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Lorenz improperly. Petitioners' accountant wrote the following
to respondent's counsel:
It was crystal clear to me that the agreement with
respect to the fraud penalty was that a 20% penalty
would be asserted against Mrs. Lorenz with respect to
her share of the additional tax. It is incredulous for
me to believe that you would not inform us as to the
impact of such an agreement (i.e., the government would
collect the entire 75% from both the estate and the
individuals) if the estate has sufficient assets. You
should have been acutely aware of the fact as all of us
that the estate possessed sufficient assets from which
to collect the difference between the 20% and the 75%.
Any reasonable person would conclude that we would
never agree to such an application as you now attempt
to explain to us.
Petitioners' counsel wrote a letter to respondent's counsel
in which he said:
The only clear and rational interpretation of the
negotiated penalty concession was that Mrs. Lorenz was
to pay a 20 percent fraud penalty on her one-half and
the Estate of Kevin Lorenz was to pay the full 75
percent penalty on its one-half.
Discussion
A. Fraud Penalty
1. Computation of the Fraud Penalty
The parties agree that the estate of Mr. Lorenz and Mrs.
Lorenz had a deficiency in income tax; i.e., total underpayment,
of $14,720 for 1989 and $54,630 for 1990.
Respondent calculated the fraud penalty to be paid by the
estate of Mr. Lorenz by applying the 75-percent rate to Mr. and
Mrs. Lorenz's total underpayment for each year in issue.
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