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assessment and collection of the additional tax liability
proposed by the report.
Subsequently, petitioners consented and agreed to the
finding of the State of New York Department of Taxation and
Finance that they owed an additional tax liability for their 1995
taxable year. The consent form prepared by the Department of
Taxation and Finance and signed by petitioners (New York consent
form) stated: "Net Adjustments to N.Y. State Income" of
$178,034. The document stated "Audit Increases to N.Y. State
Income" of $178,034 based on a "Difference in 'T' account". The
document further stated an amount of $0 for "Other Taxes or
Disallowed Credits".
Respondent timely issued a statutory notice of deficiency to
petitioners for their 1995 taxable year. Respondent determined
that petitioners failed to report Schedule C income in the amount
of $178,034. The notice of deficiency stated in pertinent part:
"Information on which we based our adjustment was derived from
your state's taxing agency."
Petitioners filed a timely petition contesting the notice of
deficiency. Subsequently, the Court issued a notice to the
parties setting the instant case for trial, along with a Standing
Pre-Trial Order which required the submission of Trial Memoranda
to the Court and opposing counsel at least 15 days before the
first day of the trial session. The Standing Pre-Trial Order
further required identification of witnesses in the Trial
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