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M. Notice of Deficiency
Dorgeval investigated petitioners and Resyn from 1970 to at
least 1984. He prepared a series of reports of proposed
adjustments for Resyn and petitioners. He completed the last
report on March 14, 1984. That report was the basis for the
notice of deficiency in this case. Respondent mailed the notice
of deficiency on September 12, 1990. Petitioners and Zuckerman
signed consents to extend the time to assess tax for 1969 and
1970, which kept those years open until terminated.
Respondent determined that petitioners received constructive
dividends from Resyn from 1963 to 1970 by analyzing Resyn's
earned surplus for that period. Respondent determined that Resyn
paid checks for petitioners' benefit of $261,789 in 1967,
$431,593 in 1968, and $341,725 in 1969. Respondent deducted from
those amounts the increases to petitioner's loan account, salary
paid to petitioner, capital items, and additional business
expenses. Respondent determined that petitioners had unreported
income of $25,022 in 1967 and $41,245.21 in 1968 based on Resyn
checks used to pay petitioners' personal expenses. N.
Petitioners' 1963 Return
Petitioners timely filed their 1963 income tax return.
Respondent did not offer a copy of petitioners' 1963 return into
evidence. Respondent's revenue agent's report for 1963 states
that petitioners reported taxable income of $30,499.50 and that
petitioner's total tax was $9,656.63. Respondent had a copy of
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