Gary R. Davis - Page 3

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               On or about April 15, 2001, petitioner filed a 2000 Federal            
          income tax return (2000 return) using the filing status of                  
          “Single”.  Petitioner’s 2000 return was prepared by a certified             
          public accountant named Gary Campbell (Campbell).  Petitioner’s             
          2000 return reported that petitioner’s address was 4302 Callahan            
          and that his total income and taxable income were $6,524 and                
          zero, respectively.  Petitioner’s 2000 return reported that                 
          petitioner’s total income consisted of taxable interest of $939,            
          ordinary dividends of $103, business income of $93,886 (gross               
          income of $208,170 less total expenses of $114,284), a capital              
          loss of $3,000, taxable individual retirement account (IRA)                 
          distributions of $3,527, and passthrough losses totaling $88,931.           
          Respondent processed petitioner’s 2000 return on July 23, 2001.             
               Respondent received certain information returns relating to            
          petitioner’s 2000 return.  In relevant part, respondent received:           
          (1)A 2000 Form W-2, Wage and Tax Statement, reporting that                  
          petitioner had received wages of $165,586 and (2)a 2000 Form                
          1099-S, Proceeds From Real Estate Transactions, reporting that              
          petitioner had received $525,000 from the sale of 4302 Callahan.            
          On October 25, 2002, respondent mailed to petitioner at 4302                
          Callahan a Letter 2201(DO) (examination notice) stating that                
          petitioner’s 2000 return had been selected for examination.2  The           


               2 More specifically, the letter was addressed to petitioner            
          and Davis (then known as Theresa L. Ricci), attention petitioner.           





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