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petitioners. Regarding the allegations that Steelman embezzled
the cash from the checks regularly cashed by Mrs. Haney, although
the embezzlement investigation and ensuing case against Steelman
was extensive, petitioners did not claim in any court proceeding
or police report prior to this case that Steelman stole cash from
Flair Body Works. Steelman embezzled funds from Flair
Enterprises through misuse of checks payable to her and through
unauthorized contributions to a 401(k) plan, but we do not
believe that she embezzled cash from the company.
Rather, the evidence establishes that substantial amounts of
cash received by Mrs. Haney from the checks cashed at
petitioners’ bank were retained by Mrs. Haney and distributed to
petitioner and their two sons. Furthermore, petitioners admit
and the evidence establishes that substantial amounts of cash
were kept in petitioners’ personal safe at home and in a safe-
deposit box at their bank.
In addition to determining that the cashed checks were
additional income to Flair Enterprises, and thus to petitioners,
respondent determined that cash deposits into petitioners’
personal checking account totaling $39,000 in 2002 constituted
additional unreported income to petitioners that year.
Petitioners argue that these cash deposits were taken from the
sum of cash received from cashing the above-mentioned checks and,
thus, that respondent is double counting this sum as income to
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