- 11 -11
The 1990 return reported gross income before adjustments of $5,791.
Petitioners never filed amended returns.
Mrs. Taylor knew that petitioners had not filed tax returns
for the years in issue. In January 1992, when she signed the
delinquent returns, Mrs. Taylor knew about the existence of
petitioner's check-kiting scheme. She also knew about the
grocery/convenience store business but never questioned why income
from that business was not reported on the delinquent returns.
Notice of Deficiency
In the notice of deficiency, respondent determined unreported
net income from the grocery/convenience store business through an
analysis of the bank deposits, ledger notations, Department of
Treasury statistics, and industry guidelines. The unreported net
income was determined to be $72,919 for 1988, $102,370 for 1989,
and $87,877 for 1990. Respondent further determined petitioners
had unreported income in 1988 from petitioner's check-kiting scheme
in the amount of $300,698.5
Respondent determined that petitioners were liable for the
fraud addition to tax for 1988, or in the event respondent's fraud
determination is not sustained, an addition to tax for negligence
or disregard of rules or regulations, an addition to tax for
substantial understatement of tax, and an addition to tax for
failure to timely file a Federal tax return. For 1989 and 1990,
5 See supra note 2.
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