Carlos Culinary owns three successful restaurants. All of the restaurants are located in leased space in various buildings. As is standard practice, all of the leases have their rental payments calculated based on gross revenue for the restaurants. When you are preparing his tax return for this year, you find that Carlos has left (intentionally?) his rent calculation schedules in his tax papers. You discover that these documents show that the income from the restaurants was $300,000 more than he reported to you for tax purposes. You suspect this has been going on for many years.

Carlos Culinary owns three successful restaurants. All of the restaurants are located in leased space in various buildings. As is standard practice, all of the leases have their rental payments calculated based on gross revenue for the restaurants. When you are preparing his tax return for this year, you find that Carlos has left (intentionally?) his rent calculation schedules in his tax papers. You discover that these documents show that the income from the restaurants was $300,000 more than he reported to you for tax purposes. You suspect this has been going on for many years.

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Steps Step 1 of 2 At first it appears that Carlos Culinary is deliberately underreporting his restau... View the full answer