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(5) Whether petitioners are liable for an addition to tax
under section 6661(a) for a substantial understatement of tax for
taxable year 1988. We hold that they are.
Background
Petitioners resided in New Orleans, Louisiana, at the time
the petition was filed. Petitioners timely filed their joint
Federal income tax returns for the years at issue. References to
petitioner in the singular are to Emmett I. Sindik.
Petitioner is the sole proprietor of an import-export
business. Petitioner has been in the business for more than 25
years acting as the middleman between U.S. and foreign importers
and exporters handling U.S. Customs duties, ocean freight fees,
and trucking fees. Petitioner essentially completes the
paperwork involved and charges a fee to his clients for this
service; he has no monetary interest in the cargo other than his
fee. Petitioner’s clients write checks payable to petitioner as
a customs broker for customs duties and various other fees.
Petitioner deposits these checks into his bank account and
subsequently issues checks to the appropriate agencies. Mrs.
Sindik did not participate in petitioner’s business or in the
preparation of their returns.
Petitioner failed to maintain complete and accurate records
of his income-producing activities and failed to produce complete
and accurate records to respondent in connection with the
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