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effort to collect under the default judgment rendered by
the State court, or the restitution ordered by the Federal
District Court. Colonial Bank has deducted the amount of
its loss for Federal income tax purposes.
Petitioners filed their joint 1989 income tax return
on or about August 3, 1992. There was attached to the
return a document entitled, "Disclosure Statement Under
Code Section 661 [sic] Schedule C, Line1 [sic]." That
document states as follows:
This return omits receipt of Income (Form
1099 from Colonial National Bank in the amount
of $886,069.00). 1989 [sic] under Code Section
108(a)(1), and as applicable, Sections 1017(a)
(1); 1017(2)(2) [sic], subsection (b)(2)(D) or
(b)(5) of Section 108.
The notice of deficiency issued to petitioners in this
case states as follows:
It is determined that since your income tax
return for the tax year 1989 was not filed
within the time prescribed by law and you have
not shown that the failure to file on time was
due to reasonable cause, twenty-five percent of
the tax is added as provided by section 6651(a)
of the Internal Revenue Code. * * *
* * * * * * *
Schedule 1-A
Explanation of Adjustments
A. It is determined that during the taxable
year 1989 you received taxable income of
$886,000.00 from Colonial National Bank
which was not reported on your income tax
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