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The Oakland boutique closed its doors in 1994. Another
boutique, which Special Occasions had opened in Baton Rouge,
Louisiana, in 1994, closed in 1997.
At the time of trial, petitioner was employed by the
Internal Revenue Service (IRS) as an acting Appeals officer.
Petitioner has been employed by the IRS since 1974 and has worked
at different times as a tax auditor, revenue agent, and technical
analyst.
Petitioner was told by her supervisors at the IRS that she
could not maintain the books and records of Special Occasions,
Special O, or Klyce "as a condition of [her] employment with the
IRS". The books and records of Special Occasions, Special O, and
Klyce were maintained by Linda Klyce. Although petitioner did
not maintain the books and records of either Special Occasions or
Special O, petitioner wrote most of the checks drawn from Special
Occasions and Special O's shared checking account at Wells Fargo
Bank.
Petitioner reported nonpassive losses from Special O on
Schedules E of her Federal income tax returns in the amounts of
$6,875,4 $8,345, and $13,777 for the 1991, 1992, and 1993 tax
years, respectively. Petitioner also reported nonpassive losses
4 Though petitioner reported 1991 losses from Special O in the
amount of $6,875 on her Federal income tax return, the parties
stipulated 1991 losses from Special O in the amount of $6,895.
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