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Form 1099 issued by Seawall for the taxable year 1989. Prior to
the audit by respondent, petitioner never told Sotiriou about the
payments received from Seawall or the rent-free apartment
received from Seawall.
After respondent began the audit of petitioners' Forms 1040,
petitioner told Sotiriou about the amounts received pursuant to
the surrender agreement and the sublease agreement. Sotiriou
advised petitioner to file amended tax returns and report the
$322,500 and the fair market rental value of the new apartment.
Petitioner rejected Sotiriou's advice.
Respondent's Investigation
Respondent initiated an audit of petitioners' Forms 1040 for
the years in issue after receiving notice of a Form 1099 that was
not reflected on petitioners' Form 1040 for the taxable year
1989.
Michael Signorile (Signorile), a revenue agent for
respondent, interviewed petitioner on April 8, 1992, and again on
April 29, 1992. Spyropoulos attended each interview. Since
Signorile did not speak Greek, Spyropoulos interpreted for
petitioner during the interviews.
During the April 8, 1992, meeting with Signorile, petitioner
stated that, in exchange for vacating rooms 103 and 141, he
received the new apartment rent free for 3 years and nothing
else.
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