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E. Audit of Petitioners' Returns
Revenue Agent Kathy Sexton (Sexton) began examining
petitioners' 1987, 1988, and 1989 returns in July 1990. Sexton
asked petitioner to substantiate the capital gains petitioners
reported on their 1988 and 1989 returns and to provide a schedule
showing the number of shares of original One Price stock
petitioners owned on January 1, 1987; the date of purchase,
number, and purchase price of shares they bought in 1987, 1988,
and 1989; all stock splits in 1987, 1988, and 1989; and
petitioners’ computation of per share costs. Petitioner sent
Sexton a letter and memorandum and gave her boxes of documents
about OPCS in response to her document request. The record does
not show specifically what records petitioner gave to Sexton.
Petitioner told Sexton that he reported the basis of the
OPCS stock based on how much petitioner had paid for it. He gave
her some, but not all, of the basis information she requested.
She could not compute petitioner’s basis because, for example, he
did not mention the September 30, 1987, stock split. Sexton and
Delk met several times in 1990 and 1991. Delk showed Sexton
petitioner’s tax organizers.
F. Petitioner's Criminal Case
On August 27, 1992, petitioner pleaded guilty to two counts
of violating section 7203 (willful failure to file a return,
supply information, or pay tax) (a misdemeanor). Petitioner
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