Theron R. Livingston, Sr. - Page 7




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               After petitioner husband’s plea agreement, Gim Baker                     
          (Baker), a revenue agent for the Internal Revenue Service (IRS),              
          was assigned to examine petitioner husband’s 1989 Federal income              
          tax liability and petitioners’ 1990 joint Federal income tax                  
          return.   Baker issued letters to both petitioners, requesting                
          them to provide documentation such as income records and expense              
          records.  In response, petitioner husband sent Baker a letter                 
          stating that it was impossible for him to collect the necessary               
          documents while he was incarcerated and requesting that the civil             
          examination be postponed until his projected release in 2000.                 
          Petitioner wife–-whose liability related only to taxable year                 
          1990--refused to provide the requested information until the IRS              
          showed her what information it had in its possession.                         
               In conducting the civil investigation, Baker relied on the               
          criminal net worth computation rather than performing an                      
          independent income reconstruction for either year in issue.                   
          Except for her unsuccessful attempt to procure information from               
          petitioners, Baker conducted no investigation regarding                       
          petitioners’ finances and did not verify the numbers contained in             
          the criminal net worth summary.  Instead, she copied the criminal             
          net worth summary that was attached to petitioner husband’s plea              
          agreement, using identical numbers to calculate the increases in              
          net worth for each of the taxable years 1989 and 1990 but making              
          certain modifications.  For instance, in drafting the notice of               





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