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carried on real estate rental activities through a variety of
passthrough entities. The Federal income tax returns of
individuals involved in these ventures reported the income or
loss therefrom on Schedules E. Dividends from these entities, as
well as from Deitsch Sales, were reflected as “Dividend income”
on their Forms 1040 and the accompanying Schedules B.
The Preparation and Examination of the Deitsch Returns
The combined financial statements and the tax returns for
DPC, DPP, Deitsch Sales, and various real estate entities were
prepared by the accounting firm of Weinstein & Anastasio, P.C.
The tax returns here at issue of individual members of the
Deitsch family were also prepared by the firm. Anthony
Valentino, a certified public accountant, has been petitioners’
primary accountant at the firm since the mid-1980’s. The
financial statements and tax returns for FIL were prepared by
petitioners’ accountant in Israel, Itzhak Timor.
For purposes of preparing these documents, Mr. Valentino was
given access to the records for the Deitsch entities kept at the
corporate facility in West Haven. The individual family members,
although they did not typically fill out the annual questionnaire
sent by the accounting firm, would provide original data such as
Forms W-2 and Forms 1099. Information regarding the payments
from FIL was obtained from the FIL financial statements sent to
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