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On March 29, 1991, Mr. Burke filed untimely Federal income
tax returns for 1985, 1986, and 1987. The returns reported tax
liabilities of $34,262, $4,359, and $4,557, respectively. The
returns also purported to be joint returns, and a signature
purporting to be that of petitioner appeared on each return.
Petitioner, individually, was not required to file a return of
her own for any of the years in issue. At the time Mr. Burke
filed the returns, petitioner was aware of the financial and
legal problems Mr. Burke had encountered during the taxable years
in issue. The returns in question were filed long after their
due dates, at which time petitioners were experiencing severe
marital difficulties.
On June 21, 1991, respondent sent a Letter 904(DO) to
petitioners at their home address in Setauket, New York. The
letter informed petitioners that their 1986 and 1987 Federal
income tax returns were under investigation and requested
information regarding a claimed theft loss and a small business
corporation (S corporation) loss, as well as copies of
petitioners' 1985 and 1988 Federal income tax returns.
In a letter dated June 28, 1991, Kenneth S. Silver, the
accountant for two insurance agencies owned by Mr. Burke (the
Burke Insurance Agencies), provided respondent with a Form 2848
(Power of Attorney and Declaration of Representative) and
confirmed a meeting with respondent for July 31, 1991. The power
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