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Penalty
Year Deficiency Sec. 6663
1992 $4,831 $3,623.25
1993 12,115 9,086.25
1994 18,912 14,184.00
Petitioner contends that respondent is barred from assessing
the income tax deficiencies because the notice of deficiency was
mailed after the expiration of the 3-year period for assessment
provided for in section 6501(a).1 Respondent contends that the
period for assessment remains open under section 6501(c)(1)
because petitioner filed false and fraudulent returns for the
years in question. In the alternative, respondent contends, and
petitioner concedes, that the period for assessment remained open
for 1994 because of the substantial understatement of gross
income by more than 25 percent. In such circumstances, section
6501(e) provides for a 6-year period for assessment.
We consider here whether petitioner’s understatements for
taxable years 1992, 1993, and 1994 were due to fraud. In the
event we do not find petitioner’s understatement for taxable year
1994 was due to fraud, respondent may assess the deficiency under
section 6501(e).
1 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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Last modified: May 25, 2011