James E. Jenkins and Ruth A. Jenkins - Page 4

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          was counted first and removed from the table.  After all the                
          money was counted, the charities would generally issue checks to            
          Mrs. Jenkins and ARJay for the rent and bingo equipment,                    
          respectively.  On financial reports, generally prepared by                  
          petitioner, the attendance, expenses, and profits were reported.            
          Hood deposited the rent checks issued to Mrs. Jenkins (i.e., by             
          endorsing the checks in Mrs. Jenkins’s name) and checks issued to           
          ARJay into a bank account in the name of Robert C. Hood, d.b.a.             
          ARJay Bingo Supplies (ARJay account).  Both petitioner and Hood             
          had signature authority over the ARJay account.                             
               Petitioner and Hood operated bingo games with the East                 
          Carters Valley Ruritan Club (Ruritan Club) during 1994 and 1995.            
          In exchange for their services, petitioner and Hood received                
          payments relating to the purchase and rental of bingo equipment             
          and a percentage of the profits.  The bingo games were generally            
          held twice a week at the Weber property.  As with the Jasper                
          property, ARJay leased the building from Mrs. Jenkins on a                  
          monthly basis for $500 and subleased it to the Ruritan Club for             
          $489 per night.  The Ruritan Club bingo games were conducted in             
          the same manner as JVFD bingo games.                                        
               In 1996, the Ruritan Club terminated its affiliation with              
          petitioner and Hood, ceased bingo operations at the Weber                   
          property, and moved its bingo operations to another building.               
          That same year, one of its members, Kathy Babb, informed the                






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