Paul McGowan - Page 7

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               Petitioner questioned Mr. Kisalus about the shareholder                
          accounts and believed that the checks he converted to personal              
          use were included in these accounts.  While he knowingly                    
          underreported his income during the years in issue, petitioner,             
          who had an eighth grade education, believed that any disparity              
          between his reported income and the amounts reflected in the                
          shareholder accounts would ultimately be reconciled and that, at            
          some point, he would pay the appropriate amount of tax relating             
          to all of his income.  Inexplicably, respondent failed to address           
          petitioner’s apparent confusion relating to these shareholder               
          accounts (i.e., respondent did not question any witnesses about             
          this issue or address it on brief).  In essence, respondent                 
          rested on petitioner’s conviction and ignored this critical issue           
          relating to petitioner’s intent to evade tax.                               
               Accordingly, respondent’s determinations relating to 1991,             
          1992, and 1993 are barred.                                                  
               Contentions we have not addressed are irrelevant, moot, or             
          meritless.                                                                  
               To reflect the foregoing,                                              

                                                  Decision will be entered            
                                             for petitioner.                          
          [REPORTER’S NOTE: This opinion was amended by Order dated Sept. 14, 2004.]  








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