- 5 - During 1992 and 1993, petitioner and Jack operated a body shop on property located at Netherland Inn Road in Kingsport, Tennessee. The body shop purchased wrecked autos which it would repair and resell through Murphy’s. During the years in issue, petitioner and Jack also built and sold condominiums. On May 3, 1995, petitioner signed and gave a "Personal Financial Statement" to NationsBank representing as "true and complete" that he had a salary of $144,000 and a net worth of $1,321,650. Petitioners’ returns were prepared by an old school friend of Jack’s who was an accountant in Florida. To prepare the tax returns, the accountant used information from a one-page summary that Jack supplied. On their 1993, 1994, and 1995 returns, petitioners reported adjusted gross income (loss) of ($11,652), $16,270, and $18,635, respectively. Petitioners’ returns indicate that Murphy’s was on a cash basis for 1993 and 1994 but on an accrual basis for 1995. Respondent’s examination of petitioners’ 1993, 1994, and 1995 returns began in May 1996. Following an initial examination of petitioners’ books, respondent’s agent reconstructed petitioners’ income using the net worth method. To that end, respondent’s agent identified petitioners’ assets, liabilities, and expenses. Respondent’s agent then reconstructed petitioners’Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011