Estate of Kevin J. Lorenz, Deceased, Elizabeth J. Lorenz, Personal Representative and Elizabeth J. Lorenz - Page 5

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                        The civil fraud penalty will be asserted in full                                
                  with respect to the estate of Kevin Lorenz, and at a                                  
                  reduced rate of 20 percent with respect to petitioner                                 
                  Elizabeth Lorenz.                                                                     
                  Petitioners' counsel then said that he had a question and                             
            asked to go off the record to clarify it with the revenue agent.                            
            When the parties went back on the record, they announced they had                           
            answered petitioners' counsel's question but had still not agreed                           
            to the "starting number" for Comet; i.e., its gross income for                              
            1989.  The parties had agreed to certain adjustments, but had not                           
            agreed on whether the amount of gross income to which they should                           
            apply those adjustments was the amount in the revenue agent's                               
            original report or amended report.  The following discussion                                
            occurred next:                                                                              
                        MS. OSHIRO:  * * * There was a [sic] original                                   
                  revenue agent's report and an amended revenue agent's                                 
                  report.  In the amended revenue agent's report, a                                     
                  $15,000 concession was made.  The question is whether                                 
                  the statutory notice of deficiency was based upon the                                 
                  original revenue agent's report or upon the amended                                   
                  revenue agent's report.  If the notice of deficiency                                  
                  was based upon the original revenue agent's report,                                   
                  then respondent will then concede the $15,000; if it is                               
                  based upon the amended revenue agent's report, then                                   
                  petitioners agree that that number does not get                                       
                  conceded again.                                                                       
                        MR. HAMMER:  That's correct.                                                    
                  Following another recess requested by the parties,                                    
            respondent's counsel stated that the parties had reached the                                
            following basis of settlement for 1989:                                                     

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