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the tax returns Mr. Jones gave her to sign during 1981 because,
at that time, she trusted him.
Upon audit of the Joneses’ 1981 return, the Internal Revenue
Service (Service) proposed disallowing the Schedule C loss
claimed by the Joneses with respect to the art tax shelter and
allowing only their cash outlay as a deduction. On August 20,
1984, the Joneses agreed to the assessment of additional tax for
1981 resulting from disallowance of the Schedule C loss with
respect to the art tax shelter by signing Form 1902-B, Report of
Individual Income Tax Examination Changes. The Joneses made an
advance payment of $610.52 on the art tax shelter adjustment on
August 22, 1984, that covered the additional tax as originally
proposed plus interest. On September 29, 1984, and March 1,
1985, respectively, the Joneses and a representative of the
Service also executed a Closing Agreement on Final Determination
Covering Specific Matters concerning only the art tax shelter for
which the Joneses had claimed deductions for 1980, 1981, and
1982.
On April 25, 1985, the Joneses and a representative of the
Service executed a Form 872-A, Special Consent to Extend the Time
to Assess Tax, extending the period of limitation for assessment
with respect to their 1981 year. The Form 872-A provided that
the Service could assess additional tax with respect to the 1981
taxable year at any time subject only to certain limitations.
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