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deficiency and whether respondent "determined" a deficiency in
petitioners' Federal income tax liability within the meaning of
section 6212(a).2
Background
On or about June 25, 1979, Benness M. Richards and Jane
Richards filed a joint Federal income tax return for 1978
reporting adjusted gross income of $86,574, taxable income of
$11,975, and tax due of $3,495. In computing their taxable
income, petitioners claimed an interest deduction attributable to
their participation in certain programs managed by Henry
Kersting. Because petitioners' 1978 tax return is not part of
the record in this case, we are unable to determine the specific
amount of the interest deduction that petitioners claimed on
their return.
On January 22, 1981, following an undercover investigation,
the IRS searched Mr. Kersting's offices pursuant to a search
warrant issued by the U.S. District Court for the District of
Hawaii. Among the items seized during the search were lists
identifying, by name and address, approximately 1,800 of Mr.
Kersting's clients, and schedules showing the amounts of interest
purportedly paid by each client to one or more of several
Kersting companies during the taxable years 1977, 1978, and 1979.
2 Section references are to the Internal Revenue Code, as
amended. Unless otherwise indicated, rule references are to the
Tax Court Rules of Practice and Procedure.
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