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C. Mr. Aulisio testified that it was common practice in the
accounting industry, in order to deal with Form 1099 amounts
misreported to the IRS by third parties, to “make full disclosure
by putting the exact same number in and out.” Aside from the
questionable validity of this statement, we find it noteworthy
that Mr. Aulisio did more than just report and subtract the same
numerical figure. He affirmatively labeled the cost of goods
sold “PROJECT COSTS”, a term which connotes active operations to
a far greater extent than it discloses the alleged situation of
inactivity.
Webster’s defines “disclose” as “to expose to view” and “to
make known: open up to general knowledge * * *; esp: to reveal in
words (something that is secret or not generally known):
DIVULGE”. Webster’s Third New International Dictionary 645
(1976). Accordingly, we take issue with petitioners’ and Mr.
Aulisio’s characterization of the Schedule C reporting as a form
of disclosure to the IRS. To report that a particular entity
earned gross receipts, incurred project costs and business
expenses, and operated at a loss, all with the material
participation of its proprietor, hardly exposes, makes known,
reveals, or divulges that the entity was inactive, that payments
were misreported by third parties, and that the income shown on
the Schedule C was actually that of a corporation. If the true
intent of petitioners and Mr. Aulisio had been to disclose the
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