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he requested they complete. Petitioners completed the tax
organizer and sent all their records to Mr. Borrelli as
requested. Petitioners reported gross revenues from the
construction business of approximately $3.5 million in 1999,
$2.7 million in 2000, and $3.4 million in 2001 on Schedules C,
Profit or Loss from Business. Additionally, petitioner was day
trading during the years at issue. Petitioners reported a
$44,004 net gain in 1999, a $313,715 net loss in 2000, and a
$377,079 net loss in 2001 from petitioner’s day trading on
Schedules D, Capital Gains and Losses. The returns reported a
zero income tax liability for 1999, a $1,523 income tax liability
for 2000 (entirely offset by a claimed earned income credit of
$2,353), and a $2,325 income tax liability for 2001.
Petitioner said “alarm bells did go off” when the returns
Mr. Borrelli prepared resulted in such reduced tax liabilities
compared to those on the returns Ms. Irussi had prepared.
Petitioners spent only minutes in reviewing the returns
Mr. Borrelli prepared. They focused exclusively on determining
whether a refund or tax was due and where they needed to sign.
In addition, petitioners failed to notice that a $53,000 gain
from the sale of real property, for which they had provided
documentation to Mr. Borrelli, was omitted from the return for
1999. Petitioners did not question how Mr. Borrelli managed to
reduce their income tax liability despite consistent gross
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Last modified: May 25, 2011