Estate of Kevin J. Lorenz, Deceased, Elizabeth J. Lorenz, Personal Representative and Elizabeth J. Lorenz - Page 10

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            will be asserted in full against the estate of Mr. Lorenz and                               
            that Mrs. Lorenz is liable for a reduced fraud penalty at an                                
            amount of 20 percent.  By agreeing that the fraud penalty applies                           
            both to Mrs. Lorenz and to the estate of Mr. Lorenz, they have                              
            each conceded that a part of their underpayment is due to fraud.                            
            Therefore, liability for the fraud penalty is joint and several                             
            because part of the underpayment is due to the fraud of each                                
            spouse.  Sec. 6663(c); Meier v. Commissioner, supra.                                        
                  The parties agreed to a reduced rate for the fraud penalty                            
            for Mrs. Lorenz, but did not reduce the base to which the penalty                           
            applies for either petitioner.  It follows that respondent                                  
            properly calculated the fraud penalty for the estate of Mr.                                 
            Lorenz by applying the 75-percent rate to Mr. and Mrs. Lorenz's                             
            total underpayment for each year in issue and for Mrs. Lorenz by                            
            applying a 20-percent rate to Mr. and Mrs. Lorenz's total                                   
            underpayment for each year.                                                                 
                              2.  Petitioners' Arguments                                                
                  Petitioners contend that (a) the parties had previously                               
            orally agreed to apply the fraud penalty separately to the estate                           
            of Mr. Lorenz and Mrs. Lorenz based on only one-half of the                                 
            underpayment, and the failure of the basis of settlement to so                              
            provide was a mutual mistake; (b) respondent's counsel knew that                            
            the estate could pay the difference between the 20 percent and                              

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