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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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