Tony D. Ishizaki - Page 5




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          and take care of their daughter.  They purchased $15,000 worth of           
          furniture for their home in 1996.  They kept at any given time an           
          average of two to three vehicles, typically leased, which                   
          included a BMW 740, a Toyota Four Runner, a Porsche, and a Honda            
          NSX.  They also owned a jet ski.  The family generally ate out              
          several times per week and took vacations, particularly ski                 
          vacations, two to three times per year.  Both spouses bought                
          expensive clothing and owned watches and jewelry which were kept            
          in bank safe deposit boxes.  Petitioner primarily used a credit             
          card for his purchases and then gave the receipts to Mrs.                   
          Ishizaki.  Bill payment and family finances were then handled by            
          Mrs. Ishizaki.  The couple also maintained a joint checking                 
          account.                                                                    
               On February 6, 1997, respondent commenced an examination of            
          Privilege House.  The taxable year under consideration was 1995,            
          and the examination was begun on the basis of two checks obtained           
          by the Internal Revenue Service from a check-cashing business.              
          Revenue Agent Mayra Encarnacion performed the examination and in            
          connection therewith conducted an interview on June 2, 1997, with           
          Mrs. Ishizaki and Jane Kim, the accountant for Privilege House              
          and for the Ishizakis personally.  Ms. Encarnacion asked at the             
          interview whether all corporate checks were deposited to the                
          Privilege House account and was initially told that they were.              
          Subsequently, however, when Ms. Encarnacion raised the                      






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