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Forms W-2 relating to, his wages. CPC employed Mrs. Drozdowski
in 1988, 1989, and 1990. At Mrs. Drozdowski's request, CPC
withheld taxes from, and issued Forms W-2 relating to, her wages.
During 1990, CPC was purchased by Continental Card Acquisition
(CCA). CCA employed Mr. Drozdowski for the remainder of 1990,
withheld taxes from his wages, and issued him a 1990 Form W-2.
On their income tax returns for the years in issue, petitioners
reported Mrs. Drozdowski's wages from CPC and Mr. Drozdowski's
wages from CCA but did not report Mr. Drozdowski's wages from
CPC.
In March 1994, Mr. Drozdowski was charged, pursuant to section
7201, with evading income tax relating to 1989. Mr. Drozdowski
pleaded guilty to the charge, was sentenced to 3 years'
probation, and was ordered to pay a fine and restitution.
Pursuant to the plea agreement, petitioners amended their tax
returns for the years in issue to report Mr. Drozdowski's wages
from CPC.
OPINION
Respondent determined that petitioners failed to report Mr.
Drozdowski's wages from CPC for 1987, 1988, 1989, and 1990.
Petitioners concede that they failed to report Mr. Drozdowski's
wages from CPC for the years in issue but contend that the
payments Mr. Drozdowski received were net of income tax
withholdings. In effect, petitioners contend that the amount of
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