Hunter Denied Any Gift Income in ‘81, IRS Official Testifies

An Internal Revenue Service official who audited Nancy Hoover Hunter’s 1981 tax return said Thursday that Hunter denied under direct questioning that she received any income from gifts that year.

Brenda S. Howe, an IRS agent, testified in Hunter’s fraud and tax-evasion trial about an “income probe” she conducted during the audit, which took place in November, 1983.

The defense in the 234-count trial contends that J. David (Jerry) Dominelli gave Hunter large sums of cash that later turned out to have been stolen by the convicted swindler. Dominelli was Hunter’s lover and they shared a Rancho Santa Fe house during the heyday of J. David & Co.

Federal prosecutors, however, say that Hunter knew the money was obtained as part of the huge Ponzi scheme that defrauded about 1,200 investors out of as much as $90 million. The tax evasion charges against her stem from the government’s assertion that the money should have been reported as income because it was obtained as part of her employment at the J. David investment house.

Under cross-examination by one of Hunter’s attorneys, Howe said that gifts are considered to be nontaxable income by the IRS, and she did not explain this to Hunter during the audit.

A Del Mar attorney, who also testified Thursday in U. S. District Judge Earl B. Gilliam’s San Diego courtroom, said Hunter “monitored” a loan made to him by J. David & Co.

Carlo Coppo met with Hunter and Dominelli at his home in 1981 while seeking $100,000 to establish a law firm in Del Mar. Coppo said Dominelli did not review his books and records before the loan.

“He just of kind of swept it aside and said, ‘I don’t need to see this stuff’ . . . only he did not say ‘stuff.’ ”

Dominelli then said he was “interested,” to which Hunter replied, “When he says he’s interested, that means it’s a deal,” Coppo testified.

Hunter provided Coppo with forms to fill out, and a J. David trading account was established against which money could be withdrawn, he testified.

Based on paper work he saw and phone conversations, Coppo said Hunter “was monitoring the account.”