Donald C. Richardson and Rita M. Allaire - Page 8

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               Also as part of the examination, the revenue agent conducted           
          a telephone interview with Wayne Catalano.  Catalano informed the           
          revenue agent that petitioner was present at the first                      
          consultation pertaining to the work to be done at the home.  He             
          also informed the revenue agent that petitioner was aware of the            
          circumstances surrounding the work and that petitioner delegated            
          the authority to proceed with the work to Paige.  The revenue               
          agent had also interviewed a former employee of PCCL.  This                 
          former employee specifically informed the revenue agent that                
          petitioners were aware of the payment arrangement for the home              
               During the interviews with the special agents, petitioner              
          admitted: (1) Making two sales of PCCL's inventory; (2) having              
          the checks made out in his name; (3) not reporting the income;              
          (4) using the funds for personal expenses; and (5) having made              
          these types of sales in the years 1990 through 1993, although               
          petitioner claimed to have split the income with Paige during               
          1993.  During the course of the investigation, respondent                   
          received evidence of a minimum of eight unreported sales made               
          payable to petitioner in 1993.                                              
               On August 19, 1996, petitioners' attorney, William Neilson             
          (Neilson), wrote a letter to a special agent involved with the              
          criminal investigation.  In the letter, Neilson questioned                  
          Paige's credibility and motives in contacting the IRS with these            
          allegations against petitioners and PCCL.  In addition, Neilson             

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