Timothy R. and Cindy I. Fuller - Page 4

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          1999, and $14,683 for 2000.  They overstated their car and truck            
          expenses by $11,273 for 1998, $7,120 for 1999, and $6,714 for               
          2000.  They also overstated their workers’ compensation insurance           
          expenses by $2,008 for 1999.                                                
               Petitioners overstated their expenses for telephone and cell           
          phone expenses for 1998 by $4,420, reported those expenses                  
          correctly for 1999, and understated those expenses by $437 for              
          2000.  Petitioners also understated their labor expenses by                 
          $3,265 for 1999 and $2,493 for 2000.  Despite these instances               
          where petitioners understated their deductible expenses, the                
          combined discrepancies listed above substantially decreased                 
          petitioners’ reported net income and income tax liability.  Due             
          to the understatement of net income reported on their tax                   
          returns, petitioners claimed and received earned income tax                 
          credits of $3,730 for 1998 and $3,770 for 1999.                             
               In various loan applications with Redding Bank of Commerce             
          (Redding Bank) from 1998 through 2000, petitioners represented              
          that they had a monthly income of between $5,000 and $6,556.                
          Petitioners also provided to Redding Bank a copy of a 1998                  
          Form 1040, U.S. Individual Income Tax Return, that did not match            
          the return that was actually filed with the IRS by petitioners              
          for that year.  The 1998 return that was provided to Redding Bank           
          listed petitioners’ Schedule C income as $44,005, while the                 
          return that was actually filed by petitioners for 1998 reported             






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