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transferred in 1982 into the offshore trusts was reflected as
taxable income to petitioners.
On September 14, 1983, Howard gave petitioners the proposed
amended 1982 return. Petitioners, however, refused to sign the
proposed amended 1982 return, and Rachel tore it in two, stating,
"We'll wait until * * * [respondent] catches us."
On petitioners' 1983 joint Federal income tax return that
was timely filed with respondent, neither the $174,308
transferred out of CCMI through the offshore trusts and into the
Alpha account, nor the $184,630 withdrawn in 1983 from the Alpha
account and used by petitioners to purchase the Oyster Pond
Property was reported as income by petitioners. On petitioners'
1983 Federal income tax return, petitioners did report as
miscellaneous income $21,058 relating to their personal use of
CCMI funds. This amount was not otherwise described.
On CCMI's 1983 Federal corporate income tax return, $3,158
in interest income earned on the Alpha account in 1983 was
reported as interest income.
On November 24, 1984, Howard, as trustee for Alpha, and
without consideration, signed a reconveyance deed transferring
Alpha's purported security interest in the Oyster Pond Property
from Alpha to petitioners.
On April 10, 1991, a Federal Grand Jury indicted petitioners
for conspiracy to defraud the United States during 1981 through
1986 with regard to petitioners' joint individual and CCMI's
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