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with revenue agent Powell (May 30, 1996 meeting). During that
meeting, revenue agent Powell questioned petitioners about the
information requested in the summons with respect to petitioners’
1994 joint return, and petitioners responded that they were not
required under the Fourth and Fifth Amendments to provide such
information to respondent. Consequently, revenue agent Powell
ended the May 30, 1996 meeting.
During the course of the examination of petitioners’ 1994
joint return, on a date after April 30, 1996, and before May 20,
1996, that is not disclosed by the record, revenue agent Powell
received a report (CID report) from the Criminal Investigation
Division (CID) of the Internal Revenue Service (IRS). The CID
report indicated that Barbara’s Gift Shop had failed to file
certain Federal employment tax (employment tax) returns and had,
in the opinion of the CID, arbitrarily changed the classification
of its workers from employees to independent contractors.
Revenue agent Powell became aware from reading the CID report
that Sandbar Wholesale Trust was formed sometime during October
1995. On May 20, 1996, revenue agent Powell forwarded the CID
report to respondent’s revenue officer Shawn Kennedy (revenue
officer Kennedy) for further investigation of the employment tax
issues contained therein.
During the course of the examination of petitioners’ 1994
joint return, on a date after May 30, 1996, and before November
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