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petitioner’s and Ms. Shaw’s 1993 and 1994 returns related to Ms.
Shaw’s store.
Petitioner timely filed his 1995 return as a single person.
On that return, he reported $221,000 in gross receipts from Far
Eastern, but he understated gross receipts from Far Eastern by
$338,276, and overstated net rental income by about $5,000.
D. Respondent’s Determination
Revenue Agent Claude Williams (Williams) began to examine
petitioner’s 1993-95 returns before July 23, 1998. Petitioner
cooperated fully with Williams during the examination.
Petitioner signed a document allowing Williams to review
petitioner’s bank records. Williams asked petitioner to complete
a lengthy form to provide information about his personal living
expenses during the years in issue. Petitioner completed the
form with information that Williams believed was fair and
complete.
Petitioner did not have many records for Far Eastern. As a
result, Williams reconstructed petitioner’s gross receipts for
1993-95 using the bank deposits method. To reduce photocopying
costs, Williams did not obtain copies of petitioner’s bank
deposit records or canceled checks for the years in issue.
Williams obtained records for Far Eastern from the Customs
Service, Panalpina, and Henry’s Gifts. He used those records to
try to reconstruct petitioner’s shipping costs. The Panalpina
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Last modified: May 25, 2011