John J. Maloney and Mary Frances Maloney - Page 5

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                        In violation of Title 26, United States Code,                                   
                  Section 7206(1).                                                                      
                  Count 3:  THE GRAND JURY FURTHER CHARGES THAT:  On or                                 
                  about June 27, 1987 * * * John J. Maloney * * * did                                   
                  willfully make and subscribe an amended federal income                                
                  tax return for the year 1986, * * * which tax return he                               
                  did not believe to be true and correct as to every                                    
                  material matter in that the return stated that his                                    
                  taxable income for this year was $167,461 when in fact                                
                  and as he then well knew, his taxable income was                                      
                  $239,418.                                                                             
                        In violation of Title 26, United States Code,                                   
                  Section 7206(1).                                                                      
            A jury returned a verdict of guilty with respect to both of the                             
            above counts, and in September of 1992 judgment was entered and                             
            Mr. Maloney was sentenced.  Mr. Butler pleaded guilty to three                              
            counts of violating section 7206(2) (assisting the false filing                             
            of a return) and one count of violating 18 U.S.C. 371 (conspiracy                           
            to defraud the Government).  On January 22, 1996, respondent                                
            issued the notice of deficiency that petitioners now contest.                               
                                               OPINION                                                  
                  Section 6501(a) provides that, generally, the amount of any                           
            tax must be assessed within 3 years of the filing of a return.                              
            Section 6501(c)(1), however, provides that if the taxpayer files                            
            a false or fraudulent return with the intent to evade tax, the                              
            amount of the tax due may be assessed at any time.  Respondent                              
            concedes that the notice of deficiency was issued after the                                 
            expiration of the 3-year period but contends that petitioners                               
            filed false or fraudulent original and amended returns and,                                 
            therefore, assessment is not barred.                                                        




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