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on whether petitioners, for the years ended 1984 through 1986,
and Mr. Gherman, for the year ended 1987, omitted from income an
amount equal to more than 25 percent of the gross income reported
on the returns. We turn now to that issue.
Unreported Income
Petitioners do not deny that Mr. Gherman embezzled money
from FIP's clients between 1982 and 1988, but they nevertheless
contend that Mr. Gherman did not receive any unreported income,
from any source, before calendar year 1988. Petitioners further
contend that Ms. Walters has never received any unreported
income. Petitioners maintain that respondent has failed to prove
unreported income for the years in issue because, they contend,
the schedules prepared for the 1988 bankruptcy, such as the Sweep
schedule, the family disbursements schedule, and other schedules
that indicate amounts purportedly owned by Ms. Walters and other
family members, and on which respondent relies to prove
unreported income, are not trustworthy.
Petitioners contend further that neither Mr. Gherman nor any
Gherman family member benefited from the CD scheme. Petitioners
maintain that the Sweep schedule reflects that only $100,000 was
payable to a Gherman family member (Ms. Walters). Petitioners
contend further that the family disbursements schedule shows that
some of the funds reflected on that schedule were used to pay
FIP's operating expenses while other funds were paid out as loans
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