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obstructing and impeding respondent’s examination of petitioner
with respect to its taxable years 1990 and 1991 and for the
purpose of concealing from respondent the falsity of petitioner’s
1990 return and 1991 return.
In Mr. Duncan’s March 31, 1998 plea agreement, Mr. Duncan
also acknowledged that: (1) Petitioner’s 1990 return fraudu-
lently understated petitioner’s income by $125,000; (2) peti-
tioner’s 1991 return understated petitioner’s income by $150,000;
and (3) petitioner’s accounting documents contained entries
falsely reclassifying $125,000 of petitioner’s income for 1990
and $150,000 of petitioner’s income for 1991 as repayments by Mr.
Duncan of loans allegedly drawn from petitioner’s “Loan to
Shareholder” account.
On March 20, 2002, respondent issued to petitioner a notice
of deficiency (notice) with respect to its taxable years 1990 and
1991. In that notice, respondent determined deficiencies in, and
fraud penalties under section 6663(a) on, petitioner’s tax, as
follows:
Fraud Penalty
Year Deficiency Under Sec. 6663(a)
1990 $64,392 $48,294.00
1991 75,726 56,794.50
Respondent further determined in the notice that petitioner
has imputed interest income for 1990 and 1991 under section 7872
of $7,089 and $7,670, respectively, as a result of the forgone
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