- 2 -
Fraud
Year Deficiency Penalty
1992 $18,087 $13,565
1993 15,653 11,740
1994 17,073 12,805
In respondent's answer, respondent alleged in the alterna-
tive, inter alia, that petitioners fraudulently and with intent
to evade tax understated their income tax liability for 1992,
1993, and 1994 in the amounts of $26,132, $30,201, and $39,712,
respectively.
The issues remaining for decision are:
(1) Do petitioners have unreported income reconstructed
under the bank deposits method for 1992, 1993, and 1994? We hold
that they do in the amounts of $73,233.69, $80,607, and $103,724,
respectively.2
(2) Are petitioners liable for the fraud penalty under
section 6663 for each of the years 1992, 1993, and 1994? We hold
that they are.
(3) Did the period of limitations for 1992 prescribed by
section 6501 expire? In light of our holding in (2) above, we
hold under section 6501(c)(1) that it did not.
2 During the trial in this case, the parties agreed that
petitioners have unreported income attributable to their personal
use of restaurant goods for each of the years at issue in the
amount of $2,600.
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