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Respondent amended his answer to assert an increased
deficiency and an increased penalty for fraud. Subsequently,
respondent, having received additional information, conceded a
portion of the increase.2 Remaining in dispute are a $157,822
income tax deficiency and a $118,365.75 section 6663(a) penalty.
FINDINGS OF FACT
At the time the petition was filed, petitioners resided in
Anaheim, California. For taxable year 1993, petitioners
conducted five separate income-producing business activities as
follows: Harrington Automotive (Automotive), Harrington Rentals
(Rentals), Harrington Auto Sales (Auto Sales), Sports Card
Connection (Card Connection), and Pacific Seed & Feed (Seed &
Feed). For 1993, petitioners disclosed Automotive and Rentals on
their Federal income tax return, but concealed Auto Sales, Card
Connection, and Seed & Feed. Petitioners reported $177,360 in
Schedule C, Profit or Loss From Business, gross receipts for
Automotive, $17,133 in Schedule E, Supplemental Income and Loss,
income for Rentals, and $84 in interest income.
Through information obtained from the Bank of America,
2 In an amendment to answer, respondent asserted a $155,687
increase in petitioners’ unreported income for a total unreported
income of $562,033. Subsequent to the amendment to answer
respondent received information from petitioners which indicated
that $18,661 in deposits to one bank account were nontaxable. On
the basis of this information, respondent reduced the unreported
income amount to $543,372. Respondent also disallowed a net
operating loss of $51,520.
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