- 13 - On August 5, 1994, Susanna informed Clement's manager that petitioners had retained counsel. However, as of August 10, 1994, Clement had not received a power of attorney from petitioners, and he therefore could not discuss the Paus' tax matters with another individual. A power of attorney was not received until after Clement prepared the notice of deficiency and forwarded petitioners' file on August 10, 1994, to the office responsible for mailing such notices. The notice of deficiency was issued on August 11, 1994, and increased petitioners' Schedule C income for 1990 by $545,000 each, for a combined increase in their taxable income of $1,090,000, as a result of the $840,000 income from Sanrio and the $250,000 commission from the sale of the Stockton Street property. (That commission had in fact been reported.) Respondent also disallowed a total of $334,073 in Schedule C expenses and $132,261 in itemized deductions. Clement learned of Susanna's $150,000 consultation fee only after receiving a copy of the canceled check pursuant to the summons served upon the Bank of America. Neither Susanna nor petitioner explained to Clement why they had not reported the consultation fee on their return. After Clement notified petitioners of the audit, petitioner prepared a bank deposits analysis to show the transfer of funds between and among petitioners' various accounts. Petitioner didPage: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Next
Last modified: May 25, 2011