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business and, particularly, not to mention his name in
association with the business.
Okema Wells (Wells) assisted petitioner with the management
of Stardust from its inception. Wells was a friend of
petitioner. In 1989, she also began modeling for Stardust.
Petitioner instructed Wells to recreate the Stardust daily logs
by hand for 1988 and 1989. The 1988 logs were recreated in 1989,
and the 1989 logs were recreated in 1990. The log recreated for
1988 listed the time that every session occurred during the year
as "9:00-9:30", "3:00-3:30", or "6:00-6:30". All of the sessions
were listed as half-hour sessions, and there were no outcalls.
The log recreated for 1989 listed various times for the sessions
but omitted the comments. For 1989, all of the sessions were
recorded as half-hour sessions with the exception of two 1-hour
sessions in June. Neither the log recreated for 1988 nor the log
recreated for 1989 contained any record of a tip next to the
models' names.
Petitioner timely filed Forms 1040, U.S. Individual Income
Tax Returns, for the taxable years ended December 31, 1988, and
December 31, 1989. Petitioner claimed married filing separate as
his filing status on the 1988 and 1989 returns. He reported his
adjusted gross income as $1,193 and $9,123 for 1988 and 1989,
respectively. Petitioner received $7,920 in April 1988 as a
settlement on an insurance claim. Petitioner filed his Form 1040
for 1990 in October 1991. Petitioner claimed married filing
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