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income, Mr. Kisalus convinced Ms. Cason to sign a 1990 joint
return.
Prior to signing a 1991 return, Ms. Cason sought legal
advice to determine whether she would qualify as an innocent
spouse if petitioner failed to report all of his income on their
joint return. Ms. Cason subsequently refused to sign a 1991
joint return with petitioner. Her failure to do so precipitated
petitioner and Ms. Cason’s 1992 separation and 1994 divorce. Ms.
Cason subsequently contacted the Internal Revenue Service and
alleged that petitioner had taken funds from the Company and not
reported those funds on his returns.
Mr. Kisalus had access to, but did not review, the
handwritten ledger, accounts receivable, and invoices. He relied
exclusively on the bank records and financial statements (i.e.,
prepared from the information in the general ledger) to prepare
the Company’s 1991, 1992, and 1993 returns.
By notice of deficiency dated September 6, 2001, respondent
determined deficiencies of $103,299, $36,968, and $67,180 and
fraud penalties, pursuant to section 6663,1 of $77,474, $27,726,
and $50,385 relating to 1991, 1992, and 1993, respectively.
1 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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Last modified: May 25, 2011