Married taxpayers were liable for fraud penalties for failing to report wage and dividend income from the daycare centers they owned and operated. The taxpayers also each had a credit card tied to the corporate bank account, which they used to purchase personal items such as college tuition, vacations, jewelry, and other luxury items. Their adult children also made personal purchases using the corporate credit cards, even though they were not employees of the daycare centers. The daycare center also paid for a Hummer, a BMW, and an Escalade for the taxpayers and their children to drive as their personal vehicles. (Hacker v. Comm., TCM 2022-16)
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