Jerry S. Payne - Page 11

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          such WA is the notation “Paid Out to Jerry Payne”.  Another WA              
          contains the notation “Draw - Jerry’s Vitamins - Sugar”.  On some           
          of the WAs for 1989 (either guest check forms or blank pieces of            
          paper), petitioner noted that he “took” the stated amount of                
          money from a “safe” or a “bag” or “stack”, or that he just “took”           
          the stated amount.  On other of the 1989 WAs (guest check forms             
          only), the authorized amount was for specific items of food.                
          Some of the WAs refer to a particular server or other person.               
          Also, one WA, which is largely illegible, appears to be a note to           
          someone named Vikki that petitioner “spent” $350 for some                   
          indecipherable purpose.                                                     
          Schedule C Deductions                                                       
               On line 28 of his Schedule Cs for the audit years (“Other              
          expenses”), petitioner listed “parking” expenses of $1,443 for              
          1989 and $1,492 for 1990.                                                   
               Bad Debts                                                              
               During 1989, petitioner paid $34,443 to Texas Commerce Bank            
          (TCB), of which $19,921, represented deductible interest.  During           
          1990, petitioner paid $13,644 to TCB.  On line 9 of his Schedule            
          Cs for the audit years (“Bad debts from sales or services”),                
          petitioner treated $14,000 (for 1989) and $8,000 (for 1990) of              
          such payments to TCB as giving rise to bad debt deductions.                 

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Last modified: May 25, 2011