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receipts that were not deposited into the corporate account, nor
did the Zamzams report as income the amounts diverted to their
personal use.
During the years in issue, ZMDI subleased to Tri-City
Opticians (Tri-City) part of the building it occupied for $6,600
per year. Tri-City paid both the rent and its portion of the
utility bill directly to ZMDI. ZMDI deducted all of the lease
and utility payments but did not report Tri-City’s payments as
income. In addition, ZMDI claimed deductions for a variety of
expenses in 1991 through 1994 that exceeded ZMDI’s payments.
In 1992, respondent began an examination of ZMDI’s returns.
In 1993, during an examination of the Zamzams’ personal returns,
respondent discovered the unreported personal income and
corporate receipts. The Zamzams’ failure to explain the deposits
to their personal account led to a criminal investigation.
During the course of respondent’s examinations and the
criminal investigation, the Zamzams made numerous false
statements to respondent’s agents, including statements that all
money in their personal account had been taxed; all corporate
receipts were deposited into the corporate account; and they did
not have foreign investments or bank accounts.
The Zamzams were indicted and convicted, pursuant to section
7201, of tax evasion relating to their 1990 through 1994 personal
returns. In addition, Mrs. Zamzam was indicted and convicted,
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Last modified: May 25, 2011