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December 21, 2000, respondent issued the notices of deficiency to
petitioners for 1994, 1995, 1996, and 1997. In connection with
these notices, respondent never issued to petitioners or to a
third party any summons for information concerning petitioners,
with the exception of a summons issued to Lubbock for information
concerning Mr. Burnett’s 1994 wages.
On the basis of an information return master file transcript
for Mr. Burnett that listed that he had received in 1994 taxable
wages totaling $19,913,5 and independent supporting documentation
as to those wages that respondent had requested and received from
Lubbock, respondent determined in the notices of deficiency for
1994 that petitioners had failed to report taxable wages of
$19,913 for that year. As to 1995, 1996, and 1997, respondent
determined in the notices of deficiency for those years that Mr.
Burnett had received unreported income in those years
attributable to his ownership of the newspaper (newspaper
income). The agent determined the amount of newspaper income by
way of a four-step process, bearing in mind the fact that
(1) petitioners had reported on their 1992 Federal income tax
return (the last Federal income tax return that they had filed as
owners of the newspaper) that the newspaper’s gross receipts for
that year were $100,736 and (2) Mr. Burnett had received during
5 The transcript referenced that these wages had been
reported to Mr. Burnett and the Commissioner on a Form W-2, Wage
and Tax Statement. That W-2 is not in the record.
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