12
During the course of the audit, petitioners were informed
that the corporate returns that they filed for the FCC were
incorrect in that they filed Forms 1120 using subchapter C filing
status when the FCC was a subchapter S corporation. Petitioners
discovered that an accountant whom they hired filed an
application for subchapter S status for the FCC with the IRS on
May 1, 1986. Petitioners concede that they signed the
application but maintain that they were not aware of its contents
or its impact. As a result of this error, petitioners' personal
returns were affected. Respondent proposed numerous adjustments
to petitioners' returns for the years at issue, including the
determination that petitioners were entitled to NOL's for 1989
and 1990.
Petitioner testified that during the audit conducted by an
IRS examiner referred to only as Ms. Van Der Heyden, the 1989 and
1990 NOL's, and their carryback to 1986 and 1987, respectively,
were discussed. According to petitioner, in response to his
request to file amended returns for 1986 through 1990 to properly
reflect the NOL's and overpayments resulting from the carrybacks
thereof, Ms. Van Der Heyden explained that the policy of the IRS
does not permit taxpayers to file amended returns while involved
in an audit. Petitioner further testified that he was assured by
Ms. Van Der Heyden that the IRS would allow him to carry back the
NOL's and obtain refunds for the resulting overpayments.
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