-2-
section 6663 for 1997 and 1998 (the years at issue).2
Respondent determined that petitioner Patricia B. Paterson
(Mrs. Paterson) was liable for a $53,168 deficiency and a $39,876
fraud penalty for 1997. For 1998, respondent determined that
Mrs. Paterson was liable for a $16,402 deficiency and a
$12,301.50 fraud penalty.
Respondent determined that petitioner George M. Paterson
(Mr. Paterson) was liable for a $125,280 deficiency and a $93,960
fraud penalty for 1997. For 1998, respondent determined that Mr.
Paterson was liable for a $88,257 deficiency and a $66,192.75
fraud penalty.
There are three issues for decision. The first issue is
whether petitioners understated their income in the amounts
respondent determined for the years at issue. We hold that they
did. The second issue is whether petitioners are liable for the
fraud penalties for the years at issue. We hold that they are.
The third issue is whether the limitations period bars respondent
from assessing petitioners’ taxes for the years at issue. We
hold that it does not.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the accompanying exhibits are
2All section references are to the Internal Revenue Code in
effect for the years at issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
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