- 17 -
Mr. Collins testified that he did not ask either Mr. Bacon
or Mrs. Bacon whether the $319,109 entry on the June 30, 1989,
balance sheet was a loan payable to Mrs. Bacon. Furthermore, Mr.
Collins testified that he did not see any documents that would
indicate that the corporation owed Mrs. Bacon $319,109.18
Petitioners did not provide corporate minutes, loan documents,
promissory notes, mortgage documents, or other documents that
would substantiate their assertion.
Mr. O’Malley, petitioners’new C.P.A., testified that he does
not know how Mr. Collins arrived at the loan payable figures that
appeared on Radtam’s Federal income tax return for the fiscal
year ending June 30, 1989. Mr. O’Malley also testified that he
could not obtain any information about the loans payable account.
Radtam’s Federal income tax returns for the fiscal years
ending 1990, 1991, and 1992, were all filed in June of 1996.19
18Although he never asked petitioners about this, Mr.
Collins testified that he thought the $319,109 was rent that
Radtam owed Mrs. Bacon. If that were true, payments of rental
amounts due from prior years would appear to be income to Mrs.
Bacon in the year received.
19Mr. Collins testified that Radtam’s Federal income tax
returns were not prepared or filed timely because details
regarding cash disbursements were not available. Each of these
income tax returns contained a Form 8275, Disclosure Statement.
The instructions to Form 8275 provide:
Form 8275 is used by taxpayers and income tax return
preparers to disclose items or positions, except those
taken contrary to a regulation, that are not otherwise
adequately disclosed on a tax return for purposes of
avoiding certain penalties. The form is filed to avoid
the portions of the accuracy-related penalty due to
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