J.J. Zand - Page 43

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          partnership, was converted to a corporate form.  In the course of           
          that change, petitioner was paid 11,750,000 rials and decreased             
          his ownership share of Diesel Power to less than 50 percent.4  On           
          his original and amended income tax returns for 1974, 1975, and             
          1976, petitioner did not report disposition of any interest in              
          Diesel Power.  Petitioner, Mr. Khalatbari, and Diana Khalatbari             
          were directors of Diesel Power during the years at issue.                   
          Petitioner's brother, I.J. Zand, was also employed by Diesel                
          Power from 1971 to 1976 as parts director and sales director.               
          From 1971 to 1976 petitioner owned the land on which the shops,             
          offices, and warehouse of Diesel Power were located, but he did             
          not report any rental income therefrom on his 1972, 1973, and               
          1974 returns.  Petitioner sold this land to Diesel Power in 1976            
          and reported the gain therefrom.                                            
                              C. Audits for Prior Years                               
               Respondent made adjustments to petitioner's 1958 income for            
          unreported commissions.  The 1958 notice of deficiency indicated            
          that 40 percent of the commissions earned for two of the items              
          and 10 percent for one item constituted additional commission               
          income.  Petitioner's Federal income tax returns for the years              
          1959 to 1961 were also audited.  His income for those years was             
          increased for omitted commissions, again at the 40 percent and 10           
          percent rates.                                                              

          4 It appears that petitioner's ownership of Diesel Power was 49 percent.    




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