Paul A. Bilzerian - Page 8




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          making numerous false statements, and creating false invoices to            
          substantiate false deductions on his 1985 Federal income tax                
          return.  On September 27, 1989, the United States District Court            
          for the Southern District of New York entered a judgment of                 
          conviction on all the counts contained in the indictment, and the           
          judgment was affirmed by the Court of Appeals for the Second                
          Circuit.  United States v. Bilzerian, 926 F.2d 1285 (2d Cir.                
          1991).                                                                      
               On October 21, 1991, respondent issued a notice of                     
          deficiency to petitioner for the taxable year 1986.  In the                 
          notice of deficiency, respondent determined that petitioner was             
          liable for additions to tax for negligence due to the omission              
          from the originally filed 1986 return of the approximately $4               
          million of taxable income from gains related to the purchase and            
          sale of Hammermill stock.  Petitioner filed a petition to this              
          Court seeking a redetermination.                                            
               In 1992, petitioner sued Mr. Norris for malpractice for the            
          omission of the $4 million of taxable income from petitioner’s              
          originally filed 1986 return.  In connection with the malpractice           
          lawsuit, Mr. Norris denied any liability with respect to the                
          preparation of petitioner’s 1986 tax return.                                
                                       OPINION                                        
               As in effect for 1986, section 6653(a)(1)(A) imposed an                
          addition to tax equal to 5 percent of the underpayment of tax               






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