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at the law firm of Hercules & Lavery for approximately $400 per
month, and he referred to the firm approximately a dozen of his
clients who required specialized work. In early 1989, Hercules &
Lavery asked petitioner to vacate the leased premises after they
discovered that he was holding himself out as a member of their
firm.
B. Petitioner's Dealings With James Franz
In January 1987, James Franz hired petitioner to create a
retirement plan. He paid petitioner a $10,000 retainer. On
December 6, 1988, petitioner incorporated Showwalter, Inc.
(Showwalter), under Texas law. Mr. Franz served as Showwalter's
sole shareholder and director. Petitioner subsequently created a
profit-sharing plan for Showwalter and prepared and filed an
application with the Internal Revenue Service (IRS) to determine
whether the profit-sharing plan was a qualified plan under the
Internal Revenue Code.
C. Petitioner's Dealings With Virginia Shaw
In December 1987, Virginia Shaw hired petitioner to prepare
her 1987 tax return. In 1988, she paid him a $5,000 retainer in
five $1,000 monthly installments. On August 12, 1988, petitioner
filed a request for a 2-month extension of time to file Ms.
Shaw's return. Petitioner provided the following reason for his
extension request: "As the preparer, I am behind due to audits
and tax court cases. The taxpayer should not be penalized
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