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conference, petitioner and intervenor entered into an agreement
on July 9, 2001. This agreement provided that
Defendant [intervenor] shall assume full financial
responsibility and shall pay the 1998 income tax liability,
penalties and interest which currently total approximately
$10,500.00. Defendant shall indemnify Plaintiff
[petitioner] and shall hold him harmless for the payment of
said tax liability.
This provision was incorporated into an Equitable Distribution
Consent Order and Judgment filed by the State court on May 17,
2002.
Petitioner and intervenor filed a joint Federal income tax
return for taxable year 1998. The return was prepared by a
return preparer, Jay Martin, before it was signed by petitioner
and intervenor. Mr. Martin was an acquaintance of intervenor and
primarily dealt with her rather than petitioner in preparing the
return. Due to an error by Mr. Martin, the $14,399 earned by
intervenor in 1998 was not reported on the return. For an
unknown reason, the $805 in income which intervenor earned in
1998 and which was reported on a Form 1099-MISC also was not
reported on the return. Neither petitioner nor intervenor
thoroughly reviewed the return, and neither corrected the omitted
items of income, prior to signing the return.
Only what appears to be a portion of the statutory notice of
deficiency is in the record. The notice recites the following
items of income as nonemployee compensation paid to petitioner
and intervenor:
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