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Respondent's basis in fact for determining that the decedent
and Mrs. Spear were liable for the addition to tax for fraud for
1975, 1976 and 1977 when the notice of deficiency was issued was:
(a) During the years in issue, the decedent and Mrs. Spear had
unexplained increases in net worth and inadequate records of
their cash transactions; (b) the decedent and Mrs. Spear failed
to supply complete information to their return preparer; (c) the
decedent and Mrs. Spear deducted the rent for their son's
apartment as a corporate expense; (d) the decedent and Mrs. Spear
used corporate funds for their personal benefit and did not
report them as income; (e) the decedent and Mrs. Spear dealt in
cash and had the opportunity to skim it without reporting it; (f)
the decedent and Mrs. Spear had an unlikely explanation about the
source of a claimed cash hoard; and (g) the decedent and Mrs.
Spear destroyed records of their cash receipts.
3. Petitioners’ Contentions
Petitioners contend that respondent's investigation was
deficient. For example, petitioners contend that respondent's
agents should have asked the decedent and Mrs. Spear about the
contents of the safe deposit boxes but only asked about cash in
their home. Petitioners also contend that the decedent and Mrs.
Spear kept cash in their safe deposit boxes and that the position
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