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Pereira relied on deposits into T.J. Construction’s bank
account in determining the company’s gross receipts and on
T.J. Construction’s check stubs, which were categorized by
Pereira based on the information recorded on the check stubs, in
determining cost of goods sold, operating expenses, and other
deductible expenditures. All checks written to Phillips or to
Phillips Contracting from T.J. Construction’s bank account were
included in the cost of goods sold listed on the Forms 1120S.
Once the Forms 1120S were completed, the returns and a financial
statement were hand delivered or mailed by Plotnik & Associates
to petitioner, who was directed to sign and mail the returns.
Petitioner never informed Pereira that he was advancing large
amounts of cash to Phillips or that the checks made payable to
Phillips were being endorsed back to petitioner and deposited
into petitioners’ personal account. She first became aware of
the cash transactions and of the checks that were endorsed back
to petitioner when the IRS initiated a criminal investigation of
petitioners, as discussed below.
The green sheets that petitioner provided to Pereira
included as business deductions of T.J. Construction estimated
tax payments made on behalf of petitioner personally. On one
occasion in 1995 or 1996, Pereira compared petitioner’s figures
on his green sheets with the figures she calculated and explained
to him that tax payments made on behalf of petitioner personally,
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Last modified: November 10, 2007