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petitioners's cousin and his wife, Keith and Renee McIntosh. In
addition, petitioners provided verification for property taxes
paid in 1995 and legal and professional fees paid in 1996.
The enclosures further included a copy of an escrow
statement dated August 30, 1994, from the Fidelity National Title
Insurance Company of California (Fidelity National) for "PROPERTY
ADDRESS: AP #007-060-04" crediting petitioners with a deposit of
$11,104.67 (the same amount as the "US Bank" check mentioned
above). Petitioners also enclosed a copy of a handwritten
receipt to petitioners from Fidelity National dated August 29,
1994, in the amount of $11,104.67, naming "US Bank" as "maker".
The items were submitted as verification of a portion of the cost
of goods sold claimed on the Schedules C for 1996.
The petition in this case was filed on September 16, 1999.
The Court filed respondent's answer on October 26, 1999.
Mr. Brown faxed additional information to the IRS Office of
Appeals (Appeals) on November 11, 1999. The information was
related to petitioners' 1994 tax year. Mr. Brown settled the
1994 tax issues with the IRS, and he considered the "auto,
property taxes, and insurance" issues to be "carryover" issues
from the settlement to 1996.
In a letter to Mr. Brown dated November 17, 1999, Appeals
requested additional information about the settlement of the
1994 "carryover" adjustments and additional information to verify
insurance and interest expenses. Appeals also requested
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