Frederic S. Clayton and Marlene B. Clayton - Page 3

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            the assessment plus additions to tax, fees, and accrued interest                             
            and issued a refund check.                                                                   
                  On October 8, 1991, petitioners filed another Form 1040X for                           
            taxable year 1985 (second amended return) and sought to carry                                
            back the remainder of the NOL from 1988 and part of their NOL                                
            from 1987.  Respondent returned the second amended return and                                
            advised petitioners that NOLs, arising in different taxable                                  
            years, must be carried back on separate Forms 1040X.                                         
                  In response to respondent's letter, Mr. Kevin Wulff,                                   
            petitioners' accountant, prepared two separate Forms 1040X for                               
            1985.  One return carried back part of the NOL from 1987 and                                 
            reflected an overpayment of $65,937 (third amended return).  The                             
            other return carried back the NOL from 1988 and increased                                    
            petitioners' alternative minimum tax by $72,747 (fourth amended                              
            return).  In addition, Mr. Wulff prepared an amended return for                              
            taxable year 1984, carrying back the balance of the NOL arising                              
            in 1987 and reflecting an overpayment of $56,956 (fifth amended                              
            return).                                                                                     
                  Petitioners included the overpayments on line 23 (refunds to                           
            be received) of the third and fifth amended returns.  Neither                                
            return included a statement requesting that the overpayments be                              
            applied to petitioners' additional liability of $72,747, which                               
            was reflected in the fourth amended return.  Mr. Wulff, however,                             
            prepared a cover letter addressed to respondent indicating his                               
            intention to call and request that the overpayments from the                                 




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