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other entities with which he was involved. On July 9, 1980, he
filed an individual joint return for 1976. Petitioner did not
file a Federal income tax return for 1977. No later than 1982,
the Internal Revenue Service (IRS) commenced an investigation of
petitioner. On April 3, 1986, petitioner pleaded guilty to
failure to file his personal income tax return for 1979 in
violation of section 7203. On May 19, 1986, he filed individual
joint returns for 1978, 1979, and 1980 in order to receive
favorable consideration at the time of sentencing on his
conviction.
In late 1979 or early 1980, attorneys for petitioner
employed William Lipton (Lipton), who was then a partner at the
accounting firm of Ernst & Whinney, to prepare petitioner's
Federal tax returns for 1978, 1979, and 1980. For approximately
3 years, Lipton attempted to reconstruct for petitioner books and
records in order to prepare returns. The records, however, were
in terrible shape, consisting of nothing but check stubs and
canceled checks. Brian Onofrio (Onofrio), an employee of
petitioner, also attempted to reconstruct petitioner's records in
order to prepare tax returns for the years in issue. Richard
Timbie (Timbie) was one of several lawyers representing
petitioner in relation to his failure to file returns.
Petitioner's return filed for 1976 reported adjusted gross
income of $4,315.86. He claimed a loss from the law firm as a
subchapter S loss and did not report the income received from
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