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nold’s letter dated August 4, 1997. Mr. Barmes’ letter dated
September 29, 1997, stated in pertinent part:
The Service has filed notices of federal tax lien
against the trusts, which are based on allegations that
the trusts are alter egos, nominee agents, constructive
trusts and/or transferees. The Service has further
proceeded against Marvin and Barbara Barmes as if they
are partners, filed notices of federal tax lien based
on this alleged partnership status, and apparently
proceeded against Marvin and Barbara Barmes individu-
ally.
It should be readily apparent that it is the
Service which has prevented us from filing appropriate
forms at this time. Until the Service determines which
legal theory pertains to us by taking a coherent posi-
tion, our hands are tied. * * *
* * * We need your help or binding assurance that
if the trusts file Form 1041's, then all filing re-
quirements have been met. * * *
In that letter, Mr. Barmes further asserted that Sandbar Whole-
sale Trust and Sandbar Real Estate Trust were “contractual
trusts”, which he described as “not so much a trust as a contrac-
tual relationship based on trust form”.
Notice of Deficiency
In the notice of deficiency (notice) issued to petitioners
for 1995, respondent determined, inter alia, to increase the 1995
Schedule C gross receipts and consequently petitioners taxable
income by $890,719.32 With respect to those determinations,
32Although respondent determined to increase petitioners’
taxable income for 1995 as a result of respondent’s determination
to increase petitioners’ Schedule C gross receipts for that year,
for convenience we shall refer only to unreported gross receipts
(continued...)
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