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were identical to the amounts deposited into the general
operating account. Respondent then analyzed specific items
deposited into petitioner’s Merrill Lynch account during 1988,
1989, 1990, and 1991. These deposits included checks from the
client trust account which were gross receipts of the law firm.
Respondent prepared a schedule of omitted income for these items.
The schedule shows that petitioner did not report substantial
amounts of the law firm’s gross receipts.
A. Deposits Into the Merrill Lynch Account
Petitioner never sent Mr. Reiter any information about the
amounts deposited into petitioner’s Merrill Lynch account, Mr.
Reiter never received any records pertaining to petitioner’s
Merrill Lynch account, and in her criminal trial petitioner
admitted that unreported income of $20,833, $94,335, and
$8,677 was deposited into her Merrill Lynch account in 1989,
1990, and 1991, respectively (i.e., that she failed to report the
seven checks).
Petitioner also admitted that she knew the legal fees she
deposited into her Merrill Lynch account were taxable income.
Petitioner stipulated she endorsed the seven checks, they
were deposited into her Merrill Lynch account instead of the
general operating account, and that the checks represented
business income. Petitioner admitted that she received the
$25,000 check (in 1988), it was a taxable referral fee, it came
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