Patricia G. McCulley - Page 2

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                            Additions to Tax                                         
          Year  Deficiency   Sec. 6653(b)(1)1   Sec. 6653(b)(2)   Sec. 6661           
          1984  $13,599      $  6,780        *              $  3,390                  
          1985   11,358         5,679             *              2,840                
          * 50 percent of the interest due on the deficiency in tax                   
               After concessions by the parties, the sole issue for                   
          decision is whether petitioner, who failed to report embezzlement           
          income, is liable for additions to tax for fraud.  We hold she is           
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and, with one                   
          exception, are so found.  The stipulated facts and the                      
          accompanying exhibits are incorporated into our findings by this            
          reference.  Petitioner resided in Duluth, Georgia, at the time of           
          filing her petition in this case.                                           
               For the taxable years 1984 and 1985, petitioner timely filed           
          Federal income tax returns, Forms 1040, as a head of household,             
          and as married filing jointly, respectively.2  On her tax returns           
          for 1984 and 1985, petitioner reported total income of $14,972              
          and $109,356, respectively.  Respondent determined deficiencies             

          1    All section references are to the Internal Revenue Code in             
          effect for the taxable years in issue, and all Rule references              
          are to the Tax Court Rules of Practice and Procedure, unless                
          otherwise indicated.  All dollar amounts are rounded to the                 
          nearest dollar, unless otherwise indicated.                                 
          2    In February of 1985, petitioner married her second husband,            
          Byron K. Griffith, and the couple filed a joint return for that             

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