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possibility of issuing summonses to customers to obtain copies of
checks written to Privilege House, Mrs. Ishizaki provided a list
of cashed checks. Ms. Encarnacion also met at some point during
the examination with petitioner.
During 1997, Mrs. Ishizaki filed for separation from
petitioner. The divorce settlement was not yet finalized at the
time of trial of this case in March of 2001. In the intervening
period, the record indicates that control of the Privilege House
business shifted between the spouses. At the time of trial,
petitioner was no longer involved and had begun another furniture
company of his own, operating under the name of Anderson & Daish.
On March 25, 1999, respondent issued a notice of deficiency
to petitioner and Mrs. Ishizaki. Therein respondent determined
that petitioners had $191,831 in unreported income for 1995, in
the form of constructive dividends from Privilege House.
Although Mrs. Ishizaki did not petition the Court for
redetermination, petitioner filed his petition in this case on
June 22, 1999. The petition expresses the alleged errors in the
notice of deficiency as follows:
4. The determination of the tax set forth in the said
notice of deficiency is based upon the following
errors.
a. The taxpayer is an innocent spouse and did not
in any way benefit from the unreported income.
b. The petitioner does not believe that he signed
the tax return for that year.
5. The facts upon which the petitioner relies, as the
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