Robert E. Iles and Monica M. Iles - Page 1

                                 T.C. Memo. 1998-337                                  

                               UNITED STATES TAX COURT                                

                  ROBERT E. ILES and MONICA M. ILES, Petitioners v.                   
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 38917-87.               Filed September 22, 1998.           

                    Petitioners (Ps) were (1) trustees for several trusts             
               and (2) principal owners of numerous business entities, some           
               of which were incorporated.  The business entities provided            
               financial and tax planning services.  Many of the trusts               
               held money that people invested in the tax shelters that Ps’           
               businesses offered.  During the years in issue, Ps caused              
               many of the trusts and some of the business entities to                
               write checks directly to Ps or to third parties on Ps’                 
               behalf to pay for Ps’ investments and personal expenses.  By           
               amendment to answer, respondent asserted Ps had omitted                
               additional items of income.  Ps did not timely file tax                
               returns for 1980, 1981, or 1982.  When those returns were              
               finally filed, Ps did not report as income most of the                 
               payments those entities made to Ps or to third parties on              
               Ps’ behalf.  Petitioner husband (H) was the driving force,             
               with petitioner wife (W) providing computer and accounting             
               skills to their joint activities.  Respondent and W filed a            
               Stipulation of Settled Issues which conditionally disposed             
               of all issues concerning W’s liabilities in this case.                 
                    1.  Held:  Ps had substantial underpayment for 1980,              
               1981, and 1982.  Sec. 6653(c)(1), I.R.C. 1954.                         

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