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used, and petitioner kept no record of the cash he advanced to
Paas.
Various methods of payment were used at various times by
petitioner to pay Phillips or to advance money to Phillips.
During the first couple of years that T.J. Construction was in
business, it was petitioner’s practice simply to write checks to
cash from T.J. Construction’s account to pay himself and
Phillips. During their compilation at a later date, he would
inform his accountants which of the checks that were written to
cash went to Phillips and which ones went to petitioner.
However, petitioner was advised by his accountants in late 1993
that checks written to cash would no longer be deducted and that
petitioner would need documentation, such as checks to a specific
payee, in order to claim a business deduction for those expenses.
Until mid-June 1996, petitioner paid Phillips and advanced
funds on current projects by writing checks in the amount of
$9,500 to Phillips from T.J. Construction’s account, which checks
Phillips cashed. Around that time, however, petitioner changed
his practice and began to advance cash to Phillips as well as to
write checks made out to Phillips from T.J. Construction’s
account, which checks were then endorsed by Phillips back to
petitioner and deposited by petitioner into petitioners’ personal
bank account, allegedly as repayments for cash advanced.
Petitioner did not inform his accountants that he was advancing
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