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Petitioner was aware that the bonuses were not included in the
joint Federal income tax return filed for 1994 and 1995.
Mr. Sullivan received salary and bonuses in 1993, 1994, and
1995, as follows:
Year Salary Bonus Total
1993 $92,379 $75,000 $167,379
1994 100,000 100,000 200,000
1995 100,000 125,000 225,000
In the same manner as petitioner, Mr. Sullivan was not issued
Forms W-2 for the bonus amounts and he did not report his bonuses
on his 1993, 1994, and 1995 income tax returns. Mr. Sullivan was
criminally prosecuted with respect to his omissions of the
bonuses and pleaded guilty to filing a false return for 1995. He
was required to make restitution by paying income tax on the
omitted bonuses for 1993, 1994, and 1995. Mr. Sullivan was not
aware that petitioner’s bonuses were not reflected on a Form W-2
or that there was no withholding for her 1993, 1994, or 1995
bonuses.
During 1996, the corporation’s in-house counsel hired
certified public accountants to examine or audit the
corporation’s books because of discrepancies on the corporation’s
Federal tax returns. The examination was conducted during
January 1997, and, as a result, the corporation filed revised
employment tax returns. In addition, revised Forms W-2 for 1993,
1994, and 1995 were prepared and issued only to two of the
corporation’s employees. The discrepancy discovered by the
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