George A. and Hilda Quintero - Page 6

                                        - 5 -                                         
          constitutes self-employment income subject to tax under section             
          1401.  Respondent also determined that the underpayment of tax              
          required to be shown on petitioners’ 1997 is a substantial                  
          understatement of income tax and imposed a penalty under section            
          6662(a).  Other adjustments made in the notice of deficiency are            
          not in dispute.                                                             
          1.   Unreported Income                                                      
               Petitioners acknowledge that petitioner received                       
          compensation from AAA during 1997 that was not reported on their            
          1997 return but claim that petitioner received less than the                
          amount reported on the Form 1099-MISC issued by AAA.  According             
          to petitioners, AAA’s monthly payroll sheets, which were used to            
          prepare the Form 1099-MISC issued to petitioner, overstate the              
          number of hours petitioner worked during 1997 and, therefore,               
          overstate the compensation he was paid.                                     
               On their 1997 return, petitioners expressly represented that           
          petitioner was unemployed during 1997 and implicitly represented            
          that he earned no income during that year.  Neither                         
          representation is true.  In the petition filed in this case,                
          petitioners represent that their “records” indicate that                    
          petitioner’s “gross” earnings from AAA during 1997 amounted to              
          less than $5,000.  If maintained, no such “records” were                    
          presented at trial.  At trial, petitioners estimated that                   

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  Next

Last modified: May 25, 2011