Wayne Payne and Dorene J. Payne - Page 2

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          section 66631 for 1993, 1994, and 1995 of $22,410, $61,488.75,              
          and $33,916.50, respectively.  The issues for decision are:                 
               (1)  Did respondent issue the notice of deficiency before              
          the expiration of the period of limitations on assessment?  We              
          hold that petitioners filed false or fraudulent returns with the            
          intent to evade tax for 1993, 1994, and 1995, and consequently              
          there is no limitation on assessment under section 6501(c)(1);              
               (2)  did petitioners receive $222,735 in unreported income             
          from HRDC Construction (HRDC), a partnership owned 100 percent by           
          petitioners, in 1994?  We hold that they did;                               
               (3)  are petitioners entitled to deductions in excess of               
          those allowed by respondent in the notice of deficiency?  We hold           
          that they are not;                                                          
               (4)  are unreported bank deposits of $30,953.94 in 1995                
          taxable to petitioners?  We hold that they are;                             
               (5)  is petitioner Dorene Payne (Mrs. Payne) entitled to               
          innocent spouse relief under section 6015?  We hold that she is             
          not; and                                                                    
               (6)  are petitioners liable for the fraud penalty under                
          section 6663?  We hold that they are liable for the fraud penalty           
          with respect to the unreported income they received from HRDC,              
          but not with respect to their unreported bank deposit income.               

               1Unless otherwise indicated, all section references are to             
          the Internal Revenue Code as amended, and all Rule references are           
          to the Tax Court Rules of Practice and Procedure.                           

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