Law Offices--Richard Ashare, P.C. - Page 12

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               On August 10, 1995, the agent prepared a report that stated            
          that petitioner was liable for alternative minimum tax (AMT); the           
          agent limited the scope of his report to AMT because the                    
          application thereof generated the maximum amount of taxes that              
          could be recovered for 1993.  On the same day, respondent                   
          forwarded the agent's report to Mr. Bess as part of a 30-day                
          letter.  Petitioner had notified respondent that Mr. Lieberman              
          and his coworker, Mr. Bess, both served as its representatives              
          for purposes of the 1993 audit.  On January 29, 1996, the agent,            
          after learning months before that he had incorrectly applied AMT            
          to petitioner's 1993 taxable year, prepared a second report that            
          stated that petitioner was not entitled to deduct any of Mr.                
          Ashare's "compensation".  On the same day, the respondent mailed            
          that report to Mr. Bess as part of a second 30-day letter.                  
               Between the dates of the 30-day letters, the agent was                 
          considering Mr. Ashare's personal income tax liability.  In                 
          connection therewith, the agent requested petitioner's board                
          minutes from Mr. Lieberman, who also represented Mr. Ashare.  Mr.           
          Lieberman delivered to the revenue agent petitioner's board                 
          resolutions for 1993, which included the resolution mentioned               
          above as to the promissory note.  The agent prepared his second             
          report on petitioner's 1993 taxable year on the basis of                    
          information that he received from petitioner on or before August            
          10, 1995.                                                                   

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