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reimbursements from the University to petitioner had been equally
split between petitioner’s employee business expenses at the
University and ISOA, Inc. Additionally, the amount of
petitioner’s travel expenses at the University on a general
ledger for 1993 did not equal the travel expenses claimed on the
1993 Form 2106. The “general ledgers” also indicated that
petitioners often claimed per diem expenses as well as hotel and
meal expenses for the same travel. There were also personal
expenses, including women’s clothing and car rental expenses for
petitioners’ son, which were included on the “general ledgers”
and deducted by petitioners on their tax returns under
examination.
During the examination, Agent Sutton was also provided with
a draft audit report prepared by the University. The draft audit
report raised questions regarding irregularities with respect to
petitioner’s expense reimbursements from the University.
On May 29, 1997, after examining the information provided to
that date, Agent Sutton issued an IDR to petitioners with more
than 300 questions and document requests. This again included,
in part, requests for substantiation for the claimed business
expense deductions, as well as an explanation of the $195,000 of
“Advances From Others” with respect to ISOA, Inc.’s 1995 return.8
8 Throughout the proceeding, the parties refer to this as
the “deferred income” issue. We do likewise.
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