Mary Lee Sharer - Page 5

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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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