-2-
report income and are liable for the section 66632 fraud or the
section 6662 accuracy-related penalty.
Background
In 1997, pursuant to California law, Ms. Ngo incorporated
168 Garment, which performed sewing services for various garment
manufacturers. Ms. Ngo was the company’s sole shareholder, and
Tho Cong Huynh (Mr. Huynh), her son, was the office assistant.
In 2000 and 2001, 168 Garment maintained a business checking
account at Citizens Business Bank (Citizens account). Ms. Ngo
and Mr. Huynh were the only individuals with signature authority
over the Citizens account. During 2000 and 2001, respectively,
petitioners deposited $511,376, and $417,761 into the Citizens
account, and 168 Garment reported these amounts on its Federal
income tax returns related to those years. During this period,
Ms. Ngo and Mr. Huynh visited Matt’s Liquor at least 60 times to
cash checks payable to 168 Garment (i.e., totaling $120,610 in
2000 and $219,394 in 2001). The proceeds from these checks were
not reported on Ms. Ngo’s or 168 Garment’s Federal income tax
returns. In 2001, Ms. Ngo endorsed 45 of the 60 checks (i.e.,
totaling $173,022) cashed at Matt’s Liquor, and Mr. Huynh
endorsed the remaining 15 checks (i.e., totaling $46,372).
2 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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Last modified: May 25, 2011