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11, 2000, petitioner submitted Forms 1040 for 1994 through 1996,
to an Appeals officer.
Because of the information disclosed by the tax returns, the
examination of 1994 through 1996 was sent back to the examination
function by Appeals and reassigned to Agent Riley. Agent Riley
issued petitioner an Information Document Request (IDR) asking
petitioner to provide documentation and support for the income
and deductions shown on his tax returns.
After issuing the IDR, Agent Riley eventually received a
response including information from another attorney, then
representing petitioner, Brian Morris. Utilizing this
information and the tax returns, Agent Riley discovered two bank
accounts under the names Oneida Family Trust (OFT) and DSG.
Petitioner possessed signature authority on both accounts.
Following a bank deposits analysis, Agent Riley determined that
petitioner understated his gross receipts on his 1994 through
1996 Federal tax returns. During a meeting with petitioner and
Mr. Marshall on May 14, 2001, Agent Riley produced three binders
containing photocopies of every check drawn on the two bank
accounts for these years. As the expenditures exceeded the
income shown on the 1994 through 1996 tax returns, Agent Riley
asked how the additional funds were derived. Petitioner replied
that he acquired the funds from gifts by family members.
After completing the examination and allowing a number of
previously disputed deductions, Agent Riley then sent the case to
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