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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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