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FINDINGS OF FACT
At the time the petition was filed, petitioner resided in
Sacramento, California. Petitioner did not file income tax
returns for her 1990, 1991, and 1992 taxable years and failed to
make estimated tax payments during these years.
Respondent mailed the notice of deficiency on February 18,
1998, for petitioner's 1990, 1991, and 1992 taxable years. Among
other things, respondent made adjustments to petitioner's income
by increases of $87,000 in 1990, $128,000 in 1991, and $153,000
in 1992. This was done by reconstructing petitioner's income
from available records.
During 1990, 1991, and 1992, petitioner operated a tax
preparation business known as Dixon Tax Returns as a sole
proprietorship. Petitioner also provided notary and property
management services.
Petitioner employed individuals to assist her in her
business--an office manager and tax return preparers. In the
notice of deficiency, respondent allowed business expense
deductions for wages paid to petitioner's employees in the
amounts of $4,000, $10,000, and $16,000 for the 1990, 1991, and
1992 taxable years, respectively.
On April 10, 1992, the United States executed a search
warrant of petitioner's business premises; approximately 60 boxes
of records were seized. The boxes included copies of
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