-7-
return, contending that he could not afford to pay the tax due
thereon because of financial difficulties.
The College offered as an employee benefit a matching pension
plan whereby it would match its employee's contribution up to 5
percent of the employee's salary. Mr. Marzullo participated in
this plan and had the matching contribution calculated on the
entire amount of his salary, not just on the amount paid to him as
salary and reported as such on his Form W-2. He determined his
total salary by adding the omitted income from the accounts payable
account to the amount paid directly to him as salary. But he did
not include as part of his salary the cost of medical benefits
received.
Mr. Marzullo listed the entire amount of his bifurcated salary
when applying for a loan. On April 29, 1986, Mr. and Mrs. Marzullo
signed a loan application in which it was stated that Mr.
Marzullo's annual salary was $60,000. On February 8, 1988, Mr. and
Mrs. Marzullo signed a loan application in which Mr. Marzullo's
gross monthly income was listed as $5,250 (which would total
$63,000 per year) and Mrs. Marzullo's gross monthly income was
listed as $3,666 (rounded) or $43,992 per year.
Form 1099
Patricia Grega, the College's director of computer services,
discovered that Mr. Marzullo was receiving payments from the
accounts payable account in August 1988, when auditors were doing
a fiscal year audit of the College. The business office was
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