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$62,804, respectively, were reported as "Cost of labor".
During the period 1982 through 1993, interest rates under
section 6621 ranged as follows from a high of 20 percent in 1982
to a low of 7 percent in 1993: Interest rates under section 6621
were 20 percent in 1982, 10 percent in 1986, 8 percent in 1987,
10 percent in 1990, 9 percent in 1991, 8 percent in 1992, and 7
percent in 1993.
In 1992, the collection division of the Internal Revenue
Service (IRS) issued a summons because the IRS did not have a
record that Paul & Joe, Inc., had filed a Form 1120S for any of
the years 1985 through 1991. When the IRS received no response
to the summons, the matter was referred to the examination
division of the IRS and assigned to William Joseph Slater (Mr.
Slater), a revenue agent in that division. Around October 1994,
Mr. Slater wrote a letter to petitioners in which he indicated
that the IRS had no record of having received Forms 1120S for
Paul & Joe, Inc., and requested that they contact Mr. Slater to
discuss the matter. Because petitioners did not respond to Mr.
Slater's letter, Mr. Slater contacted the individual who was
shown in petitioners' returns as their return preparer in order
to obtain an explanation regarding the failure of Paul & Joe,
Inc., to file Forms 1120S. Shortly thereafter, Mr. Slater
received Forms 1120S for Paul & Joe, Inc., for 1991, 1992, and
1993, which were signed by Mr. Mifsud and petitioners' return
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