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when paid by T.J. Construction, were additional income to
petitioner and not business expenses of the company.
Pereira had frequent discussions with petitioner regarding
the books and records of T.J. Construction, but petitioner never
disclosed to her that payments to Rougewood Construction and to
Star Mechanical out of T.J. Construction’s account were for his
personal benefit or that they were related to personal home
improvements. When Pereira sorted the check stubs that she was
provided during her compilation for T.J. Construction, she
categorized these payments under cost of goods sold as payments
to subcontractors, because the names of the payees did not
trigger any suspicion regarding whether the payments were
business items, no notation was made on the check stubs that the
payments were personal, petitioner’s green sheets listed the
payments as miscellaneous expenses of T.J. Construction, and
Pereira was never informed otherwise by petitioner. In addition,
T.J. Construction issued Forms 1099 to Rougewood Construction and
to Star Mechanical for 1996 through 1998 for payments made to
those entities to cover the personal expenses of petitioners.
Criminal Investigation and Conviction
During an initial interview with special agents of the
Criminal Investigation Division of the Internal Revenue Service
(IRS) on July 20, 1999, when asked why he and his wife had been
consistently withdrawing large sums of cash from their accounts,
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Last modified: November 10, 2007