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States. On April 21, 1988, petitioner created Blue Lotus
Holdings Ltd. (Blue Lotus) in the British Virgin Islands. Trupin
paid $1,500 for the formation of Blue Lotus. There was no
business purpose for the formation of Blue Lotus. Blue Lotus was
subsequently used as an alter ego of petitioner for, among other
things, holding title to her residence and for selling artwork
and other items at Sotheby’s in New York City, New York.
In December 1988, petitioner purchased a Regal 360 Commodore
boat, named Black Lotus, for $140,000. Trupin paid $35,000 as a
downpayment on the boat. Petitioner financed the balance of the
boat, providing false financial information to the lender. The
boat was stored in the Virgin Islands. As of December 1988,
petitioner owned a Rolls Royce Silver Spur and a 1988 Jeep
Wrangler.
Between September 5, 1989, and October 24, 1994, petitioner
received at least $958,538 from Trupin as proceeds from the
disposition of residences and other assets owned by Trupin or
corporations controlled by Trupin.
IRS Assessments
The first letter of proposed deficiency, which allowed
Trupin and petitioner an opportunity for administrative review in
the Internal Revenue Service (IRS) Office of Appeals, for 1982
and 1983 was mailed on September 5, 1990. The first letter of
proposed deficiency, which allowed Trupin and petitioner an
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