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“cash” from the deposit account in the total amount of
$1,293,600, $582,200 of which was deposited into the operating
account.
In 1992, petitioner purchased a house in Glendale, Arizona,
for $208,250. A downpayment of $41,650 was made on the home.
Petitioner applied for a loan to finance the purchase. He
reflected on the loan application that the net worth of Gene’s
was $269,115 and that his monthly income from Gene’s was $7,197.
In 1994, petitioner sold Gene’s for $259,790.
On their 1991, 1992, and 1993 income tax returns,
petitioners reported net profit from Gene’s of $6,696, $13,363
and $67,126, respectively. On the 1991 and 1992 returns,
petitioners claimed petitioner’s parents and brother as
dependents. Petitioner knew that the gross receipts reported for
1991 through 1993 were understated. He omitted some gross
receipts in order to avoid tax so that he would have more
retained cash.
Respondent conducted a civil examination of petitioners’
income tax returns, and petitioners did not provide the internal
revenue agent with the cash register tapes. Invoices for
purchases by check were presented, but no invoices were provided
for cash purchases. During the examination, petitioner stated
that he was the sole source of support of his parents.
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