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understatement for each of the years 1986 and 1987 was minimal.
Based on our findings, it is clear that the Michoff, Srs., did
substantially understate their Federal income tax. Respondent is
sustained to the extent, consistent with this opinion, there is
an underpayment attributable to such understatement for each of
the years 1986 and 1987.
Unreported Income--Michoff, Jr.
Revenue Agent Anita Russell conducted a bank deposits
analysis of the 1986, 1987, 1988, and 1989 tax years of Michoff,
Jr. Respondent additionally refers to the United States Bureau
of Labor Statistics (BLS) in order to determine petitioner's
unreported income for each of the years in issue. Based on this
analysis, respondent, after concessions, argues that Michoff,
Jr., had unreported income of $39,850, $29,879, $24,422, and
68,798 in the 1986, 1987, 1988, and 1989 tax years, respectively.
As a potential source for additional income, respondent argues
that Michoff, Jr., had a lucrative business selling drugs.
Michoff, Jr., was convicted of a felony in California for
possession of drugs for sale.
Deposits were made into the Michaels & Michaels Autobody
Shop's (the autobody shop) CapFed account in the amount of
$71,544 in the 1986 tax year. Michael Juarez testified that he
did not remember making deposits in this amount into the CapFed
account for the autobody shop in the 1986 tax year. The autobody
shop's CapFed account remained active through October of 1986,
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