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E. Petitioner’s Income Tax Returns
Petitioner filed Federal income tax returns for 1985 and
1986 but not for 1987. He did not report any income from lending
or check cashing on those returns. He reported the following
amounts of income:
Accounting Taxable
Year Interest business income
1985 $100 $10,940 $5,460
1986 300 10,188 5,908
F. Seizure of Petitioner’s Records and Respondent’s
Determination
Respondent’s agents obtained a search warrant and seized the
computer and about 260 boxes of records from petitioner’s office
on December 15, 1988. The U.S. Attorney’s Office for the Eastern
District of New York hired a computer expert, who downloaded from
the computer the records that Seth Wapnick kept. Respondent’s
agents verified the accuracy of some of the computer records by
comparing those records with information that respondent obtained
from third parties. Respondent’s agents interviewed petitioner’s
clients and reviewed bank statements, canceled checks, deposit
slips, and Forms 1099. Respondent prepared summaries of the
computer records, other business records that petitioner had, and
records from third parties.
By notice of deficiency issued on October 21, 1993,
respondent determined that petitioner had the following amounts
of unreported income:
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