Jimie R. and Sandra Herlitschek Overby - Page 4

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          attributable to petitioners’ wages; $132 is attributable to                 
          interest earned; $4,444.97 is attributable to transfers between             
          petitioners’ savings account and checking account; and $15,760.22           
          is attributable to employee reimbursements that petitioners                 
          received and deposited into their two bank accounts in 1995.                
               Petitioners timely filed a Form 1040, U.S. Individual Income           
          Tax Return, for the 1995 taxable year (1995 return).  Petitioners           
          reported items of income and expenses for both businesses on one            
          Schedule C, Profit or Loss From Business.  In so doing, they                
          reported $9,996 in gross receipts on Schedule C of their 1995               
          return.                                                                     
               Upon examination of petitioners’ 1995 return, respondent’s             
          revenue agent performed a bank deposits analysis and determined             
          that petitioners had unreported income based upon unexplained               
          bank deposits.  A summary of the revenue agent’s bank deposit               
          analysis for 1995 reflects the following:                                   
               Deposits to bank accounts               $103,072.44                    
               Less deposits from known sources        70,994.19                      
               Net deposits                            32,078.25                      
               Less gross receipts per return           9,996.00                      
                    Total unexplained deposits         22,082.25                      
               During the initial interview with the revenue agent,                   
          petitioner indicated that petitioners did not keep any cash at              
          home.  During a subsequent interview with the revenue agent,                









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