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petitioners were filing their 1986 return that they were not
reporting all of their income.
Item 10 on Schedule B, Interest and Ordinary Dividends,
asked the following question: “At any time during the tax year,
did you have an interest in or a signature or other authority
over a financial account in a foreign country (such as a bank
account, securities account, or other financial account)?”
Petitioners responded that they did not. This was false: in
addition to the Canadian brokerage accounts, petitioners each
opened foreign bank accounts in 1985 at the TSB Private Bank
International S.A. in Luxembourg and maintained them throughout
1986.
VI. Respondent’s Notice of Deficiency
In respondent’s notice of deficiency, dated February 26,
1999, he determined that petitioners had unreported income for
1986. Specifically, respondent determined that petitioners
should have reported all of the long-term and short-term capital
gains and losses from the Canadian brokerage accounts in 1986,
totaling $5,084,483, because Mr. Ford was the beneficial owner of
the stocks traded.
VII. Respondent’s Increase in Deficiency
Respondent amended his answer in this case to assert
additional unreported income of $2.8 million based on statements
made under oath by Mr. Ford in his allocution quoted above as to
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