- 36 -
wage or other compensation received by the employees.
Petitioners offered timecards to substantiate its alleged wages;
however, the timecards only encompassed a few months in 1995 and
purported to be for a company named “Shun Wo Fashions Inc.”, not
Sam Kong Fashions. We find that the inadequate records
maintained by Sam Kong Fashions indicate that petitioners
intended to conceal income and evade taxes owed in 1994 and 1995.
Based on the foregoing, we find that petitioners
fraudulently understated their tax liabilities for 1994 and 1995
and hold that they are liable for the fraud penalty under section
6663.20
Section 6663(b) provides that a taxpayer will not be liable
for the fraud penalty with respect to any portion of the
underpayment that the taxpayer proves by a preponderance of the
evidence is not attributable to fraud. Mr. Kong submitted to his
accountant a list of Sam Kong Fashions’s gross receipts and
expenses for 1995. Although the gross receipts on the list
totaled $241,890, an employee of Kim Y. Ling, P.C., mistakenly
calculated this amount as $217,296.06. Because this omission was
the mistake of the tax preparer, we find that the tax
20 Because we find that petitioners are liable for fraud
penalties under sec. 6663, we shall not address respondent’s
alternative argument that petitioners are liable for the
accuracy-related penalties pursuant to sec. 6662.
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