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joint Federal income tax returns with his wife for the years
1986, 1987, and 1988, reporting gross income of $1,637, $6,798,
and $2,068, respectively. The gross income reported on these
returns consisted solely of wages earned by petitioner’s wife.
Petitioner’s return for 1988 reflected zero income tax liability.
In February 1991, petitioner and several codefendants were
indicted under Federal law on 27 counts of drug offenses and
money laundering. In June 1991, petitioner was convicted on 17
counts of the indictment and received a 30-year sentence of
imprisonment. Petitioner’s conviction reflects that, during 1989
and through April 1990, petitioner managed a continuing criminal
enterprise involving cocaine distribution, and that he received
and spent the proceeds of that enterprise. Petitioner kept no
records of his income or expenses with respect to his purchase
and sale of cocaine during the years in issue.
Petitioner did not file Federal income tax returns for
taxable years 1989 and 1990. After petitioner was convicted, he
was issued a notice of jeopardy assessment followed by a
statutory notice of deficiency for 1989 and 1990. In the notice
of deficiency, respondent determined petitioner’s tax liabilities
and deficiencies, based upon a filing status of married filing
separately, as follows:
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