Chester H. and Michelle R. Rossman - Page 8

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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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