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source of this income in a statement attached to their 1991 return.
Abatement Letters
The Internal Revenue Service (IRS) assessed taxes, interest,
and late payment additions with regard to petitioners' 1991 tax
year. In a February 1, 1995, "Transmission of Payment and Request
for Abatement of Penalties", petitioners requested abatement of the
$9,169.88 in late filing addition. On March 8, 1995, the IRS
notified petitioners that it had abated the late filing addition.
Notice of Deficiency
In the notice of deficiency respondent determined that
petitioners realized $212,000 of income, rather than $106,000 as
reported on their 1991 return. Accordingly, respondent increased
petitioners' 1991 taxable income by $106,000. Respondent also
determined that petitioners were liable for a section 6651(a)(1)
addition to tax and a section 6662(a) accuracy-related penalty for
1991.
OPINION
The primary issue is factual: whether petitioners had
$106,000 of unreported income in 1991 arising from currency found
in a cooler in petitioners' garage during the October 25, 1991,
search and seizure. Petitioners claim that $106,000 of the
$201,034 found in the cooler was not their money and therefore is
not includable in their 1991 income. Respondent, on the other
hand, contends that ownership of the funds is irrelevant; rather,
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