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Gene’s. Petitioner provided the daily summary sheets to Mr. Kim
every month.
Petitioner knew that the amounts of gross receipts provided
to Mr. Kim were less than the actual gross receipts for Gene’s.
As an example, the cash register tapes for August 1, 1992,
totaled $2,925.72, whereas petitioner’s summary sheets given to
Mr. Kim reflected total sales of $1,325.42. Mr. Kim prepared
yearly summaries based on the daily summary sheets received from
petitioner and used the summaries to prepare the Schedules C,
Profit or Loss From Business, for Gene’s that were included with
petitioners’ Federal income tax returns. Petitioner did not
provide Mr. Kim with the register tapes from Gene’s. In
addition, Mr. Kim was provided with inaccurate (understated)
records of cash inventory purchases.
Petitioner’s method of accounting for Gene’s receipts and
expenditures caused the omission and understatement of income for
the years in issue. During the examination of petitioners’
Federal income tax returns, petitioner estimated and represented
to respondent’s agent that he had understated Gene’s gross
receipts by approximately $15,000 per month. Petitioner, on the
basis of the actual cash register receipts, determined that
Gene’s gross receipts during 1991 and 1992 were $50,000 to
$60,000 per month or $600,000 to $720,000 per year, respectively.
On the Schedules C of the 1991 and 1992 income tax returns, gross
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