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BIC’s 1992 income.7 Without the BIC income, FFI apparently had
no taxable income in 1992; indeed, the Fieldses apparently used
the refund of FFI’s $300,000 estimated tax payment to pay almost
all of their 1992 underpayment of approximately $350,000 that
resulted from Mr. Carcasi’s botched plan. In effect, the
Fieldses simply made a payment to the wrong tax account in 1992.
On those facts, respondent had no reasonable basis for asserting
the fraud penalty against petitioner with respect to the
understatement of income on the initial 1992 return.
D. Disallowed Business Expense Deductions
Respondent averred that petitioner fraudulently overstated
business expenses (1) on the amended 1991 return by $46,790, (2)
on the amended 1992 return by $138,795, and (3) on the 1993
return by $64,081. Respondent’s position in that regard is
particularly puzzling, since the Fieldses filed those returns
after respondent had commenced his examination of the years in
question.8 In effect, respondent took the position that
petitioner committed fraud with respect to those returns even
though she knew that respondent would immediately examine them.
7 The size of that estimated tax payment indicates that the
amount of BIC’s income that was sheltered by FFI’s losses in
accordance with Mr. Carcasi’s plan was, in fact, insubstantial.
8 Petitioner alleges that the revenue agent who examined
the returns never relied on the disallowed deductions to sustain
a finding of fraud, an allegation that is supported by the
revenue agent’s report (Form 886-A) with respect to this case.
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