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The estate tax return was filed on June 4, 1979. The amount
of tax shown on the return to be due ($7,972) was paid at the time
the return was filed. Subsequently, the Estate made a payment to
the Internal Revenue Service (IRS) in the amount of $1,204; the
reason for this payment is not stated in the record.
Respondent examined the estate tax return in 1981 and
disallowed the $38,000 theft loss, contending that at the time of
the theft the assets stolen no longer were the property of the
Estate but rather had been distributed to Ms. Gardiner as
beneficiary. Petitioner and Ms. Gardiner agreed to the resulting
tax assessment of $12,701 by signing Form 890 (Waiver of
Restrictions on Assessment and Collection of Deficiency) on July
24, 1981. The assessment for the $12,701 deficiency occurred on
December 7, 1981.
In 1987, a representative of respondent requested petitioner
to sign an agreement extending the 6-year period of limitations for
collection of the deficiency against the Estate, which petitioner
refused to do. A representative of respondent then approached Ms.
Gardiner with the same request; she signed the Form 900 agreement
(Tax Collection Waiver) on October 16, 1987, which extended the
period for collection to December 31, 1993.
Statutory interest of $31,275 had accrued on the deficiency
through December 21, 1993 (the mailing date of the notice of
liability to petitioner). Penalties assessed with respect to the
deficiency through December 21, 1993, totaled $191. Payments on
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