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As of October 1990, at a time in which Mrs. Zaban was aware of
Mr. Zaban's gambling and bookmaking activities, Mrs. Zaban knew she
should not rely on Mr. Fidati to prepare their returns. Despite
this concern, Mrs. Zaban signed the 1989 and 1990 joint returns
without reviewing them.
G. Notice of Deficiency
Pursuant to a reconstruction of petitioners' income under the
net worth method, respondent determined that petitioners had
unreported income from illegal gambling and bookmaking activities
for 1986 through 1989 in the following amounts: $101,599.43 for
1986; $183,991.39 for 1987; $82,902.23 for 1988; and $255,623.58
for 1989. Petitioners concede that these figures are correct
except for the 1989 determination. The parties disagree whether
$115,100 in cash that existed in a safe deposit box on December 31,
1989, was attributable to petitioners.
Respondent further determined additions to tax for fraud for
1986 through 1988 and the fraud penalty for 1989 against Mrs.
Zaban, additions to tax for substantial understatement of tax for
1986, 1987, and 1988, an addition to tax for failure to timely file
the 1989 joint return, and an accuracy-related penalty for
substantial understatement of tax for 1990. As an alternative to
the fraud additions to tax and penalty, respondent determined
additions to tax for negligence or disregard of rules or
regulations for 1986 through 1988, and an accuracy-related penalty
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