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account had been transferred during December 1986 from an account
with Prudential-Bache in Ms. Walters' name. Justice For All Inc.
was a Florida corporation formed by Mr. Gherman to hold funds in
brokerage accounts and to hold cash in bank accounts.
Tax Returns for the Years in Issue
Petitioners filed joint Federal income tax returns for tax
years ended 1984, 1985, and 1986. The returns were prepared by
or under the supervision of Ronnie Thaw (Mr. Thaw), a certified
public accountant (C.P.A.), who had prepared tax returns for
petitioners since the 1970's. The joint return for tax year
ended 1984 was filed on August 19, 1985. The joint return for
tax year ended 1985 was filed on August 15, 1986. The joint
return for tax year ended 1986 was filed on September 21, 1987.
Mr. Thaw relied on FIP's books and records to prepare
petitioners' joint income tax returns for the years ended 1984
through 1986. Petitioners did not engage Mr. Thaw to verify the
books or to perform a certified audit, and he did not perform
those services. When the joint tax returns were prepared for tax
years ended 1984 through 1986, Mr. Thaw was not aware of the CD
scheme. Mr. Thaw did not include in income on those joint tax
returns any moneys charged on FIP's books and records as loans to
either Ms. Walters or Mr. Gherman. After the returns were
prepared by their accountant, Mr. Gherman had the returns
reviewed by petitioners' tax attorneys before petitioners signed
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