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as a certified public accountant since that time. At the time he
prepared petitioner’s 1986 return, Mr. Norris worked for the
accounting firm of Porterfield & Co., C.P.A.s, located in
Sacramento, California.6 In connection with his preparation of
petitioner’s 1986 tax return, Mr. Norris received a package of
information from petitioner’s office consisting of Schedules K-17
and other various schedules necessary to prepare petitioner’s
individual return, including the schedule prepared by Peat
Marwick.
In the fall of 1988, Mr. Norris was contacted by Mike Shaw
(Mr. Shaw), an attorney representing Mr. Norris at the time,
concerning an omission of income on petitioner’s 1986 return. As
a result, Mr. Norris learned that petitioner had failed to
include $4,170,1858 of taxable income from gain realized by
petitioner from the purchase and sale of Hammermill stock. Mr.
Norris informed petitioner of this. Mr. Shaw was alerted to the
omission of income on petitioner’s 1986 return by an agent of the
Federal Government.
6At the time of trial, Mr. Norris resided in California.
7A Schedule K-1 is a schedule attached to a Form 1120S, U.S.
Income Tax Return for an S Corporation, or a Form 1065, U.S.
Partnership Return of Income, to report a shareholder’s or a
partner’s share of income, credits, deductions, etc., from the S
corporation or the partnership.
8The total omission from income was reduced to $4,008,928,
due to miscellaneous adjustments.
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