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substantiated and were ordinary and necessary business expenses.
The petition further alleged that Beacon and ISOA, Inc., did not
fail to properly report any items of taxable income.
On March 8, 2001, Mary Kay McIlyar (Ms. McIlyar), the
District Counsel attorney to whom the case was assigned, filed an
answer to the petition which denied all of petitioners’
assignments of error.
Ms. McIlyar met with Agent Wharton, Ms. Stephenson, and Mr.
Finley to discuss petitioners’ case. At this meeting, it was
decided that petitioners would provide “mockup” tax returns which
would include only the amounts that could be adequately
substantiated by petitioners. These “mockup” tax returns would
not be filed with the IRS.
Years after petitioners’ filed returns, “Estimated” returns,
“Revised” returns, and “Amended” returns, Ms. Stephenson prepared
the “mockup” tax returns along with “general ledgers” to support
the amounts on these returns. Between June and September of
2001, Mr. Finley provided Ms. McIlyar with the “mockup” returns
for the entities and taxable years in issue. Many of the amounts
on the “mockup” tax returns differed from the amounts on the tax
returns petitioners had previously submitted to the IRS. Revenue
Agent Richard Laakso (Agent Laakso) was assigned to examine the
“mockup” returns and the “general ledgers” prepared by Ms.
Stephenson. Agent Laakso selected a limited number of entries
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Last modified: November 10, 2007