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distributions received by petitioner from CNC represent a return
of capital that is not taxable because CNC had no earnings and
profits. See secs. 301, 316.
Petitioner pleaded guilty to violating section 7201 for his
failure to declare $127,512 of income earned in 1994 from CNC.
At petitioner’s plea hearing, petitioner admitted: (1) At the
time he filed his 1992 Federal income tax return, he knew that he
had received approximately $41,600 in total monthly profit income
on his CNC investments in 1992; (2) the tax loss on the
unreported income was approximately $7,597; (3) at the time he
filed his 1993 Federal income tax return, he knew that he had
received approximately $109,663 in total monthly profit income on
his CNC investments in 1993; and (4) the tax loss on the
unreported income was approximately $26,959. Thus, petitioner
admitted that he received unreported income and that the
nondisclosure resulted in an underpayment.
Petitioner also submitted amended Federal income tax returns
for the 1992 and 1993 tax years. On those returns, which
petitioner signed under penalties of perjury, petitioner included
in income the amount of the distributions that he had received
from CNC during 1992 and 1993. Petitioner’s amended returns are
admissions of Federal income tax underpayments. See Badaracco v.
Commissioner, 464 U.S. 386, 399 (1984).
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