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deficiency for 1989, Baker reduced from $16,511 to $9,845 the
amount of personal expenditures contained in the 1989 criminal
net worth computation3 and disallowed the $6,000 personal
exemption that had been allowed in the criminal net worth
computation. The net result of these two changes was a decrease
in the amount of petitioner husband’s unreported income. In
drafting the notice of deficiency for 1990, Baker increased by
$12,421 the offset allowed for income reported on the return, but
omitted the $27,412 of “deductions”–-comprising $12,356 for
petitioner wife’s wages, $6,856 for petitioners’ settlement of
their injury claims from the automobile accident, and $8,200 for
personal exemptions–-that had been allowed in the criminal net
worth computation, resulting in an increase in the amount of
petitioner husband’s unreported income.4
3 The record does not reveal the basis upon which Baker
determined this lesser amount of personal expenditures.
4 The net worth analyses included in the 1989 and 1990
statutory notices of deficiency were as follows:
Particulars 12/31/89
Understatement of income $14,690
Total assets $7,445
Less: Total liabilities (2,600)
Net worth 4,845
Less: Prior years net worth ( -0-)
Increases in net worth 4,845
Plus: Expenditures 9,845
Understatement of income 14,690
(Increase in net worth ======
plus expenditures)
(continued...)
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