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Petitioner was issued a refund of $6,330 plus interest of $183.31
for a total of $6,513.31.
In a letter dated July 17, 1984, the Internal Revenue
Service (IRS) notified petitioner that for tax year 1983 First
Energy was an abusive tax shelter the deductions from or credits
for which "are not allowable". On November 4, 1986, the IRS sent
petitioner's attorney a settlement offer regarding First Energy.
After no response was received, the IRS issued a notice of
deficiency dated July 13, 1987, determining deficiencies in
petitioners’ Federal income taxes for 1980 and 1983 in the
amounts of $6,330 and $5,717, respectively, and additions to tax
for 1980 in the amounts of $316.50 and $1,899 under sections
6653(a) and 6659, respectively. The underpayment of tax for 1980
was determined to be a substantial underpayment attributable to a
tax motivated transaction under section 6621(c).
Petitioner filed a petition with the Court on August 17,
1987, for a redetermination of the deficiencies. After a timely
answer was filed, respondent, on October 15, 1987, sent
petitioner's case to the Appeals Office to give petitioner
another opportunity to accept the "national" settlement offer.
On January 13, 1988, respondent's counsel wrote to petitioner's
counsel inquiring "whether you intend to litigate all issues, or
only the penalty issues, and whether you will agree to a test
case approach." In a letter dated March 10, 1988, petitioner
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