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In 1995, respondent suspended all civil action against
petitioner because he was being investigated by a grand jury for
violation of section 7206(1). In April of 1996, petitioner was
indicted by a grand jury for bank fraud, mail fraud, money
laundering, and felony tax violations. One day prior to the
indictment, petitioner filed an amended return for 1989 that
reported an increase in Schedule C taxable income of $102,506.
Petitioner was found guilty of filing false income tax returns
for 1989, 1990, 1991, and 1992. Petitioner’s conviction was
upheld on appeal by the Court of Appeals for the Sixth Circuit.
By notices dated December 29, 1997, and October 4, 1999,
respondent sent petitioner two notices of deficiency in which he
determined fraud penalties, pursuant to section 6663, of $28,407,
$31,721, $41,424, $44,930, and $16,722 relating to 1989, 1990,
1991, 1992, and 1993, respectively. Petitioner paid the civil
fraud penalties relating to 1989 and 1990, but petitioned this
Court for a redetermination relating to 1991, 1992, and 1993. At
trial, respondent failed to present any witnesses or introduce
sufficient evidence to establish that any portion of the
underreported income was attributable to fraud. Accordingly, we
held that respondent failed to establish that petitioner intended
to evade tax.
On August 2, 2004, petitioner filed a Motion to Recover
Reasonable Litigation Costs. On September 3, 2004, respondent
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Last modified: May 25, 2011