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petitioners. This argument is inconsistent with petitioners’
assertion that the cash received from the cashed checks was not
retained by petitioners but was entrusted to Steelman for an
alleged petty cash fund. Because no records were maintained
regarding the amount, timing, or source of cash that petitioner
added to his personal safe, and because petitioners’ testimony
regarding the cash transactions was inconsistent and
unpersuasive, petitioners have not met their burden of proving
that respondent erred in including these cash deposits as
additional income to petitioners in the notice of deficiency for
2002.
Additional Employee Embezzlement Account Deduction
Petitioners assert that they are entitled to an increased
deduction for cash funds allegedly embezzled by Steelman in 2000,
before her embezzlement scheme was discovered. For the reasons
stated above, we do not believe that Steelman had access to the
cash that Mrs. Haney received upon cashing the checks received by
Flair Enterprises. Petitioners are not entitled to a deduction
for their Employee Embezzlement Account beyond what respondent
has already allowed.
Claimed Deductions Disallowed
Respondent disallowed many flowthrough deductions claimed by
petitioners because they related to personal expenses of
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Last modified: November 10, 2007