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On or about April 15, 1989, petitioner filed for an
extension to file the 1988 Federal income tax return together
with a payment of $469. On the extension form, petitioner
indicated that he would claim joint filing status.
On October 5, 1990, after substantial negotiation,
petitioner and Mrs. Noonan signed an Indemnification and Hold
Harmless Agreement (the indemnification agreement). The
indemnification agreement recited that the Noonans had not filed
tax returns for the years 1986, 1987, and 1989, and that they
agreed to file joint tax returns for 1986 and 1987 reflecting
refunds due. According to the indemnification agreement,
petitioner agreed to accept sole financial responsibility for all
taxes, interest, and penalties connected with the 1988 Federal
return in exchange for Mrs. Noonan's agreement to sign a 1988
Federal tax return claiming joint filing status. Petitioner and
Mrs. Noonan further agreed that a 1988 California State income
tax return (the California return) would be filed after execution
of the indemnification agreement, but that a 1988 Federal return
would not be filed at that time because petitioner was
financially unable to pay the indicated liability. Petitioner
and Mrs. Noonan further agreed that Mrs. Noonan would sign a
completed 1988 joint Federal return which would be retained by
Hill, Farrer, & Burrill (the law firm) until petitioner notified
the law firm that he was able to pay the entire tax liability.
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