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that petitioner did not deal in cash, (7) that K&L Exteriors was
one of the least sophisticated operations he had seen, (8) that
petitioner paid approximately $90 in self-employment tax for
taxable year 1992 and a minimal amount of income tax, and (9)
that petitioner reported no income tax or self-employment tax
liability for taxable years 1993 and 1994.
The special agent did not discover evidence showing an
overstatement of expense deductions or illegal activities or that
Four Square was used for any improper purposes. At the
conclusion of the criminal investigation, the special agent
recommended criminal prosecution of petitioner and petitioner’s
father for taxable years 1993 and 1994. The record does not
reflect the disposition of these matters.
OPINION
The parties have narrowed the focus of this case.
Petitioner agrees that there was unreported income and, hence,
underpayments of tax for 1992, 1993, and 1994. However, the 3-
year period for assessment, provided for in section 6501(a), had
expired with respect to all 3 taxable years at the time
respondent mailed the notice of deficiency to petitioner.
Respondent, in his answer, affirmatively alleged that the
understatement of tax for each of the 3 years is due to fraud
and, therefore, that the period for assessment remained open at
the time the notice was mailed. See sec. 6501(c)(1).
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