Polidori v. Commissioner

• Decision Date: 19 November 1996
• Docket Number: Docket No. 1902-95.
• Citation: 72 T.C.M. 1297
• Parties: Lawrence J. Polidori v. Commissioner.
• Court: U.S. Tax Court

72 T.C.M. 1297

T.C. Memo. 1996-514

Lawrence J. Polidori v. Commissioner.

Docket No. 1902-95.

United States Tax Court.

Filed November 19, 1996.

Sherwin C. Peltin, Milwaukee, Wis., for the petitioner. J. Paul Knap, for the respondent.

WRIGHT, Judge:

Respondent determined deficiencies in and additions to petitioner's Federal income tax as follows:¹

                Additions to Tax
                                                                            ------------------------
                Year                                           Deficiency   Sec. 6661   Sec. 6653(b)
                1980 .......................................    $113,469       --         $64,650
                1981 .......................................      39,563       --          28,150
                1982 .......................................      40,360     $10,090       25,125
                1983 .......................................      19,561       4,890        9,781
                1984 .......................................      19,286       4,822        9,643
                1985 .......................................      41,813      10,453       20,907
                1986 .......................................      21,143       5,286       12,907
                

After concessions, the issues for decision are:

(1) Whether certain deposits to a foreign bank account constitute unreported income to petitioner. We hold that they do.

(2) Whether petitioner is liable for additions to tax for fraud under section 6653(b) for 1980 and 1981, under section 6653(b)(1) and (2) for 1982 through 1985, and under section 6653(b)(1)(A) and (B) for 1986. With respect to taxable years 1980 through 1984, we hold that he is. With respect to taxable years 1985 and 1986, we hold that he is not.

(3) Whether petitioner is liable for the addition to tax under section 6661 for a substantial understatement in income tax for taxable years 1982, 1983, 1984, 1985, and 1986. To the extent provided for herein, we hold that he is.

(4) Whether the period of limitations has expired for assessment and collection of the deficiencies in and additions to petitioner's Federal income tax for any year at issue. With respect to taxable years 1980 through 1984, we hold that it has not. With respect to taxable years 1985 and 1986, we hold that it has.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The stipulation of facts and attached exhibits are incorporated herein. At the time the petition was filed, petitioner resided in Ozona, Florida.

Petitioner and his former spouse² were husband and wife throughout the years at issue. They filed joint Federal individual income tax returns for taxable years 1980, 1981, 1982, 1983, 1984, and 1985. Despite being married, petitioner filed his 1986 Federal individual income tax return using the filing status of "head of household."

Petitioner was a practicing dentist throughout the years at issue. During that period, both he and his former spouse were co-owners of a foreign bank account (the foreign account) located in the Bahamas. From time to time, petitioner opened subsidiary accounts within the foreign account for various investment purposes. Neither petitioner nor his former spouse made withdrawals from the foreign account prior to 1986.³ On September 1986, petitioner opened a second foreign account with the same Bahamian bank. Unlike the first foreign account, however, petitioner was the sole owner of this second account. The first foreign account was closed in November 1986.⁴

During the years at issue, petitioner made 66 deposits to the foreign account. Many intra-account transfers were also made. The aggregate annual deposits to the foreign account were as follows:

                Number of    Amount
                Year                   Deposits    Deposited
                1980 ...............       6       $202,000
                1981 ...............      15         42,031
                1982 ...............      17         52,016
                1983 ...............      10         24,205
                1984 ...............       5         17,695
                1985 ...............      12         51,484
                1986 ...............       1          1,096
                

More specifically, individual deposits to the foreign account were as follows:⁵

                Taxable Year 1980
                Date                                 Deposits
                2/12/80 ........................   $ 20,000.00
                6/4/80 .........................     10,000.00
                6/23/80 ........................     80,000.00
                6/30/80 ........................     12,000.00
                7/14/80 ........................     70,000.00
                11/24/80 .......................     10,000.00
                                                   ___________
                  Total ........................   $202,000.00
                             Taxable Year 1981
                Date                                Deposits
                5/20/81 ........................   $ 4,000.00
                5/28/81.........................     1,500.00
                6/9/81 .........................     3,874.00
                6/29/81 ........................     2,425.00
                7/14/81 ........................     2,300.00
                7/22/81 ........................     2,400.00
                8/*/81 .........................    12,505.23
                8/21/81 ........................       800.00
                8/31/81 ........................     2,300.00
                9/3/81 .........................     1,300.00
                9/15/81 ........................     1,400.00
                9/23/81 ........................     1,000.00
                9/29/81 ........................     3,473.**
                11/19/81 .......................     1,300.00
                11/30/81 .......................     1,453.60
                                                   __________
                  Total ........................   $42,031.**
                             Taxable Year 1982
                Date                                Deposits
                2/17/82 ........................   $ 3,200.00
                2/26/82 ........................     2,103.40
                3/11/82 ........................     1,000.00
                4/7/82 .........................     2,138.40
                5/12/82 ........................     3,649.00
                6/16/82 ........................     1,000.00
                6/22/82 ........................     1,500.00
                7/27/82 ........................     1,225.00
                8/18/82 ........................     6,700.00
                16/5/82 ........................     5,500.00
                10/15/82 .......................     3,000.00
                10/18/82 .......................     2,000.00
                11/18/82 .......................     3,500.00
                

                11/19/82 .......................     6,500.00
                12/15/82 .......................     3,000.00
                12/15/82 .......................     3,200.00
                12/30/82 .......................     2,800.00
                                                   __________
                  Total ........................   $52,015.80
                             Taxable Year 1983
                Date                                Deposits
                1/5/83 .........................   $ 2,000.00
                3/8/83 .........................     2,500.00
                5/31/83 ........................     2,400.00
                6/8/83 .........................     1,500.00
                */*/83 .........................     3,395.00
                */*/83 .........................     2,000.00
                */*/83 .........................     4,110.00
                */*/83 .........................     3,300.00
                11/*/83 ........................     3,000.00
                11/*/83 ........................     2,900.00
                                                   __________
                  Total ........................   $27,105.001
                1 The parties stipulated that deposits to the foreign account
                in 1983 totaled $24,205, but a review of the account records
                indicates that their stipulation failed to account for the
                $2,900 deposit on 11/*/83
                             Taxable Year 1984
                Date                                Deposits
                4/19/84 ........................   $ 2,393.00
                4/30/84 ........................     2,915.20
                5/30/84 ........................     4,069.30
                6/1*/84 ........................     2,717.70
                9/5/84 .........................     5,600.00
                                                   __________
                  Total ........................   $17,695.20
                             Taxable Year 1985
                Date                                Deposits
                1/*/85 .........................   $ 9,340.50
                2/*/85 .........................     1,049.00
                2/*/85 .........................       998.25
                2/*/85 .........................       931.00
                */*/85 .........................     3,428.42
                5/3/85 .........................     3,388.55
                5/24/85 ........................     3,183.60
                7/1/85 .........................     4,517.50
                11/14/85 .......................     1,235.80
                11/14/85 .......................     4,444.37
                12/12/85 .......................    17,289.57
                12/12/85 .......................     1,677.40
                                                   __________
                  Total ........................   $51,483.96
                             Taxable Year 1986
                Date                               Deposits
                4/2/86 .........................   $1096.00
                                                   ________
                  Total ........................   $1096.00
                

The account records indicate that most of the 66 deposit transactions involved the deposit of multiple checks.

During the years at issue, the foreign account earned the following amounts of interest:

                Year                          Interest Earned
                1980 ......................       $ 7,503
                1981 ......................        33,286
                1982 ......................        33,594
                1983 ......................        24,408
                1984 ......................        30,539
                1985 ......................        48,621
                1986 ......................        36,886
                

In 1980, petitioner also realized a short-term capital gain in the amount of $13,117.23 from assets contained in the foreign account.

Petitioner used a professional accountant to prepare his tax returns for each year at issue. He did not, however, provide the accountant with information pertaining to the existence of the foreign account. Consequently, the accountant did not include, and petitioner did not report on his returns for any taxable year at issue, either the interest earned on the foreign account or the short-term capital gain realized in 1980.⁶ Petitioner reported the following amounts of gross income for the taxable years at issue:

                Year                          Gross Income
                1980 ......................     $ 77,539
                1981 ......................       70,185
                1982 ......................       60,665
                1983 ......................       57,343
                1984 ......................      104,827
                1985 ......................       55,367
                1986 ......................       66,994

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