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$14,881 of additional interest income. Of the $14,881 of
additional interest income, the Fieldses reported that $13,881
derived from BIC’s commercial checking account. The Fieldses
paid the resulting additional tax of approximately $500,000
(approximately $150,000 for 1991 and $350,000 for 1992) with the
amended returns, apparently deriving approximately $450,000 of
such amount from refunds of erroneous FFI estimated tax payments,
including FFI’s $300,000 1992 estimated tax payment.
Conclusion of Respondent’s Examination
In February 1997, the revenue agent notified the Fieldses
that, for 1991, 1992, and 1993, she proposed (1) a reduction of
business expense deductions for all 3 years, (2) the fraud
penalty for 1991 and 1992, and (3) certain other penalties. The
case then went to respondent’s Appeals Office. As part of a
written settlement offer dated June 2, 1999, respondent’s Appeals
officer offered to concede 25 percent of the fraud penalty. The
Appeals officer characterized such proposed concession as a
50-percent concession of petitioner’s 50-percent share of the
penalty. The Fieldses rejected that offer.
By notice of deficiency dated July 29, 1999, respondent
determined deficiencies, additions to tax, and penalties with
respect to the Fieldses’ income taxes for 1991, 1992, and 1993 as
follows:
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