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Mr. Kelly entertained business associates at restaurants,
Mrs. Kelly sometimes accompanied him. On these occasions she and
other women present would carry on their own conversations. At
Mr. Kelly's request, Mrs. Kelly sometimes assisted him in
maintaining records of the entertainment expenses for purposes of
reimbursement.
Mrs. Kelly took no part in the preparation of the joint tax
returns for the years at issue. Each of the returns was prepared
and signed by the accountant, and then delivered to petitioners
for their review. Mrs. Kelly signed the returns without review
or inquiry. Mrs. Kelly made no attempt to inform herself of
their contents because she trusted Mr. Kelly completely, not
because he in any way hindered or discouraged her from doing so.
She endorsed the refund checks they received, but neither asked
nor cared what Mr. Kelly would do with the money.
In 1989 Mrs. Kelly learned that Mr. Kelly was in a
controversy with the Internal Revenue Service. She signed a
power of attorney to authorize lawyers to represent them in
administrative proceedings. Mr. Kelly did not show her any
correspondence with the lawyers regarding the nature of the
controversy, and she remained ignorant of the details until after
the years at issue.
Petitioners experienced no marked changes in their lifestyle
during or after the years at issue. Mrs. Kelly received no
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