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deposition, the clients who had sued petitioner agreed to accept
$3,000 each in satisfaction of petitioner’s obligations to them.
The two $3,000 payments were made by Taxman in 1990. Petitioner
did not include the $6,000 paid by Taxman as income to him on his
1990 Federal income tax return.
Each of Taxman’s corporate returns for its taxable years
ending September 30, 1990, 1991, 1992, and 1993, was completed by
petitioner. Mr. Jondahl is listed as the majority stockholder on
each return. Petitioner determined Taxman’s income for its
corporate returns from Taxman’s bank deposits. During each year
at issue, approximately $3,000 of Taxman’s cash receipts was not
deposited in Taxman’s bank accounts. Petitioner took possession
of the cash but did not keep records of how it was spent. Some
of the cash was used by petitioner to pay personal expenses.
Petitioner did not report the cash amounts on his individual tax
returns. Most of Taxman’s expenses, even amounts less than $2,
were paid by check. During the 4 years in issue, Taxman issued
over 500 checks to various eating establishments, to Sam’s
Wholesale Club, and for office supplies, snacks, and postage.
In September 1992, after petitioner was notified that the
IRS was auditing Taxman’s 1990 return, he typed up minutes of
annual directors meetings that he claims took place on October 5,
1987, October 2, 1989, and October 8, 1990. Petitioner claims
that he took handwritten notes of these meetings. The minutes
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