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In May 1991, Vernon and Janet’s joint Federal income tax
returns for 1987, 1988, and 1989 were selected for audit.
Revenue Agent Danny Craddock (RA Craddock) was assigned to the
audit. During the audit, Vernon cooperated with RA Craddock.
Vernon gave RA Craddock a desk inside TECO’s office and allowed
RA Craddock to copy documents and to speak with TECO employees
unsupervised. TECO’s officers, employees, and agents cooperated
with the IRS during the audit of petitioners. Vernon answered RA
Craddock’s questions. When requested by RA Craddock, petitioners
extended the period of limitations on assessment several times.
On August 22, 1991, RA Craddock referred the 1987, 1988, and
1989 tax years to the Internal Revenue Service (IRS) Criminal
Investigation Division. Special Agent Andrew D. Bishop (SA
Bishop) was assigned to conduct a criminal investigation of
Vernon. RA Craddock assisted SA Bishop.
No criminal charges were brought against Janet. Vernon,
however, was tried for violating section 7206(1), willfully
making and subscribing a return under penalties of perjury that
he did not believe to be true and correct as to every material
matter, for 1988 and 1989. He was acquitted on both counts.
During the years in issue, TECO did not have income from
illegal activities and did not deal in cash to avoid reporting
income. Neither Vernon nor Janet had unexplained increases in
net worth, had substantial expenditures over available sources,
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Last modified: May 25, 2011