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receipts of approximately $592,000 and $508,000, respectively,
were reported.
The cash used in the operation of Gene’s was maintained in a
safe, and petitioner counted the cash daily. No record of the
cash transactions or cash on hand was maintained, and the cash
received from customers of Gene’s was not deposited in the bank
accounts maintained for Gene’s. Some of the cash receipts from
the operation of Gene’s were used to pay petitioners’ and their
family’s household and other living expenses.
During the 1991 and 1992 tax years, petitioner maintained
two checking accounts in the name of Gene’s. Petitioner was the
only person with access to the two business accounts. The first
account, No. 162-14996 (the deposit account), was used for
deposits of third-party payroll and personal checks, food stamps,
and WIC vouchers that were received in Gene’s grocery business.
No cash deposits were made with respect to the deposit account
during 1991 or 1992.
The second account, No. 161-17636 (the operating account),
was used for Gene’s operating expenditures. Petitioner’s
practice was to fund the operating account by making withdrawals
from the deposit account. During 1991, petitioner drafted checks
made out to “cash” from the deposit account in the total amount
of $2,045,900, $625,700 of which was deposited into the operating
account. During 1992, petitioner drafted checks made out to
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