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corporation. Ms. McNamara supervised the office functions,
engaged in some sales activities, and handled some of the
bookkeeping. Petitioner’s daughter, Phyllis Moran, held a
position at the corporation, where she performed “billing,
typing, [and] posting” duties. The corporation also employed
Ellen Moran, petitioner’s mother, who was paid $50 a week. From
1987 to 1993, the corporation also employed Emma Brinton.
During the years in issue, Mr. Agresto also prepared the
Federal income tax returns for the corporation. Ms. McNamara
provided Mr. Agresto with information to prepare the
corporation’s income tax returns, including cash receipt
summaries, cash disbursements, and payroll records.
Petitioner and Ms. McNamara diverted numerous checks issued
to the corporation for services rendered by the corporation.
The checks received by the corporation were either (1) cashed by
petitioner or another employee and the proceeds were given to
petitioner or Ms. McNamara, or (2) deposited into petitioner and
Ms. McNamara’s personal joint checking account maintained at
Continental Bank. The amounts of those diversions were
$70,672.15 for 1988, $35,497.58 for 1989, and $57,521.81 for
1990. See appendix A, listing checks diverted from the
corporation. The proceeds from these checks were not recorded as
income on the corporation’s books or reported as gross receipts
on any of the corporation’s Federal income tax returns. These
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