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1 50 percent of the interest due on the amount of the underpayment
attributable solely to fraud.
All section references are to the Internal Revenue Code in
effect for the years in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
The issues for decision are: (1) Whether petitioners
underreported their taxable income for the year 1987 in the
amount of $130,232; (2) whether petitioners underreported their
taxable income for the year 1988 in the amount of $85,231; (3)
whether the above-mentioned understatements of income for 1987
and 1988 were attributable to fraud by Donald Ferry (petitioner);
and (4) whether petitioners are liable for an addition to tax
under section 6661 for 1987 and 1988. Respondent has conceded
that Sharon Ferry is not liable for the fraud addition.
FINDINGS OF FACT
Preliminary Matters
The stipulated facts and exhibits are incorporated by this
reference.
When the petition in this case was filed, petitioners
resided in Newark, Delaware. Petitioners are husband and wife
and filed joint Federal income tax returns for the years in
issue.
On their joint Federal income tax return for 1987,
petitioners reported total income of $6,920 consisting of wages
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