William F. Middleton - Page 6




                                        - 6 -                                         
               After petitioner filed his amended 1989 and 1990 returns and           
         his original 1991 return, respondent was forced to summons                   
         petitioner’s records to verify the income and deductions reported            
         by petitioner.  The summonsed records generally did not agree                
         with petitioner’s tax returns.  In addition, records provided by             
         petitioner to respondent’s agent were not properly organized or              
         categorized.  Petitioner’s 1990 records contained duplications               
         and personal expense receipts.  Due to the discrepancies and poor            
         records, respondent’s agent reconstructed petitioner’s 1990                  
         income by means of a bank deposit analysis.  Petitioner’s                    
         deductions were determined by means of analyzing the records                 
         summonsed and provided by petitioner.                                        
               Respondent’s bank deposits reconstruction of petitioner’s              
         income revealed that petitioner had unexplained deposits which               
         petitioner omitted from his original 1990 return.  Respondent’s              
         determination for petitioner’s 1990 income was that he failed to             
         report specific identified gross receipts of $17,572 from                    
         Medicaid administrative fees and $129,136 from taxi leasing.                 
               Respondent’s agent was able to verify $127,879 of                      
         petitioner’s claimed deductions of $211,875 for 1990.  With                  
         respect to 1991, respondent’s agent was able to verify $112,023              
         of the $254,787 petitioner claimed as business deductions.  After            
         the petition was filed, based on petitioner’s further                        
         substantiation, respondent allowed an additional $45,184 in taxi             






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Last modified: May 25, 2011