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Item 1990 1991 1992 1993 1994
Gross
receipts
or sales $20,100 $81,640
$24,150 $26,210 $47,934
Returns &
allowances --- --- --- 2,110 ---
Net sales --- --- --- 45,824 ---
Cost of
goods sold --- --- --- 29,151 66,204
Gross
profit --- --- --- 16,673 15,436
Total
expenses 19,642 24,818 24,970 30,016 15,436
Net profit
(loss) 458 (668) 1,240 -0-
(13,343)
The Forms 1040 Mr. Strong filed reflect a $65 tax liability
based on self-employment tax in 1990 and a $175 self-employment
tax liability in 1992. Mr. Strong reported no other tax on the
Forms 1040 for 1990-94.
Mr. Strong’s Initial Contacts and Discussions With A Revenue
Officer
In late 1991, Mr. Strong was contacted by an Internal
Revenue Service (IRS) revenue officer. The purpose of this
contact was to inquire regarding Mr. Strong’s unpaid income tax
liabilities for 1987 and 1988 and his unfiled income tax returns
for 1989 and 1990. Mr. Strong refused to provide the revenue
officer with any personal or financial information, but he told
the revenue officer that he expected his tax liabilities for 1989
and 1990 to be at least $50,000. In a later conversation, Mr.
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