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underpayment and the taxpayer acted in good faith with respect to
such portion. Sec. 6664(c)(1). The determination of whether the
taxpayer acted with reasonable cause and in good faith depends
upon the pertinent facts and circumstances. Sec. 1.6664-4(b)(1),
Income Tax Regs.
Petitioner husband is an experienced businessman who devised
a bewildering payment system between two related corporations
which he controlled. Eastimpex admitted that its purpose in
using the two-tier payment system was to help Shin conceal income
from the Taiwanese Government. Eastimpex also used the payment
system to increase the amount it claimed as the cost of goods
sold knowing that it would be unable to substantiate the
deposited amounts. In addition, individual petitioners used the
two-tier payment system to divert funds to their relatives. We
find that individual petitioners and Eastimpex acted negligently
and without substantial authority with regard to the deposited
amounts and are liable for the above additions to tax and penalty
as determined by respondent.
In addition to the additions to tax and penalty with respect
to the issues involving the deposited amounts, respondent also
determined additions to tax against individual petitioners under
section 6653(a)(1)(A) and (B) for 1987, under section 6653(a)(1)
for 1988, and under section 6661 for 1987 and 1988 attributable
to their omission of interest income from the Standard Chartered
account from their tax returns. Failure to report large amounts
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