AJF Transportation Consultants, Inc. - Page 9




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          Ferrentino's Guilty Plea to Filing a False Tax Return                       
               On April 13, 1995, Ferrentino pleaded guilty to a one count            
          information charging him with willfully making and subscribing to           
          a false and fictitious U.S. income tax return for the year 1988             
          in violation of section 7206(1).  On January 29, 1996, Ferrentino           
          filed Forms 1040X, Amended U.S. Individual Income Tax Return, for           
          the taxable years 1988, 1989, and 1990, which reported additional           
          income in the amounts of $30,975, $28,870, and $32,572,                     
          respectively.                                                               
          Respondent Issued Notices of Deficiency After the 3-Year Period             
          of Limitations on Assessment Had Expired                                    
               Ferrentino filed timely tax returns for the 1988, 1989, and            
          1990 taxable years.  AJF, on the other hand, filed its tax                  
          returns late.  AJF filed its 1988 and 1989 tax returns on May 10,           
          1991, and its 1990 return on July 17, 1991.                                 
               Respondent mailed notices of deficiency on August 13, 1996,            
          with respect to petitioners' 1988, 1989, and 1990 income tax                
          returns.  The general 3-year period of limitations on assessment            
          under section 6501(a) expired before the issuance of the notices            
          of deficiency in these consolidated cases.                                  
          Circumstances Surrounding the Late Filing of AJF's Tax Returns              
               John Witkowski, C.P.A. (Witkowski), prepared AJF's tax                 
          returns during the years in issue.  When preparing the returns,             
          Witkowski relied on AJF's books and records, which included                 
          receipts journals, disbursement journals, payroll records, and              
          bank reconciliations.  Witkowski determined AJF's gross income              


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