C. Richard Roose, Jr. and Betty B. Roose - Page 2

                                        - 2 -                                         
                                       Additions to Tax                               
          Sec.        Sec.       Sec.            Sec.             Sec.                
          Year Deficiency 6653(b)(1) 6653(b)(2) 6653(b)(1)(A) 6653(b)(1)(B)6661(a)           
                                     1                                                
          1984 $50,374.00 $25,187.00      --               --      $12,593.50         
                                     2                                                
          1985  15,577.00   7,788.50      --               --      3,894.25           
                                                            3                         
          1986  24,752.00  --    --       $18,564.00               6,188.00           
               150 percent of the interest due on $50,374.                            
               250 percent of the interest due on $15,577.                            
               350 percent of the interest due on $24,752.                            
          Unless otherwise indicated, 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.                                                                  
               After concessions by both parties, we must decide whether              
          petitioners are liable for the additions to tax for fraud for               
          1984, 1985, and 1986; whether petitioners are liable for the                
          additions to tax for substantial understatement of liability for            
          1984 and 1986; and whether the statute of limitations bars the              
          assessment of deficiencies and additions to tax for 1984, 1985,             
          and 1986.                                                                   
                                  FINDINGS OF FACT                                    
               Petitioners C. Richard Roose (Mr. Roose) and Betty B. Roose            
          (Mrs. Roose) resided in Middlefield, Ohio, when their petition              
          was filed.  During the years in issue and at the time of trial,             
          petitioners were husband and wife.                                          
               Mr. Roose was a pharmacist at all relevant times.                      
          Mrs. Roose also attended pharmacy school but did not complete her           
          pharmacy degree.  As part of their pharmacy school course work,             




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