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California for the purpose of making home improvements and buying
home furnishings.
Mr. Ford received $1,750,000 from the Maryland Bank in
Luxembourg, secured by a Blackbird Investments trading account,
and from a Toronado Resources account. These funds were used for
Ms. Ford’s purchase of the Montecito home and to pay taxes which
Mr. Ford owed from the 1970s. In March 1986, Mr. Ford also
authorized a withdrawal from a Solar Aquafarms, Ltd., account,
which Ms. Ford used to buy fur coats at the Pappas Fur Co. in
Canada. Mr. Ford also transferred money from various Canadian
corporate accounts, derived from International Tillex stock
transactions, into his own bank accounts. Further, in April
1986, funds were transferred from at least one of the Canadian
corporate accounts into a bank account in Beverly Hills,
California, belonging to Ms. Ford.
V. Petitioners’ 1986 Return
On petitioners’ 1986 return, they did not report that they
had received any wages, salaries, or other compensation (e.g.
self-employment income). They did not attach any Forms W-2, Wage
and Tax Statement, to their 1986 return. The 1986 return did not
include a Schedule C, Profit or Loss From Business. Petitioners
reported taxable income of negative $275,937, stated they had no
income tax liability, and requested a refund for the full amount
of their estimated tax payments of $38,000. Mr. Ford knew when
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