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petitioner's Federal income taxes, and additions to tax for
fraud, for petitioner's tax years ended September 30:
Additions to Tax
Sec. Sec. Sec.
Year Deficiency 6653(b)(1)(A) 6653(b)(1)(B) 6653(b)
1988 $247,112 $185,334 1 --
1989 195,154 -- -- $139,746
1 50 percent of the interest due on $247,112.
All section references are to the Internal Revenue Code in
effect for the taxable years in issue, and all Rule references
are to the Tax Court Rules of Practice and Procedure, unless
otherwise indicated.
At the time the petition in this case was filed by D.J.
Marino, an officer of petitioner, petitioner's office was located
in Cleveland, Ohio.
Background
The petition filed in this case generally disputed
respondent's adjustments to petitioner's income. Respondent's
answer denied the material allegations of the petition and
further alleged:
6. FURTHER ANSWERING the petition, and in support
of the determination that the underpayments of tax
required to be shown on petitioner's tax returns for
the tax years ending September 30, 1988, and September
30, 1989, are due to fraud, the respondent alleges:
(a) Donald J. Marino was the president and major
shareholder of, and had direct control over, petitioner
during the years at issue.
(b) Petitioner paid certain personal expenses of
Donald J. Marino and his family.
(c) On December 22, 1987, petitioner's president
Donald J. Marino purchased a diamond necklace, diamond
tennis bracelet, and two sets of diamond earrings from
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