Duncan & Associates - Page 5

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          services” to Georgio Armani for the purchase of clothing for Mr.            
          Duncan.  When petitioner filed its 1990 return, petitioner                  
          through Mr. Duncan knew that the deduction of $9,610 claimed for            
          “outside services” was improper.  Petitioner also claimed a                 
          deduction of $25,000 in its 1990 return for alleged contributions           
          to petitioner’s pension and/or profit sharing plan.  However,               
          petitioner did not make any contributions to petitioner’s pension           
          and/or profit sharing plan during 1990.                                     
               On March 24, 1993, Mr. Duncan spoke with two of respondent’s           
          revenue agents on behalf of petitioner.  During Mr. Duncan’s                
          conversation with those revenue agents, Mr. Duncan acknowledged             
          that petitioner would have to pay tax, interest, and fraud                  
          penalties that were attributable to the adjustments made by                 
          respondent to petitioner’s 1990 return and 1991 return.  Mr.                
          Duncan also told respondent’s revenue agents on behalf of peti-             
          tioner the following with respect to petitioner’s taxable years             
          1990 and 1991:  (1) He believed that petitioner’s books, records,           
          and returns were incorrect; (2) the worksheets that petitioner              
          presented to respondent’s examining agents to explain income were           
          false; (3) petitioner’s accountant prepared an altered set of               
          books, including journals and ledgers, to conceal the fact that             
          petitioner had understated its income; and (4) he and one of                
          petitioner’s employees had participated in the falsification of             
          invoices, receipts, and check register stubs during respondent’s            






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