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as Coastal Builders, Agent Daniels found that petitioner
deposited income of $3,651,293, $9,409,882, and $4,316,813 into
various bank accounts in the respective years at issue.
Respondent did not issue to petitioner or Mr. Townshend a 30-day
letter setting out Agent Daniels’s findings.
On September 15, 2004, petitioner filed a Form 1040 for 1999
reporting a tax liability of $11,155. The 1999 return included
petitioner’s Schedule C for 1999 reporting gross receipts of
$3,601,882 and costs of goods sold and expenses totaling
$3,600,556.6 Based upon respondent’s bank deposits analysis,
respondent determined that petitioner understated his Schedule C
gross receipts in 1999 by $49,411.7 Petitioner did not assert in
his petition or offer evidence to show he did not understate his
income in 1999.
Petitioner failed to file a return for 2000. Consequently,
on June 15, 2005, respondent filed a substitute for return
pursuant to section 6020(b), in which he determined petitioner
received gross receipts of $9,409,882 in 2000. On brief,
respondent conceded petitioner only received gross receipts of
$9,009,882 for 2000. Petitioner failed to make estimated tax
6 The $3,600,556 comprised costs of goods sold of
$2,932,248, and deductions of $668,308.
7 $3,651,293 (bank deposits) - $3,601,882 (reported Schedule
C gross receipts) = $49,411 understatement
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Last modified: November 10, 2007