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JJH’s return were accurate. This double counting of income was
of no consequence to petitioner since he managed to manipulate
the numbers on all returns to the point where there was little to
no taxable income.
Petitioner intentionally mischaracterized items of income on
his 1994 return. He reported total income of $31,500, comprising
$1,000 Schedule C income, $10,000 rent income, $3,000 capital
gain income and $17,500 as income from a covenant not to compete.
At trial, he admitted these categories were all concocted,
stating: “I don't mind giving you [IRS] the elbow, but I'm not
going to lie to him [the Court]”. Petitioner mischaracterized
his income to avoid self-employment tax and to deter the Service
from discovering unreported income related to JJH. Petitioner’s
lack of candor was prevalent throughout the discovery process and
trial.12
Petitioner filed a separate return to avoid payment of taxes
on the unreported income in the event he got caught.13
12By interrogatory, respondent asked why JJH paid the
University of Central Florida, and petitioner stated the payments
were for “equipment rental”. When questioned on cross-
examination about why JJH paid petitioner’s personal living
expenses, petitioner stated: “I've got to live somewhere".
13Charlene did not file and testified that she bought her
husband out of JJH and took his name off everything including the
CCA signature card because of the IRS collection activity. In
avoiding the joint and several liability of a joint return,
petitioner hoped to remain free to transfer assets and income to
Charlene to frustrate the Service’s collection activities.
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