1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 MARCH 20, 2012 10 CORPORATE FRANCHISE AND PERSONAL INCOME TAX HEARING 11 APPEAL OF 12 ALI AMIDY AND GUITI NAHAVANDI 13 NO. 524954 14 AGAINST PROPOSED ASSESSMENT OF 15 ADDITIONAL INCOME TAX 16 17 18 19 20 21 22 23 24 25 26 27 Reported by: Kathleen Skidgel 28 CSR No. 9039 1 1 P R E S E N T 2 For the Board Jerome E. Horton of Equalization: Chairman 3 4 Michelle Steel Vice-Chair 5 6 Betty T. Yee Member 7 8 George Runner Member 9 10 Marcy Jo Mandel Appearing for John 11 Chiang, State Controller (per Government Code 12 Section 7.9) 13 Diane G. Olson 14 Chief Board Proceedings Division 15 16 For Board of Linda Frenklak 17 Equalization Staff: Staff Counsel 18 For Franchise Tax Raul Escatel 19 Board: Tax Counsel 20 Bill Hilson Tax Counsel 21 22 For Appellant: Ali Amidy Taxpayer 23 24 ---oOo--- 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 MARCH 20, 2012 4 ---oOo--- 5 MR. HORTON: Ms. Olson, in the words of 6 Mr. Runner, considering our lengthy agenda, let us 7 reconvene the meeting of the Board of Equalization. 8 MS. OLSON: Okay. Our first item on this 9 afternoon's agenda is B1, Ali Amidy and Guiti Nahavandi. 10 Please come forward. 11 Board Proceedings has received contribution 12 disclosure forms for this afternoon's hearings from the 13 parties, agents and participants. All forms were 14 properly completed and signed. All parties, agents and 15 participants are on the alpha listing provided to your 16 office. 17 Each person sitting at the table will be asked 18 to introduce themselves and, if necessary, their 19 affiliation with the taxpayer of the record. 20 Ten minutes is allocated for the taxpayer's 21 opening presentation, followed by ten minutes for the 22 Department's -- excuse me, the Franchise Tax Board's 23 presentation. And five minutes is allocated to the 24 taxpayer for rebuttal. 25 Mr. Horton. 26 MR. HORTON: Thank you. 27 Ms. Frenklak, won't you please introduce the 28 issues in this case. 3 1 MS. FRENKLAK: Thank you. My name is Linda 2 Frenklak with the Appeals Division. 3 The issues in this appeal are the following: 4 Whether the Franchise Tax Board correctly 5 determined that Appellants failed to provide sufficient 6 documentation to establish their cost basis in United 7 Food Enterprises, Inc. for purposes of calculating their 8 claimed long-term capital loss from the sale of their 9 share of UFE in 2004. 10 The second issue, whether the accuracy-related 11 penalty was properly imposed and whether Appellants have 12 shown reasonable cause for abatement of the penalty. 13 And lastly, whether the imposition of interest 14 should be waived. 15 MR. HORTON: Thank you. 16 The taxpayer will have ten minutes to make 17 their, uh, presentation. Please commence with your 18 introductions. 19 MR. AMIDY: Good afternoon, Mr. Chairman and 20 Member of the Board. 21 MR. HORTON: Good afternoon, sir. 22 MR. AMIDY: I apologize for my accent and 23 English grammar. 24 MR. HORTON: Please don't. 25 MR. AMIDY: For the last five years, I have 26 provide over thousand page of documents, including my 27 tax return, all my personal business bank statement, all 28 my tax exchanges, all the cancelled check, all wire 4 1 transfer, all direct cash, and all deposit, along with 2 all the three years of the United Food Enterprise bank 3 statement to show exactly the total cash -- my total 4 cash capital investment. Including date of the deposit, 5 cancelled check, wire transfer, direct deposit, cash or 6 check deposit to auditor, showing where the money funds 7 came from and when was deposit to United Food Enterprise 8 account. 9 Some of the document I be unable to provide 10 because of the bank timing. The bank only allowed five 11 years for the past document. They are not allowed more 12 than five years. 13 So the Board has -- Board of Equalization has a 14 timing to ask me all this document. Which is they ask 15 the document after five years; which is, when I called 16 the bank, they could not provide all those other 17 additional documents. 18 And after all this, the only auditor approved 19 only $370,000 from my original investment of $871,500. 20 That excuse is the deposit might be for another investor 21 and is not my deposit. 22 They could call on my other partner or they can 23 review the tax return and see how much they deposit, how 24 much the capital investment was, how much my month 25 capital investment was. 26 My partner all have the taxes done probably. 27 They can access. They can call them. They have the 28 name. And they can call my attorneys, also, which is 5 1 they did a final closing after we sell this partnership. 2 Is this coincidence that have I draw the same 3 amount of money, for example $80,000, the same date from 4 my personal account and they are not approving because 5 this $80,000 was not my money go to that -- my business 6 account? 7 I have showed everything. I have show -- I can 8 go to each items with you and show you exactly where the 9 money come from and was deposit in United Food 10 Enterprises. I also have provided, both this morning, a 11 copy of accountant statement and show, as of 12 December 31, 2002, showing my capital contribution of 13 586,500. And which is not including my first capital 14 investment of $200,000 for purchasing of the existing 15 business of United Food Enterprises. 16 MR. HORTON: Thank you very much, sir. Could 17 you please state your name for the record. 18 MR. AMIDY: Ali Amidy. 19 MR. HORTON: Thank you very much. 20 We'll now go to the Department. You'll have 21 ten minutes to make your presentation. Please commence 22 with your introductions. 23 MR. ESCATEL: Good afternoon, Board Members. 24 My name is Raul Escatel representing Respondent 25 Franchise Tax Board, along with my co-counsel Bill 26 Hilson. 27 The law's pretty clear on this. It's -- in 28 order to, um, verify Mr. Amidy's tax basis in his stock, 6 1 we have to determine whether he substantiated his 2 capital contributions and infusion of capital in order 3 to claim the -- the amount that his alleges in -- in 4 this appeal. 5 This case is basically about documentation and 6 whether or not this documentation shows that deposits in 7 UFE can be traced back to Mr. Amidy. 8 Um, the problem with a lot of the documentation 9 received by Mr. Amidy is that, as your Board has 10 reviewed, there is no checks directly from Mr. Amidy. 11 They're from all these other third parties. We have 12 checks from Alamo, we have checks from, um, 13 Hesperian (phonetic), um, apparently from some of 14 Mr. Amidy's other, uh, business ventures. However, 15 without any direct linkage between Mr. Amidy and the 16 deposits in UFE, we cannot, um, allow him to -- to claim 17 the cost basis that he does now before our Board. 18 Mr. Amidy -- according to Mr. Amidy, he 19 was a -- he was a 50 percent, um, shareholder or, as he 20 now says, partner in, um, UFE. Yet he cannot provide 21 any of these documents showing direct linkage between 22 himself and -- and UFE. 23 Another thing is that the evidence here is -- 24 the record here is very sparse as it comes to tracing. 25 I mean, as -- as indicated by Respondent, um, UFE never 26 filed a tax return from its inception in 2001. Um, 27 none -- our records show there has not been one tax 28 return filed. And this recordkeeping doesn't -- isn't 7 1 isolated to just this case. We started looking at some 2 of his other business ventures where we've also found 3 that no business -- no tax returns had been filed. And 4 some of these, um, entities are implicated in the 5 documentation submitted by Mr. Amidy to prove his 6 contributions to, um, UFE. 7 We have no idea how many shareholders/partners 8 there is in this entity. Uh, we don't have any 9 information as to this entity. 10 It's very important that, you know, 11 Mr. Amidy -- that records be kept in order to 12 substantiate cost basis. We can't just let taxpayers 13 come in, say this is my cost basis and my asset, throw 14 documentation at -- at -- at us and your Board and that 15 be enough to claim, um, sub -- substantiate his 16 position. 17 Um, I want to address a couple of things that 18 were in, um, the hearing summary. There was a -- an 19 issue as to the abatement of tax. What happened there 20 was there was a -- there was a -- an NPA was issued for 21 2003 and 2004. The protest for 2003 was untimely. And 22 it basically -- what it resulted was a $373 abatement of 23 tax because, due to a tweak in the mortgage interest 24 deduction -- this was actually out of consideration for, 25 um -- for, um -- for Mr. Amidy. This agreement was done 26 between the protest hearing officer and at that time 27 Mr. Amidy's, uh, tax preparer. And it was for -- more 28 for a convenience purpose than anything else. 8 1 And as stipulated by Mr. Amidy, he has conceded 2 that -- that -- that, um, he owes the mortgage interest 3 deduction -- um, he's not entitled to the mortgage 4 interest deduction claimed. 5 Um, let's see. I guess, um, as I submitted in 6 my last brief, that's my explanation for why we didn't, 7 um, allow the cost basis. Some of those documents show 8 also that they're loans. And we know that, um, for 9 capital contribution purposes, a loan is not a capital 10 contribution. And as stated earlier, we don't know 11 whether that loan was repaid. We don't know whether 12 that loan was forgiven. We have no information because 13 UFE never filed any tax returns. 14 So, with that, I will take any questions for 15 clarification from your Board. 16 MR. HORTON: Thank you very much. 17 Mr. Amidy, you have five minutes on rebuttal. 18 MR. AMIDY: Um, Chairman, my Alamo property 19 Hesperian (phonetic), LLC, Centra Net Investment was my 20 business. I have withdraw from the -- every month from 21 that account of that, which is I show my tax return at 22 the end of the year how much withdraw I have. 23 Those checks was made to Alef Market and it was 24 deposited in the Alef Market. And if you look at the 25 document, which can -- you can see this. 26 The was money came from, for example $10,000 27 draw from my Alamo property was deposit to -- for Alef 28 Market, and as a contribution. 9 1 The only one loan was -- went to the Alef 2 Market, which was $19,000 rent, which is the landlord 3 was going to take over the business on the following 4 day. So I have to go to San Francisco and deposit that 5 $90,000. And I have a letter attached with the CEO of 6 the corporation, which is that $19,000 was loan. 7 Since the market did not make any money, we 8 lost the money, that loan was never paid off. They have 9 all my bank statements, all the cancelled checks. All 10 the cancelled checks for last three years of the 11 business, and there was no check was ever made to me, 12 only was cash draw any in those three years. 13 So, I could not take any cash from the business 14 because they didn't have the money. So they have the 15 three years of the bank statement. They can review it 16 and see any of those checks was made to me or I draw any 17 money. They cannot find anything. 18 And regarding the mortgage, mortgage yes, my 19 tax accountant was made a mistake. We show over a 20 hundred thousand dollar for my home mortgage. I have 21 paid the 2003 taxes to Board of Equalization. I already 22 paid that in 2004. I don't know how much is it. That's 23 on my responsibility. I will taking care of that. 24 And the 50 -- I was owned 50 percent share of 25 the United Food Enterprises. That's correct, but as 26 absentee owner. I was in San Jose. The business was in 27 Los Angeles. I was going every other two weeks over 28 there and -- to look at the business. 10 1 And the reason this take over five years, the 2 audit, because they have changes, several auditors on 3 me. They either assigned to me new auditor or the 4 auditor has been moved to another department. I have to 5 provide, over and over, document and document to the 6 Board for last five years. And they should have 7 everything. 8 And all these cancelled check, they exactly 9 show exactly where the money come. I don't understand 10 why they say this money not deposit to your account the 11 same day. How can not be that happen? 12 MR. HORTON: Thank you very much. 13 Discussion, Members? 14 Mr. -- Mrs. Steel, then Mr. Runner. 15 MS. STEEL: Um, Franchise Tax Board, explain -- 16 could you explain how the assessment for 2003, uh, was 17 added to the assessment for 2004? 18 MR. ESCATEL: Yes. The 2003 assessment was 19 based on, um -- it was for the home mortgage interest 20 deduction. There was, uh, discrepancy between what 21 happened at, uh, audit and protest. And that -- that 22 amount was not calculated correctly at audit. It was 23 a -- it resulted in a -- a net amount of $373 in tax. 24 And what the, um, auditor did was, uh, just 25 basically took the 2003 year -- because the only issue 26 that had any tax result was, um, an adjustment to the 27 home mortgage interest deduction which Mr. Amidy 28 conceded was owed -- and just put that in the 2004 tax 11 1 year. 2 So it was 373 -- 330 -- $373, um, adjustment. 3 MS. STEEL: Well, I -- I didn't ask about the 4 amount. But is it any legal authority for that 5 procedure? 6 I've never heard that. And I've been asking. 7 I have three attorneys working, uh, with me. I ask any 8 of them to see -- some of them, CPAs been working with 9 BOE for last 27 years. We never really saw that amount. 10 It's $10 or $20 -- 11 MR. ESCATEL: Right. 12 MS. STEEL: -- or $300, it doesn't really 13 matter. But how it really happen? 14 MR. ESCATEL: Yes, um, I -- I agree. I 15 don't -- I couldn't find any legal authority as well. 16 Um, and I asked at audit and it was, uh -- that was the 17 rationale given to me for that. 18 So, um, I cannot, um -- I do not know whether 19 or not we had the legal authority to -- to -- to abate 20 that tax. 21 MS. STEEL: Appeals, um, is it possible it can 22 happen? 23 MS. FRENKLAK: Um, the abatement itself can 24 happen. But to then transfer it to another tax year, 25 um, seems to be a little bit unusual. 26 MR. ESCATEL: It wasn't a transfer. I'm sorry. 27 MS. STEEL: Little bit added to the assessment. 28 But is it little bit or is it really odd? 12 1 MS. FRENKLAK: I would say it's very odd. 2 MS. STEEL: Thank you. 3 MR. HORTON: Mr. Runner. 4 MR. RUNNER: Yeah, I want to kind of walk 5 through, um -- I have a couple of questions in regards 6 to some of these, um, deposits and payments that the 7 taxpayer said he had made into, um -- uh, to UFE. 8 Uh, and I'm trying to get through this idea 9 about what it is the taxpayer has and what it is that 10 FTB is looking for. And why they don't quite match up. 11 Um, just to let you know what we did, we 12 went -- we went through his records. I think he came 13 into our office. We went through the records. Um, and 14 we matched up about $826,000. 15 MR. ESCATEL: Right. I saw that. 16 MR. RUNNER: Uh, which we felt was basically 17 monies moved from one account or from someway in a 18 pretty direct date correspondence to what he reported. 19 Um -- and um, you know, which is obviously a 20 large chunk toward the, what, one point -- what is it, 21 one point -- yeah. 22 MR. ESCATEL: One point -- 23 MR. RUNNER: One million 70,000. 24 MR. ESCATEL: Right. 25 MR. RUNNER: Um, there's some that we 26 couldn't -- we couldn't verify and we didn't think were 27 able to get there. But obviously a great deal of it we 28 did. 13 1 So help me understand what it is when you -- 2 when you're trying to find verification and you see 3 money moved from this account over here and he's got -- 4 demonstrates the -- the withdrawal, and you see that 5 same amount of money here over here within a day, two, 6 three, sometimes a week. Why isn't that enough to 7 demonstrate, um, that we're talking about the same money 8 at that point? 9 MR. ESCATEL: No, that can be. And that's an 10 excellent question. Um, and that can be enough in -- in 11 many circumstances. 12 I think the problem in this case was that, in 13 digging into this, um, these amounts came from various 14 business ventures that were also either in some kind of 15 form, whether it be an LLC, whether it be a -- a 16 partnership, and there was other members in that, um -- 17 in -- in those businesses. 18 MR. RUNNER: Well, let me ask you this. Let me 19 be specif -- again, there's so many of them, I think 20 sometimes it's easy to talk about the broad and say some 21 of them did this. 22 But let me ask you specifically about $145,000 23 from a personal, um, Washington Mutual account. 24 MR. ESCATEL: Correct. 25 MR. RUNNER: Okay. So clearly that's not -- 26 that's not an LLC. It's a personal account. 27 MR. ESCATEL: Mm-hmm. 28 MR. RUNNER: 145,000. It was paid in three 14 1 different payments then into -- into, uh, to UFE. 2 MR. ESCATEL: Well, if you look at that and you 3 compare that to the amount that I -- that we did let, 4 the $80,000, that shows a direct wire transfer from the 5 Fidelity account straight into the UFE bank account. 6 MR. RUNNER: Right. 7 MR. ESCATEL: That -- that shows that. And 8 that's -- and we did allow that. 9 MR. RUNNER: Okay. Okay. But I'm -- you're 10 right. I'm talking about not the -- not the wire. 11 MR. ESCATEL: Right. Right. 12 MR. RUNNER: I'm talking about the fact where 13 you ended up with amounts of money that weren't wire, 14 but the amounts corresponded. And they may have been 15 done -- there might have been a little bit of time in 16 between. 17 Clearly a wire is clear. Now we're talking 18 about other kinds of deposits that are not that clear 19 but correspond to the date which you told me, you said 20 that that's -- that that would work at times. So help 21 me understand why this particular one didn't work? 22 MR. HILSON: Mr. Runner, if I might help. 23 MR. RUNNER: Yeah. Yeah. 24 MR. HILSON: Um, specifically looking at the 25 Washington Mutual $145,000 -- 26 MR. RUNNER: Mm-hmm. 27 MR. HILSON: -- that you're referencing. 28 MR. RUNNER: Right. 15 1 MR. HILSON: The -- the spreadsheet that was 2 sent to us by the Board with further questions, uh, 3 basically it -- it's a request for authorization of 4 $145,000. But if you add up the contributions that are 5 made, supposedly from this source, uh, within the next 6 week or so, it's $154,500. 7 MR. RUNNER: Right. 8 MR. HILSON: Some of it is supposedly, uh, from 9 a credit card transfer. We don't have any of the credit 10 card transfer information. And there's another $10,000 11 added in here. 12 MR. RUNNER: I get that. I get why you don't 13 do the whole amount. 14 MR. HILSON: Exactly. So it -- it -- 15 MR. RUNNER: So what about the rest of it? 16 MR. HILSON: Well, it's -- it's -- you take it 17 in conjunction with the whole. And we find lots of 18 these transfers, we find lots of -- lots of transfers 19 that don't match up -- 20 MR. RUNNER: I guess that's where I'm a little 21 confused. 22 MR. HILSON: -- and there's also an addition of 23 cash. 24 MR. RUNNER: Okay. This is where I'm a little 25 confused then. 26 Okay. There's clear evidence that there -- 27 there -- there's been a large amount of money moved from 28 here to here. And then -- and then there's other money 16 1 that is unclear, like a credit card. 2 And so it seems to me what you did is you wiped 3 out the whole thing because -- because there was a 4 question on $14,000 of it or $10,000 of it. But there 5 was clear evidence in regards to the dates and the 6 corresponding in terms of the -- in terms of the larger 7 amount. 8 MR. HILSON: There's -- there's coincidental 9 evidence with respect to dates. There are not -- even 10 with the Washington Mutual situation that we're talking 11 about, what we see is money moving from one of many 12 accounts with a corresponding number in another account. 13 We don't see any of the intermediary action. 14 Where -- where is the check? Did it actually 15 come from this account or did it come from somewhere 16 else? 17 We've got personal loans from friends. We've 18 got advances that are denominated as loans from other 19 business entities into UFE. And the whole 20 circumstance -- it's just a -- it's just a morass of 21 stuff. 22 MR. RUNNER: Well, and that's -- that's why it 23 is that I agree. And that's why it is some of them we 24 didn't count. But I'm -- what I'm struggling with is 25 that many -- again, I can understand some of those that 26 didn't count because they were unclear. But, again, the 27 corresponding dates -- so at least what I thought I 28 heard -- I thought I heard earlier said that 17 1 corresponding dates does demonstrate. If there's a 2 removal of money here and put it over here, and those 3 are dates correspond, that that is enough evidence. 4 Now, what I'm hearing from you right now is 5 that's not enough evidence. 6 MR. HILSON: I'm just referring to the 7 specific -- the specific transactions that you're 8 referencing. And -- and basically, I've looked at these 9 things as well, and that's the problem I had with them 10 in going through it is there's always a piece that is 11 missing. 12 There's nothing -- it's not -- it's not the 13 wire transfer that -- that obviously that's what 14 occurred. It's, as I mentioned a minute ago, it's the 15 moving of money from multiple savings accounts or 16 multiple checking accounts -- 17 MR. RUNNER: Okay. 18 MR. HILSON: -- personal loans and whatnot, 19 and -- 20 MR. RUNNER: Well, let me ask about -- again, 21 you keep saying "personal loans." I don't have a -- 22 help me out. 23 Let me ask the taxpayer. How many -- I've got 24 the spreadsheet here. How many of these were personal 25 loans? 26 MR. AMIDY: Two of them. 27 MR. RUNNER: Two of them? 28 MR. AMIDY: Yes. 18 1 MR. RUNNER: Um, do you remember which trans -- 2 do you have this sheet? Which transactions were 3 personal loans? 4 MR. AMIDY: Okay. I can go through and let you 5 know. Please, give me time. 6 MR. RUNNER: Okay. Are you claiming -- are you 7 claiming that -- 8 MR. AMIDY: There was one loan from the 9 Canadian association, loan for $45,000. And there was 10 one loan for Tammy Negua (phonetic) was the loan. 11 MR. RUNNER: Okay. Are you counting those in 12 terms of your investment? 13 MR. AMIDY: Yes, because I borrowed the money, 14 put it in United Food Enterprise, and later on I pay it 15 back -- 16 MR. RUNNER: Okay. 17 MR. AMIDY: -- paid that back to the person I 18 borrowed the loan from. 19 At that time we need the monies to put the 20 Board -- to United Food Enterprise. I did not have the 21 money, so I borrowed the money and I deposit directly to 22 United Food Enterprise. And later on I have to pay my 23 obligation to that person. 24 MR. RUNNER: What difference does it make in 25 that -- talking to the Department. What difference does 26 it make in that scenario, if indeed it is a loan that he 27 got? He borrowed the money over here and he put it over 28 here. What difference does it make then if it is a loan 19 1 that he then invested and brought into the -- into the 2 company? 3 MR. HILSON: Has it been repaid? 4 MR. RUNNER: Um, and do you have any evidence 5 that it has been? 6 MR. HILSON: Exactly. I have no evidence that 7 it has been repaid. 8 MR. RUNNER: Well, you mean or -- or -- you 9 mean repaid or that he still has the liability? 10 MR. HILSON: Either. 11 MR. RUNNER: If he still has the liability, 12 that would be the same thing as repayment, right? 13 MR. HILSON: No. 14 MR. RUNNER: Why -- if he -- why -- 15 MR. HILSON: Because you're taking the tax 16 deduction for an obligation you have not yet 17 satisfied. 18 MR. RUNNER: On that. Okay. 19 And -- and have you -- have these loans been 20 repaid? 21 MR. AMIDY: Both of them's been paid, yes. 22 MR. RUNNER: I'm sorry, what? 23 MR. AMIDY: Both of them has been paid. I can 24 get the letter from both of them to provide it to them 25 which is that it's been paid. 26 MR. RUNNER: So you've repaid those and they -- 27 and -- and you have a letter of -- 28 MR. AMIDY: I can get the letter. 20 1 MR. RUNNER: Their statement. 2 MR. AMIDY: When we paid the loan -- if I don't 3 pay, they come after me. They sue me, you know, and get 4 the money back, you know. They're not going to walk 5 away from $45,000. 6 MR. RUNNER: Have you known they've been 7 looking for some evidence of repayment on those loans? 8 MR. AMIDY: They never asked me any document to 9 provide. So I can go back to them and get the letter 10 saying the loan has been paid off. 11 MR. RUNNER: Okay. Let me ask you about one 12 more, and then I'm going to -- because, again, I -- 13 there's a series of these that make me just question 14 whether or not we've created -- we -- we've given him 15 enough benefit from these dollars. 16 On 1/31/2001, $200,000 from Fidelity investment 17 account, again, his account, to pay in the escrow 18 account for the purchase of UFE. Uh, and the UFE bank 19 statements directly correspond to this. 20 Why was that not counted? 21 MR. ESCATEL: Well, in that case we show a 22 withdrawal of $275,000 from his Fidelity account. And, 23 yes, we do show, uh, that there was a deposit made of 24 $200,000 in UFE. 25 MR. RUNNER: Mm-hmm. 26 MR. ESCATEL: And that's all we have. 27 MR. RUNNER: So because he didn't invest the 28 whole 275? 21 1 MR. ESCATEL: No, no, not at all. 2 MR. RUNNER: Oh. 3 MR. ESCATEL: It's because we don't know where 4 that -- we don't know where that money came from. 5 There's no linkage. There's no tracing. 6 The fact that he de -- he took out 275 -- 7 MR. RUNNER: So in order for you to be 8 satisfied, the amounts have got to be the exact amount? 9 MR. ESCATEL: No, not at all. What we're 10 saying is there should be some kind of recordkeeping 11 tracing the money back directly from -- from Mr. Amidy 12 and not just a coincidence -- a coincidental, uh, 13 withdrawal in one account and a deposit in another. 14 MR. RUNNER: Now -- again, I'm confused right 15 now because at least what I thought you said was -- 16 MR. ESCATEL: No, I said it can. I didn't say 17 that in this -- and I specifically said in this 18 instance, no, because of the fact that there's so many 19 different entities and money coming from all these 20 different entities. 21 MR. RUNNER: Well, let's not talk about all the 22 different ones. Let's just talk about this one. Okay. 23 Because, again, whenever we go down this path, all of a 24 sudden you say, well, yeah, but there's loans, there's 25 all these other things. 26 Let me just talk about this one. So what about 27 this one here, this $200,000. Why wasn't this one 28 allowed? 22 1 MR. HILSON: Mr. Runner -- 2 MR. RUNNER: Uh-huh. 3 MR. HILSON: -- if you look at the Fidelity 4 statement, it does show the withdrawal of $275,000 -- 5 MR. RUNNER: Right. 6 MR. HILSON: -- during the month of January. 7 MR. RUNNER: Uh-huh. 8 MR. HILSON: At the end it also shows the 9 purchase of $175,000 worth of stock on one -- on 1/31. 10 The transaction that -- there's supposedly a 11 $200,000 loan or $200,000 investment on the same 1/31 12 date. Is it the -- is it the -- is the one -- is the 13 200 different or is it the same? Or is the $175,000 14 purchase on 1/31 documented by the Fidelity account the 15 same money? 16 MR. RUNNER: Can I ask the taxpayer? How do 17 you -- what's your answer to that? 18 MR. AMIDY: We have deposit $75,000 to 19 Fidelity. And I have another $90,000 so we bought 20 another -- this 240,000 of this go to the United Food is 21 not 200. It's 240,000 go to United Food. 22 MR. RUNNER: Right. 23 MR. AMIDY: The same -- from the same draw. 24 And $25,000 was used for my -- I don't know, whatever I 25 have, get it. 26 And then I deposit $75,000 back on January 8th 27 to the, uh, Fidelity. Fidelity's my only personal 28 account. It's not the company or anybody's else is 23 1 sharing it. 2 So this money directly come from Fidelity and 3 go to United Food Enterprises. It's a large amount of 4 money. It's -- nobody else deposit that money. None of 5 my partner claimed that money was for them. It was from 6 me. And who else can put those $240,000 deposit in that 7 account besides me? 8 MR. RUNNER: How did the money -- what was the 9 actual -- what did the money look like? I mean, how did 10 it get in -- what -- what was deposited into the -- the, 11 uh, UFE account? How did it get there, the $240,000? 12 MR. AMIDY: $240,000 was a check, Your Honor. 13 MR. RUNNER: And it was a check. 14 MR. AMIDY: Check made out to United Food 15 Enterprises. 16 MR. RUNNER: From you? 17 MR. AMIDY: Yes. And then deposited the same 18 day, and I have bank statement. 19 MR. RUNNER: And deposited into escrow. 20 MR. AMIDY: Deposited into -- 21 MR. RUNNER: Because this was in escrow, I 22 believe. 23 MR. AMIDY: Well, let me see. It went to the 24 bank, United Food, and then from United Food made a 25 check to the escrow company. 26 MR. RUNNER: Okay. 27 MR. AMIDY: And the deposit still shows that 28 that deposit -- 24 1 MR. RUNNER: Okay. So help me understand -- 2 again, to the Department -- what -- if he's got the 3 check for that, why -- doesn't that -- doesn't that 4 answer the question as to whether that -- 5 MR. HILSON: We don't have it, sir. We've 6 never been given -- 7 MR. RUNNER: You've never been -- 8 MR. HILSON: No. 9 MR. RUNNER: He's never provided that for you? 10 MR. HILSON: No. 11 MR. AMIDY: Because they -- they asked me over 12 five years. This audit was going on long time. 13 MR. RUNNER: Hold -- hold it. Do you have the 14 check? 15 MR. AMIDY: No. I asked the bank to provide. 16 They said five years is gone, we cannot provide you 17 anymore copy. 18 MR. RUNNER: Okay. 19 Okay. Thank you. 20 MR. HORTON: Member Yee. 21 MS. YEE: Uh, this is unfortunate because I 22 would agree with Mr. Escatel this does really come down 23 to an issue of documentation. 24 Um, and I guess I wanted to just delve into 25 whether, um -- what documentation might be available, 26 understanding that we're many years down, you know, past 27 the period in question. 28 MR. AMIDY: Documentation, I have it for the 25 1 bank statement. It show that money goes out. And I 2 have the same bank statement for United Food Enterprise, 3 that money was deposit in the bank. 4 MS. YEE: No. And I understand that. And I 5 don't think anyone's disputing what came out and what 6 got deposited into the various accounts. 7 It's, um -- I guess as Mr. Hilson indicated, 8 it's this missing piece about, um, whether there's 9 anything to document. And I guess, I don't know, 10 perhaps a cancelled check might be sufficient to verify 11 that the funds actually came. 12 MR. AMIDY: If the auditor was ask me before 13 five years -- it take him so long to ask the document. 14 If you look at all the documents requested, 15 they never ask for these checks. Otherwise, I could 16 call the bank and get the copy. 17 They ask for this document now or month ago or 18 two months ago. They did not ask when the audit 19 started. Remember, this audit is for 2001 and 2003. 20 And then I have already paid almost $13,000 for 21 $371 mortgage which is I show to -- for taxes for the 22 2003, which is almost $371. I pay $13,000 for taxes. 23 But I'm not worried about the mortgage. 24 Mortgage was my mistake. But this -- if the Board -- if 25 the auditor was asking, give me the lease, I want the 26 following document -- for example, I want a cancelled 27 check for Fidelity, I could go get those. But I tried. 28 I went to Fidelity, I went to see several people. I 26 1 wrote the letter. I e-mailed them. They say, 2 Mr. Amidy, we only keep for five years. We cannot give 3 you more than five years. 4 MS. YEE: Okay. Yeah, I understand that. 5 MR. AMIDY: Even Washington -- even from 6 Washington Mutual. And also, I called the bank for the 7 Wells Fargo, so they could not do that. They give me 8 bank statement, and I have everything I could get it 9 because I don't have no problem to provide because this 10 money I'm sure come from me and deposited. So there was 11 no reason for me to hide anything. 12 MS. YEE: Okay. Uh, with respect to, uh -- do 13 you have -- did you have a CPA prepare your tax returns? 14 MR. AMIDY: Yes. 15 MS. YEE: Okay. And, uh, is there any 16 accounting or confirmation about, uh, the various 17 investments that might be helpful? 18 MR. AMIDY: I -- I went to them, my accountant, 19 and he don't have anything. The only thing I reported 20 to him what I put in the United Food Enterprises and the 21 dates. 22 MS. YEE: Okay. 23 MR. AMIDY: And it show on my tax return back 24 on -- if you look at Exhibit C, page one of two, it show 25 $567,509 lost on 2004. 26 MS. YEE: Okay. Let me ask you another 27 question. 28 MR. AMIDY: Okay. 27 1 MS. YEE: I was curious about the, uh, initial 2 investment of 240,000 that was, um, deposited into the 3 UFE bank account. It looked like there were two 4 separate deposits that added up to that. 5 MR. AMIDY: Yes, one for 40,000, one for 6 200,000. 7 MS. YEE: And why were there two separate 8 deposits? 9 MR. AMIDY: It's a different date. The draw 10 from the Fidelity was two different dates. It was not 11 the same date. Let me look at it. I'll explain to you. 12 MS. YEE: I see. Okay. 13 MR. AMIDY: It was two $200,000 deposit, and 14 then one for $75,000 deposit. 15 MS. YEE: Mm-hmm. Okay. I mean, this is 16 frustrating for us. I mean frustrating for me. I 17 just -- I -- I think there's a, uh -- I mean, I think 18 the figures that you've provided, and certainly from 19 information that we are able to derive from the 20 documentation we do have, um, there's any number of 21 scenarios about what could constitute the potential 22 basis. And when we have missing pieces of information, 23 it's hard to confirm or verify, um, you know, what that 24 amount ought to be. 25 And, um -- and maybe I -- I'm kind of -- I 26 don't -- I came in here thinking that maybe providing 27 you additional time to try to help us find those missing 28 pieces might be helpful. But if the documents don't 28 1 exist at this point, I'm not sure where we go. 2 MR. AMIDY: I went to Mr. Runner's office and 3 show all the evidence. 4 MS. YEE: Mm-hmm. 5 MR. AMIDY: The only things I could not provide 6 was some deposit, cash deposit for 6,000 700,000 -- 7 $7,000 or 75. Which is I had the check, but those are 8 the questionable. But the rest of them, I provide 9 exactly document which is support all my deposit to 10 United Food Enterprises. 11 MS. YEE: Mm-hmm. 12 MR. AMIDY: And I went through each-by-each. 13 We spend about three and a half hours in the office, and 14 I went through the -- we had Mr. Runner's secretary, and 15 show all the document, each-by-each. 16 And I receive a e-mail today which is -- she 17 already okay most of it. Only two items, which is she 18 did not accept, that she said it's questionable which 19 is -- was all the cash, which is we're talking about 20 $17,000 or less. 21 MS. YEE: Okay. To the Franchise Tax Board, 22 can you just walk through what concessions we've made 23 here? I'm -- I just want to be sure we're working off 24 of the -- 25 MR. ESCATEL: Yes. No, we, uh -- we allowed, 26 uh -- there was a direct wire deposit from, um, 27 Mr. Amidy's Fidelity account, straight into UFE, in the 28 amount of $80,000. And, um, we also allowed -- even 29 1 though the $30,000, it was a check payable to UFE from 2 Appellant's attorney, uh, for Appellant's share of 3 another investment, and even though that really, the 4 linkage wasn't there, um, it appeared it may be -- it 5 was on behalf of Mr. Amidy, but we couldn't tell because 6 it was not legible, um, the -- the -- the check, the 7 copy of the check. But we, uh, we allowed that as 8 well. 9 MS. YEE: Okay. 10 MR. AMIDY: We have several check made to Alef 11 Market directly and deposit to Alef Market. What 12 excuses you have for those checks? 13 MR. ESCATEL: Because the checks aren't -- 14 MR. HORTON: Sir -- gentlemen. Thank you. 15 MR. AMIDY: The checks is all made to Alef 16 Market and deposit to Alef Market. And the checks was 17 cashier check from me to Alef Market and deposited to 18 Alef Market. And I have a copy of the cancelled check 19 provided. It showed that deposit went to Alef Market, 20 and the same date. 21 MR. RUNNER: Do you -- again, is he talking 22 about documents that you have? 23 MR. HILSON: No. 24 MR. ESCATEL: I didn't see any. 25 MR. HORTON: Excuse me. 26 Member Yee. 27 MS. YEE: No, I -- I -- this is the 28 frustration. I'm not sure who's seen what and who has 30 1 what. I mean, I -- and so I wanted to kind of just 2 establish kind of where we are right now from the 3 Franchise Tax Board's perspective. And then see, with 4 respect to what Mr. Amidy's continuing to assert. 5 MR. AMIDY: I have the same document that 6 provided to them. They should have every copy I have. 7 MS. YEE: Okay. Okay. They may not have a 8 dispute around documents. 9 And then, uh, we didn't talk about this, but 10 there was also a concession on the, uh, reported capital 11 loss, as well, right? 12 MR. ESCATEL: Correct, yes. 13 MS. YEE: Okay. All right. 14 Okay. Thank you, Mr. Chairman. 15 MS. MANDEL: So if FTB doesn't have these 16 cashier checks, maybe those are ones that went in at 17 protest and you didn't have them on appeal. Maybe 18 that's the issue. If he thinks he already gave them to 19 you. 20 MR. ESCATEL: Um, we'll be happy if he wants -- 21 MS. MANDEL: Or -- or -- or at audit. 22 MR. ESCATEL: Right. Because we don't have 23 these checks. But if he has copies of these checks, 24 we -- I went through -- 25 MS. MANDEL: You went through the appeal file. 26 MR. ESCATEL: No, I went through all the 27 file. 28 MS. MANDEL: All the files. 31 1 MR. ESCATEL: Yeah. 2 MR. AMIDY: Let me ask -- 3 MR. HORTON: Mr. Runner. 4 MR. RUNNER: Just to follow up. Let me ask 5 Appeals, real quick, a question. And that is, what -- 6 in order for the taxpayer to demonstrate this investment 7 that he has made, um, you know, FTB is trying to 8 correlate these dates and trying to say, hey, does these 9 deposits -- is that required? I mean, it seems to me he 10 has -- isn't his deduction just based upon the amount of 11 money that he actually moved into that company? 12 MS. FRENKLAK: The problem is that there are no 13 accounting records and tax returns for UFE that would 14 substantiate his claimed cost basis. 15 And so, looking at substantiation versus simply 16 the asserted cost basis that he's asserting, it makes it 17 more, um, dubious as to the source of the monies. 18 MR. RUNNER: Is the assumption then at that 19 point that somebody else made those deposits? That all 20 that money came from somebody else? 21 MS. FRENKLAK: Well, um -- 22 MR. RUNNER: I mean, is that what we would have 23 to suspect in order to -- in order to -- in order to not 24 grant the taxpayer's argument, do we have to suspect 25 that those dollars came from somebody else? 26 MS. FRENKLAK: Well, if there's a, um, check 27 written by Roadrunner Gas, for example, for $10,000 to 28 the Appellant, there's no information as to what portion 32 1 of it went into the UFE account. 2 MR. RUNNER: Okay, now I get that. Again -- 3 again, that problem is we keep coming up with those 4 one -- those examples. 5 MS. FRENKLAK: Well, there's an example -- 6 MR. RUNNER: But how about the -- how about the 7 ones that are coming from the -- you know, from -- 8 back -- going back to the Fidelity investment, that came 9 from his account and that -- I mean, that is his 10 account, obviously money that came out of his account. 11 And somewhere there's money that has been invested over 12 here, may not correspond exactly to the exact right same 13 dates, but it's clear that there's money that -- that 14 the taxpayer had, um, and there's money that showed up 15 in this -- in this -- in this business over here. I 16 guess the underlying assumption would have to be that 17 money came from somebody else if we don't give credit to 18 the taxpayer. 19 MS. FRENKLAK: I think there is an inference 20 that can be made that if there is a $275,000 amount of 21 money available and there is proof of $240,000 being 22 deposited, that one may infer that it came from that 23 275,000, but it's not a direct link. 24 MR. RUNNER: Correct. Right. And then -- and 25 in order for him to not get the credit for it, we have 26 to assume that it came from somebody else. 27 MS. FRENKLAK: I think there's a burden of 28 proof issue here, which is that who has the burden of 33 1 proving that that $240,000 -- 2 MR. RUNNER: Right. 3 MS. FRENKLAK: -- was sourced from Appellant? 4 And, um, if you have -- 5 MR. RUNNER: No, I -- I agree. And I agree 6 with that. I agree that there's a lot of assumptions 7 that have to be made here. I'm just trying to get there 8 in terms of what is the logical assumption. 9 MS. FRENKLAK: Another issue is if you have 10 checks that are being written by third party entities, 11 not the Appellant, there is an inference that those 12 third party entities are correlated with the Appellant, 13 that they are somehow one in the same. And, therefore, 14 if deposits are shown in the UFE Wells Fargo account, 15 therefore, that money is Appellant's capital 16 contribution. And there's a certain leap of faith 17 involved in that without more substantiation. 18 MR. RUNNER: Is that true in his -- how is that 19 true in his personal accounts versus the LL -- the few 20 that were done by LLCs and whatnot? I get that. You 21 know, it comes out of an LLC or something, then there's 22 a question as to whose money it is. But if it's out of 23 his personal account, how's the question in regards to 24 whose money it is? 25 MS. FRENKLAK: Well, if there is a, um, 26 cashier's check for $8,000 from the Bank of America, for 27 example -- 28 MR. RUNNER: Right. 34 1 MS. FRENKLAK: -- with Appellant listed as the 2 remitter -- 3 MR. RUNNER: Uh-huh. 4 MS. FRENKLAK: -- with a processing date of 5 March 18th and it's payable to Alpha Market -- 6 MR. RUNNER: Right. 7 MS. FRENKLAK: -- and there's a UFE bank 8 statement dated April 1st shows that a March 18th 9 deposit of $8,000 was made -- 10 MR. RUNNER: Right. 11 MS. FRENKLAK: -- then I think that there would 12 be a reasonable inference that that money was coming 13 from Appellant. 14 MR. RUNNER: And did they credit that money for 15 the Appellant? 16 MS. FRENKLAK: That was not one of the two 17 concessions made in the response to the Board Member 18 inquiry. 19 MS. MANDEL: So I just have a question, 20 Mr. Runner. 21 MR. RUNNER: Go ahead. Yeah. 22 MS. MANDEL: Because now that's one of the 23 items, that's one of the cashier's checks he's talking 24 about. And you guys say you don't have copies of the 25 cashier's checks? So now -- 26 MR. ESCATEL: No. What, uh -- what item is 27 that? It's $8,000. 28 MS. MANDEL: She did -- where -- what line is 35 1 it on your thing, Linda? 2 MS. FRENKLAK: It's March 18th, 2003 for 3 $8,000. 4 MS. MANDEL: She says it's a cashier's check 5 with him as the remitter and the same date. And I 6 thought I heard you guys say you didn't have cashier's 7 checks. Or is Mr. Amidy -- 8 MR. HILSON: No, what I -- 9 MS. MANDEL: -- talking about other cashier 10 checks? 11 MR. HILSON: What -- what I was saying is we 12 don't have copies of the checks on -- by and large. 13 The specific check that we're referencing now 14 is in the materials -- 15 MS. MANDEL: Okay. 16 MR. HILSON: -- in the Appellant's supplemental 17 brief. 18 I -- I didn't suggest to Raul that we make that 19 concession because, quite frankly, the copy we had was 20 illegible. If -- if in fact there's a better copy of it 21 and it confirms what's been represented -- 22 MS. MANDEL: This kind of answer you're giving 23 right now is the answers that -- kind of answers 24 Mr. Runner's looking for, the exact why on particular 25 ones that he's asking about that you didn't accept. 26 And here you're just saying we couldn't really 27 read the copy we got. If we saw a better copy -- so, 28 that was my question. 36 1 MR. RUNNER: But apparently it was good enough 2 for Appeals to read. 3 MS. FRENKLAK: I have a copy of it here. 4 MS. MANDEL: Well, I think they're making 5 copies of copies of copies. 6 MR. RUNNER: Right. 7 MS. MANDEL: And sometimes that happens, but -- 8 MS. FRENKLAK: May I show this to the FTB? 9 MR. RUNNER: But if -- 10 MR. HORTON: Um -- 11 MR. RUNNER: Well -- 12 MR. HILSON: I'm prepared to accept the 13 representation. 14 MR. RUNNER: Well, here's the problem. That's 15 great. I'm glad you accept that one now, but I don't 16 care to go through these -- you know, the 50 of them or 17 60 of them one-by-one to see what you guys have done 18 with them. This only indicates to me that there could 19 be others. 20 So, I'm -- I'm, um, a little bit taken back 21 right now that, again, you all told us that you had no 22 copies of these. Now we find out we do have copies and 23 the reason you didn't take them into consideration is 24 because they were not legible. And yet, Appeals can 25 read them. 26 MR. ESCATEL: I -- I can actually, um, address 27 that. 28 MR. RUNNER: Okay. 37 1 MR. ESCATEL: This $8,000 one was -- I was 2 actually on the fence about whether or not to give it to 3 him. It's not that I -- 4 MS. MANDEL: Is it -- is it eight or 18? 5 Oh, it's March 18 for 8,000. 6 MR. ESCATEL: It's March 18th. 7 MS. MANDEL: Okay. 8 MR. ESCATEL: And, um -- 9 MS. MANDEL: Thank you. 10 MR. ESCATEL: That was one that I -- you know, 11 I was on the fence about giving it to the taxpayer. I 12 didn't. But, you know, that's one that I -- I can. 13 But it's not the fact that these checks are 14 illegible or it isn't that -- it's the fact that -- it's 15 the bigger issue here that there is just no -- the 16 documentation does not show a direct nexus between 17 Mr. Amidy and the UFE, um, account. 18 And for someone who has multiple business, um, 19 ventures to not keep the most basic of recordkeeping, 20 Mr. Amidy said that checks were never asked. Checks 21 were the very first thing asked at audit, um, as 22 evidenced by communications. 23 MR. AMIDY: Show me, please, the paper you ask. 24 MR. ESCATEL: Well, that was you were 25 represented by -- 26 MR. HORTON: Gentlemen. 27 MR. ESCATEL: -- Mr. O'Neal, I believe. 28 MR. HORTON: Sir. You know -- 38 1 MR. ESCATEL: I'm sorry. I apologize. 2 Um, so that's -- it's just the bigger issue. 3 So, yes, some of these are questionable. And the fact 4 that we're here discussing which to allow and which not 5 allow further shows the importance of recordkeeping in 6 this -- in these kinds of situations. 7 MR. HORTON: Um, the discussion may be, uh, 8 reducing itself to a debate in which doesn't -- I don't 9 think does anyone any good. So, um, based on winning 10 one or two items here and there and therefore concluding 11 that -- making a conclusion or an inference. 12 So, did the Department see -- 13 May I, Mr. Runner? 14 MR. RUNNER: Yes. 15 MR. HORTON: Did the Department see any, um -- 16 any other transactions that, uh, the Department's of the 17 opinion that the documentation is there and it should be 18 allowed? 19 MS. FRENKLAK: Thank you for asking. That was 20 the only other one that I saw that I felt was a cause of 21 concern. That I felt that the $8,000 item had the 22 cashier's check with Appellant listed as a remitter. 23 There wasn't anything else here that I felt 24 would contradict what the FTB is saying today. 25 MR. HORTON: Did the Franchise -- are there any 26 other transactions that the Franchise Tax Board is on 27 the fence about one way or the other? 28 MR. ESCATEL: No. It was that one and the 39 1 $30,000, but I gave it to him. That was the check from 2 the attorney. 3 I really tried to find a link between Mr. Amidy 4 and the -- and the UFE deposit that I would be 5 comfortable with in terms of saying, yes, this came from 6 him. But as we -- as we have seen here there's too much 7 uncertainty. 8 But, no, that -- that -- that's it from 9 Respondents. 10 MR. HORTON: Mr. Amidy, is there any 11 documentation that you may be able to come up with that 12 would support your position, hindsight being 20/20 and 13 now that you know the documentation is necessary? 14 MR. AMIDY: I -- Chairman, I have, for example, 15 showed twelve -- uh, ten -- $12,000 on -- on the May 16 11th -- 17 MR. HORTON: Sir, it's -- 18 MR. AMIDY: From Alef Market. 19 MR. HORTON: Sir, if I may, it's a general 20 question. I -- I don't want examples. 21 MR. AMIDY: No, I have the checks, your -- 22 MR. HORTON: Let me -- let me -- 23 MR. AMIDY: I'm sorry. 24 MR. HORTON: Let me restate the question. If 25 we allowed you time, could you come up with some sort of 26 documentation to support your position? 27 MR. AMIDY: What documentation? I have to know 28 what documentation you need so I can come up with. 40 1 To me, all the documentation -- for example -- 2 I have a lot of cashier checks made to -- only 8,000. I 3 have lot of cashier checks -- 4 MR. HORTON: Okay. 5 MR. ADMIDY: -- made to Alef Market from me 6 they are not allowing either. 7 MR. HORTON: Okay. Thank you. 8 What I might encourage is that, um, if the -- 9 if the Members decide to take this under consideration 10 and not act upon it currently, uh, that to the extent 11 possible, the FTB and the taxpayer meet and confer and 12 communicate through, uh, Ms. Frenklak, uh, if it's their 13 desire to have additional time to look at these items. 14 Either the taxpayer or the FTB. 15 MR. ESCATEL: We'd be more than happy to look 16 at anything Mr. Amidy wants to provide. 17 MR. HORTON: Well, Mr. Amidy has expressed 18 specific, uh -- or requests for delineation of the items 19 that you feel is necessary in order to support his 20 position, which is more than fair even if you've already 21 articulated that in the past. 22 Further discussion, Members? 23 MS. MANDEL: Just that would include this 24 little thing that was handed up to us, to the extent 25 they haven't looked at it. 26 MR. HORTON: Okay. Is there a motion? 27 MS. YEE: Move to take the matter under 28 submission. 41 1 MR. HORTON: Moved by Member Yee to take the 2 matter under submission. Second by Member Runner. 3 Without objection, such will be the order. 4 ---oOo--- 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 42 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, KATHLEEN SKIDGEL, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 March 20, 2012 I recorded verbatim, in shorthand, to the 10 best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding pages 1 13 through 42 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: April 2, 2012 17 18 19 ____________________________ 20 KATHLEEN SKIDGEL, CSR #9039 21 Hearing Reporter 22 23 24 25 26 27 28 43