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Petitioner operated a dental practice as a professional
corporation. From 1983 through 1995, the corporation was liable
for Federal employment taxes and corporate income taxes.
Petitioner filed returns for the corporation, but he did not pay
the tax liabilities. After the taxes were assessed,
approximately $275,000 was collected by levy upon assets of the
corporation in the possession of third parties.
Petitioner’s corporation filed a refund suit in the U.S.
District Court for the Eastern District of Pennsylvania, docket
No. 97-0762, contending that the excess of the moneys collected
by levies on corporate assets should have been applied to his
personal income tax liabilities or should be refunded. The
District Court appointed a certified public accountant as a
“Special Master” to meet with the accountants for both parties in
an attempt to determine the correct amounts of assessment of
interest and penalties and payments with respect to the
corporation’s tax liabilities. In a Memorandum Opinion and Order
filed January 18, 2001, the District Court concluded that only
$331.50 was available to have been applied to petitioner’s
personal income tax liabilities. The District Court concluded
that the IRS properly accounted for all payments made by the
third parties, applying the payments first to the oldest
liabilities of the corporation, and that penalties and interest
had appropriately accrued on the balances remaining.
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Last modified: May 25, 2011