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Unless otherwise indicated, all section references are to the
Internal Revenue Code in effect for the years in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure.
After concessions, the issues for decision are: (1) Whether
petitioner had unreported income in 1988 and 1989; (2) whether
petitioner is liable for the addition to tax and penalty for
fraud in 1988 and 1989, respectively, or, in the alternative,
liable for the addition to tax and penalty for negligence; and
(3) whether the period of limitations for assessment is open for
1988 under section 6501(c)(1) or, in the alternative, open under
section 6501(e)(1)(A).
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Included among the stipulated exhibits is the transcript of
petitioner's criminal trial. At the time the petition was filed,
petitioner was incarcerated at the California Correctional
Institution in Tehachipi, California.
Petitioner started a business known as the Stardust Modeling
Agency (Stardust) in 1987. Petitioner opened a bank account for
Stardust, purchased furniture for Stardust, and signed the lease
for Stardust. Petitioner operated Stardust from the end of 1987
into mid-1991. The hours of operation of Stardust were Monday
through Saturday, 10 a.m. to 10 p.m. During 1988 and 1989,
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