Lance Brown - Page 6

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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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