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petitioner received in 1987 was in repayment of loans she had
made to Mr. Sharer during that year.
Petitioner failed to file timely her income tax return for
1986. Her 1986 return was filed on October 18, 1988.
By letter dated November 16, 1990, the Internal Revenue
Service (IRS) informed petitioner that her 1986 and 1987 returns
had been selected for examination. In the letter, an audit
appointment was scheduled for December 12, 1990, and attached to
the letter was an Information Document Request (IDR), requesting
that petitioner provide certain information, which included bank
records, documentation on her income from taxable and nontaxable
sources, and returns and other tax statements concerning
petitioner's investment in the partnership from which she claimed
partnership loss deductions for 1986 and 1987. Petitioner did
not provide the requested information to the IRS.
On January 17, 1991, the IRS sent another letter and a
second IDR, this time to petitioner's attorney. The second IDR
requested essentially the same information and documentation that
had been sought by the first IDR. The second IDR also asked for
promissory notes and records on loans that petitioner made from
1986 through 1988. Petitioner again did not provide the
requested records. As a result, the IRS summonsed bank records,
obtained a copy of the partnership agreement of the partnership
in which petitioner claimed loss deductions for 1986 and 1987
from the Sacramento Recorder's Office, and obtained a copy of
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