate
income tax return nor the Ishizakis’ personal income tax return.
At pertinent times and through at least 1996, petitioner and
Mrs. Ishizaki maintained what must be characterized as a
relatively high standard of living. The couple and their child
resided in a four- to five-bedroom ranch-style home with a
swimming pool in Monterey Park. They leased the property at a
rate of approximately $1,700 to $1,800 a month and also employed
an individual for about $600 a month to maintain their residence
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Last modified: May 25, 2011