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the significant horse racing losses. Petitioner falsely
explained to Mr. Agresto that he “had a very good job” before the
years in question.
Finally, petitioner was convicted of aiding the filing of
false tax returns for himself and Ms. McNamara for the years of
1989 and 1990. In pleading guilty to these charges, petitioner
admitted to diverting corporate funds and using those funds for
personal purposes in 1988 through 1990.
We find that respondent has clearly and convincingly proven
that substantial portions of petitioner’s underpayments of tax
are the result of fraudulently diverted corporate receipts,
fictitious corporate expenses, and fraudulently deducted alleged
expenses of his beauty shop operation.7
IV. Section 6651(a)(1)--Failure To Timely File
Section 6651(a)(1) provides for an addition to tax when a
taxpayer fails to file a timely return. Section 6651(a)(1)
provides an exception to the addition to tax when the failure to
file a timely return “is due to reasonable cause and not due to
willful neglect”.
Petitioner and Ms. McNamara filed their 1989 joint Federal
income tax return on September 14, 1990. There is no evidence in
the record that they requested an extension of time to file their
7 Petitioner has not argued or established that any portions
of the underpayments due to other adjustments were not due to
fraud. Secs. 6653(b)(2), 6663(b).
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