Francis M. Gagliardi - Page 14




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         Additionally, child support of approximately $6,500 per month was            
         deducted from the gross annual lottery payments made to Mr.                  
         Gagliardi during the years in issue.                                         
              Mr. Hunner prepared Mr. Gagliardi’s Federal income tax                  
         returns for 1997, 1998, and the years in issue.  Mr. Hunner used             
         the same method to prepare Mr. Gagliardi’s returns for 1997 and              
         1998 as he did for the years in issue.  Mr. Hunner never stated              
         to Mr. Gagliardi that the records Mr. Gagliardi gave to him were             
         inadequate to prepare his tax returns.                                       
              After receiving voluminous documentation and records from               
         Mr. Gagliardi regarding his gambling during the years in issue,              
         Mr. Hunner was comfortable preparing Mr. Gagliardi’s returns for             
         the years in issue, especially with regard to the gambling loss              
         deductions claimed on the returns, given the nature and extent of            
         Mr. Gagliardi’s gambling.  Mr. Hunner believed that Mr.                      
         Gagliardi’s gambling losses were greater than the amounts of                 
         gambling loss deductions claimed on Mr. Gagliardi’s returns.  Mr.            
         Gagliardi reported the following amounts on his returns:                     
            Year   Casino Winnings State Lottery Winnings   Casino Losses             
            1999      $127,073           $666,500           ($502,433)                
            2000      270,052            666,500            (802,921)                 
            2001      631,629            666,500            (1,170,140)               
              In calculating the amounts of gambling loss deductions to               
         claim on Mr. Gagliardi’s returns, Mr. Hunner added all of Mr.                
         Gagliardi’s checks, charges, and withdrawals made at the casinos             






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