Sally Conforte v. Commissioner of Internal Revenue, Joseph Conforte v. Commissioner of Internal Revenue

Joseph and Sally Conforte appeal from a decision of the tax court sustaining tax deficiencies and penalties which had been assessed against them for the calendar years 1973 through 1976. Conforte v. Commissioner, 74 T.C. 1160 (1980). Jurisdiction is based on 26 U.S.C. § 7482 . They question the tax court’s failure to limit their tax payments at the 50 percent maximum rate and its application of fraud penalties. In addition, the government has moved to dismiss the appeal of Joseph Conforte on the ground that he is a fugitive from justice. As to Sally Conforte’s appeal we affirm in part, reverse in part, and remand. The motion to dismiss the appeal of Joseph Con-forte is conditionally granted.

I

The Confortes, who were husband and wife during the years in question, owned and operated the Mustang Ranch Brothel (Mustang Ranch), a legal house of prostitution located in and licensed by Storey County, Nevada. For each of the years 1973 through 1976, the Confortes filed a Form 1040, U.S. Individual Income Tax Return, which reflected only their names, addresses, social security numbers, filing status (married, filing a joint return), exemptions, an amount designated as taxable income and…