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profit) of petitioner from marijuana sales not reported on
petitioners’ 1985 and 1986 Federal income tax returns.2
In addition, based on his above calculation and
determination that petitioner had $200,910 in additional
unreported income in 1987 from marijuana sales, respondent
disallowed the portions of petitioners’s claimed 1987 $332,696
net operating loss carryback that were claimed on petitioners’
1985 and 1986 Federal income tax returns.
For 1985 and 1986, respondent also determined that
petitioner was liable for additions to tax for fraud and for
substantially understating his Federal income tax liability.
Certain other adjustments made by respondent against
petitioners in each notice of deficiency are no longer in
dispute.
At trial, respondent sought to significantly increase the
illegal drug income to be charged to petitioner for each year.
As indicated, the tax deficiencies reflected in respondent’s
notice of deficiency to Martha Mchan were based solely on
Martha’s alleged joint liability under section 6013 for the tax
deficiencies determined against petitioner, and no fraud or other
additions to tax were determined against Martha.
2 Respondent’s calculations of petitioner’s income from the
sale of marijuana were also used by the District Court in the
second criminal forfeiture action against petitioner.
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