John Michael Treu - Page 4

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          various receipts for the purchase of air conditioner parts and              
          services on trucks, etc., constituted the records of Treu Air.              
          Petitioner did not maintain a personal checking account, and he             
          was paid in cash.  In addition, Treu Air paid for petitioner’s              
          tolls and gasoline.  Treu Air had no credit, and the expenses for           
          some of the machinery installed were paid in cash.  Petitioner’s            
          brother would draw a check payable to cash or to his own name and           
          note on the check register the amount paid to petitioner.  Mr.              
          Burgess apparently was paid in the same way, and it appears that            
          he received $25,000 in compensation during 1999.  At the end of             
          the year, Treu Air issued a Form 1099-MISC, Miscellaneous Income,           
          to petitioner showing that he received gross income of $35,000.             
          In early 2000 petitioner used the Form 1099-MISC to establish his           
          income in a domestic relations matter.  In 2000 Treu Air hired an           
          accounting firm to prepare the various corporate tax forms and              
          returns for 1999.  The corporate returns were prepared from                 
          information supplied by petitioner’s brother.                               
               Petitioner and his wife filed a joint 1999 Federal income              
          tax return on May 5, 2000.  The return was not timely filed.  On            
          the return petitioner reported gross income of $1,000.  He                  
          reported no income from Treu Air.  Petitioner originally                    
          maintained that he had received no income from Treu Air in 1999.            
          During the examination of the 1999 return, however, petitioner              
          gave the revenue agent an affidavit claiming that he was paid               






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