-20-
contends that Mr. Marzullo established the account in order to
receive part of his taxable income tax free. Further, respondent
contends that the only difference between 1986 and the later years
is that some college checks were used to pay Mr. Marzullo's
personal credit card bills in 1987 and 1988.
Payments Mr. Marzullo received from the account in all 3 years
were falsely claimed to be for such things as "car allowance". Mr.
Marzullo is an experienced accountant. He established the accounts
payable account so that a portion of his salary would not be
reported to the IRS. On the other hand, he reported his full
salary on loan applications and used the entire amount when
calculating matching contributions for his pension. He knew these
amounts were taxable but rationalized his actions by focusing on
the unfairness he perceived because his sons could not take
advantage of the tuition waiver as could daughters of other
employees. We conclude that respondent has established by clear
and convincing evidence that Mr. Marzullo committed fraud on
petitioners' 1986 tax return. Accordingly, he is liable for the
fraud additions to tax for 1986, as well as 1987 and 1988.
To reflect the foregoing and petitioners' concessions,
Decision will be entered
under Rule 155.
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