Fletcher H. Hyler - Page 5

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               Petitioner sold the Woodside property for $1.6 million and             
          acquired the Portola Valley property for $4 million.  He                    
          estimated that the Portola Valley property was worth $6.5 million           
          when he bought it and $10 million at the time of trial in May               
          2002.  He applied available funds to the debt on his Portola                
          Valley residence rather than to his outstanding tax liabilities             
          (acknowledged at $67,000) because of the perceived necessity of             
          maintaining his residence and his lifestyle for business reasons.           
               On February 3, 1999, Rausch sent a 30-day letter explaining            
          proposed deficiencies for 1995.  In response, Stone filed a                 
          timely protest requesting that the proposed deficiency for 1995             
          be reviewed by the IRS Appeals Division.  Appeals Officer                   
          Lawrence Dorr (Dorr) of the San Francisco Appeals Office                    
          undertook the requested review.  Beginning in April 1999, he sent           
          at least four contact letters to Stone and spoke with her on the            
          telephone on at least one occasion.  During the course of their             
          discussions, Stone did not inform Dorr that petitioner had moved            
          from the Woodside address shown on his 1997 return.                         
               Stone did, however, send to Dorr a facsimile cover sheet               
          requesting more time to submit information.  On June 25, 1999,              
          Dorr replied in a letter stating that, if his office did not see            
          some progress on the matter within 2 weeks, it would be necessary           
          to issue a notice of deficiency.  Stone did not reply to that               
          letter, and, on August 19, 1999, the San Francisco Appeals Office           

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