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Petitioner was circumspect about her CNC involvement when
Mr. Zocks, her accountant, prepared her return for 1994. Some
time in 1994 she called him and asked "a general question" about
when to report income from an investment. She did not show him
any CNC checks or vouchers, or give any specifics about CNC. Mr.
Zocks assembled and mailed to her a questionnaire, based upon
information in the previous year's return. Among the sources of
income petitioner disclosed on the organizer for 1994 was
"dividend" income from CNC of $38,275 that Mr. Zocks later
reported on the return as "miscellaneous investment income".
Petitioner explained at trial that she came up with the 1994
reported CNC income figure through the following steps: (1) She
totaled what was received from CNC from December 31, 1991,4
through December 31, 1994, which she determined to be $314,000;
(2) before her husband died in May of 1992 "he said we needed
approximately $18,000 more to start retaining a profit from CNC";
(3) she deducted the $258,000 that was invested from the $314,000
which left $56,278; and (4) she then deducted "the $18,000 that
[her husband] said we still needed, and came out with the figure
of $38,278." The Court finds this to be an implausible
explanation.
4On petitioner's amended returns for 1991 through 1994, she
reported income from CNC in amounts somewhat less than those
finally agreed upon with respondent: $48,144, $52,061, $104,982,
and $112,997, respectively, for a total of $318,184. The
discrepancies are unexplained.
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