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B. Dallas Executive Couriers
In early 1989, petitioner decided to establish a courier
business. To obtain the necessary financing, petitioner
persuaded Mr. Franz on March 23, 1989, to sign a letter of
credit. A letter for ‹60,000 was issued by the Isle of Man Bank
and was secured by the Showwalter pension plan. On April 19,
1989, petitioner incorporated under Texas law Dallas Executive
Couriers, Inc. (Executive Couriers). Executive Couriers operated
out of petitioner's office at Hercules & Lavery. Hercules &
Lavery used, and paid petitioner compensation for, Executive
Courier's services during 1989. On October 17, 1990, Executive
Couriers forfeited its right to conduct business in Texas,
because it failed to pay Texas franchise taxes. Its corporate
charter was subsequently revoked on June 17, 1991.
III. Respondent's Investigation and Determinations
After petitioner was convicted of misappropriating Ms.
Boals' money, the Dallas district attorney's office notified the
IRS of petitioner's conviction and informed it that petitioner
may not have reported the misappropriated funds on his Federal
income tax returns. The IRS assigned petitioner's case to
Revenue Agent Jesse Luna. Agent Luna obtained court records from
the Dallas district attorney's office. Based on these records,
Agent Luna determined that petitioner had unreported income of
$74,000 and $110,000 in 1988 and 1989, respectively.
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