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Respondent determined the following deficiencies in and
additions to petitioner's Federal income taxes:
Additions to Tax and Penalties
Year Deficiency Sec. 6653(b)(1)1 Sec. 6654 Sec. 6661
1982 $6,918 $3,459 $656 $1,730
1983 53,455 26,728 3,271 13,364
1984 41,584 20,792 2,614 10,396
1 Plus 50 percent of the interest on the deficiency under
section 6653(b)(2).
Petitioner resided in East Dublin, Georgia, at the time she
filed the petition in the instant case. In the answer,
respondent denied all substantive allegations of fact and error
contained in the petition and affirmatively alleged the following
facts:
6. FURTHER ANSWERING the petition and in support
of respondent's determination that the underpayment of
tax required to be shown on the petitioner's federal
income tax returns for each of the taxable years 1982,
1983, and 1984 is due to fraud, the respondent alleges:
(a) From at least January of 1981 through October
of 1985, the petitioner operated, as a sole proprietorship,
a retail store in Las Vegas, Nevada known variously as
"Linda Palmer Designs," "Mill Direct Carpets," and "Mill
Direct Carpet and Furniture."
(b) The business referred to in subparagraph 6.(a)
above was primarily engaged in the retail sale of carpeting
and other floor coverings, though the business also sold
draperies and wall coverings.
(c) During all relevant periods, the petitioner
was solely responsible for maintaining all books and records
of the business referred to in subparagraph 6.(a) above.
(d) On or about April 15, 1983, the petitioner,
with her husband Wayne E. Palmer (since deceased), filed a
joint federal income tax return (Form 1040) for the 1982
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