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Petitioners filed a joint Federal income tax return for
1988. By September 16, 1991, they owed $109,580.82 on their 1988
income tax liabilities. Notices of Federal Tax Lien concerning
that joint liability were filed during the fall of 1991. On
October 4, 1991, petitioners' 1989 Federal income tax return was
filed on their behalf approximately 1 year late. They had filed
and received two extensions of time in which to file their 1989
return. No payment was made with the filing of the 1989 return,
and, on November 4, 1991, the IRS assessed penalties for a
failure to pay estimated tax and for late filing. During the
winter and spring of 1992, the IRS recorded Notices of Federal
Tax Lien against petitioners relating to their 1989 return.
Petitioners' 1990 joint Federal income tax return was filed on
their behalf on December 17, 1991, 8 months late. On December
17, 1991, penalties for the late filing and for failure to pay
estimated tax were assessed against petitioners. During the
Spring of 1992, the IRS recorded Notices of Federal Tax Lien
concerning petitioners' 1990 joint tax liability.
In the notice of deficiency sent to petitioners in the
instant case, respondent determined that petitioners failed to
include flowthrough income from BGE in the amounts of $79,380 and
$18 on their 1992 joint Federal income tax return. Petitioners
concede that the flowthrough from BGE for petitioner's husband's
share of the net settlement proceeds ($79,380) received by BGE
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