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On February 10, 1989, petitioner provided respondent’s
revenue agent with a schedule on which petitioner indicated that
he received $31,503 in total commissions and fees in 1987.
As indicated above, petitioner actually received in 1987 a
total of $37,166 in commissions and fees.
By March of 1989, respondent’s revenue agent believed that
firm evidence of fraud had been established with respect to
petitioner's 1986 and 1987 Federal income tax returns, and on
March 13, 1989, the revenue agent made a fraud referral to
respondent’s Criminal Investigation Division.
On March 19, 1992, petitioner was criminally indicted on two
counts of willfully filing false Federal income tax returns for
1986 and 1987. On April 28, 1992, based upon his guilty plea,
petitioner was convicted under section 7206(1) of willfully
filing a false 1987 Federal income tax return. In exchange for
his guilty plea, the United States agreed to dismiss the other
count of the indictment relating to petitioner’s 1986 Federal
income tax return.
Prior to trial herein, petitioner and respondent agreed that
for 1986 and 1987, petitioner is liable for income tax
deficiencies of $6,247 and $5,638, respectively, and additions to
tax for substantial understatements of income tax under section
6661(a) for 1986 of $1,501.
The following table sets forth petitioner's gross income as
reported on petitioner's original 1986 and 1987 Federal income
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