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Mrs. Runkle operated the Canyon Kennel as a sole
proprietorship since its inception in 1988 through at least 1995.
She provided dog and cat kenneling and grooming services through
Canyon Kennel. She maintained a checking account and was
responsible for paying the Canyon Kennel’s bills and collecting
its income.
Filing of Tax Returns & American Institute Philosophy
Petitioners timely filed their Federal income tax returns
for all years before 1990 and paid the related taxes due. On
February 25, 1991, petitioners applied for a $25,000 home equity
loan line of credit with Garrett State Bank to pay their taxes
for 1990.2 Petitioners timely filed a joint return for 1990
showing a tax liability of $13,467, which they paid with the loan
proceeds from Garrett State Bank.
In the fall of 1991, petitioners attended a seminar
sponsored by the American Institute for the Republic (American
Institute) at which it promoted its “untaxing” program. The
American Institute purported to advise petitioners how to “opt
out of the system of paying taxes” and provided petitioners with
letters to send to respondent’s Service Center and agents in
petitioners’ effort to “opt out” of the taxing system.
2Mr. Runkle showed his monthly gross income as $6,000 in the
home equity loan application and showed his monthly net income as
$4,500. Mrs. Runkle showed her monthly gross income as $1,731
and her monthly net income as $1,298.25.
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