Charles Choi was the owner/operator of a grocery store in California called Gene's Modem Market. In addition to the sale of normal grocery items, the store cashed payroll, personal, and third-party checks for a fee. The fee was 1% of the face amount of the check. From 1991 to 1993, the store used two cash registers, but the cash register tapes were not used to make entries into the accounting system. Rather, all entries were made based on cash payments and receipts. While monies were held in bank accounts, these accounts were not reconciled and the sales activity that Mr. Choi provided to the company's accountant were lower than the amounts that appeared on daily cash register tapes. In addition, inventory records were not maintained The Chois challenged an IRS audit determination that contained the following findings: (1) failure to report income for two years; (2) incidence of fraud, resulting in assessment of a fraud penalty (3) liability for self-employment taxes; and (4) denial of a dependency deduction. The matter was considered by the United States Tax Court in 2002 The tax court memorandum is available at www.ustaxcourt.gov At the homepage for this site select the "Opinions Search" tab. Then use the case keywords feature and enter: "Choi." A case with the name Charles Y and Jin Y Choi will be among the cases listed. Select this case for further use. After reading the case, respond to the following questions