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affidavits and exhibits, which are incorporated herein by this
reference.
Petitioner is an exotic dance club, whose address was
Westport, Massachusetts, at the time the petition in this case
was filed.
Background
Petitioner filed its Federal income tax returns using a
fiscal year ending on March 31. In April 1995, respondent began
an examination of petitioner's 1994 and 1995 corporate tax
returns. The examining revenue agent found that during these
years, petitioner had deducted cash payments made to many
individuals, including Henry Lauzon, Jr. (Lauzon, Jr.),
petitioner's president and sole shareholder, for which no Forms
W-2, Wage and Tax Statement, or Forms 1099-MISC, Miscellaneous
Income, had been issued. These cash payments totaled $644,743 in
1994 and $733,448 in 1995.
On July 16, 1995, January 30, 1996, July 12, 1996, and
September 18, 1997, the revenue agent sent petitioner information
document requests for documents that would substantiate that the
cash payments were corporate expenses. During the course of the
examination, the revenue agent and petitioner had several
meetings regarding the requested documentation.
Eventually, the revenue agent wrote a report on the disputed
items and proposed adjustments. In May 1997, petitioner
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