Joseph A. and Carol DelVecchio - Page 1

                                 T.C. Memo. 2001-130                                  

                               UNITED STATES TAX COURT                                

                    JOSEPH A. AND CAROL DELVECCHIO, Petitioners v.                    
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 6533-94.                      Filed June 6, 2001.           

                    Petitioner H was the sole proprietor of a                         
               business, A.  Ps, H and W, filed original joint returns                
               and, subsequently, amended tax returns for the tax                     
               years 1987 and 1988.  R determined deficiencies and                    
               additions to tax against Ps based on Ps’ failure to                    
               report on the original returns all gross income from A                 
               and all capital gain from the sale of real property.                   
                    1.  Held:  Each of Ps’ amended returns is an                      
               admission of a tax underpayment.                                       
                    2.  Held, further, P-H is liable under sec.                       
               6653(b)(1)(A), I.R.C., for 1987 and sec. 6653(b)(1),                   
               I.R.C., for 1988 for the addition to tax for fraud on                  
               the portion of the underpayment attributable to the                    
               failure to report all gross income from A.                             
                    3.  Held, further, to the extent we have                          
               determined there to be an underpayment of tax                          
               attributable to fraud, the addition to tax under sec.                  
               6653(b)(1)(B), I.R.C., shall apply for 1987.                           
                    4.  Held, further, Ps are liable for the addition                 
               to tax for substantial understatement under sec. 6661,                 
               I.R.C., for 1987 and 1988.                                             

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