T.C. Memo. 2003-297
UNITED STATES TAX COURT
NICHOLAS J. AND DIANE L. PALIHNICH, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10591-00. Filed October 23, 2003.
Petitioners (Ps) claimed deductions relating to
White Rim, a limited partnership in which they owned an
interest in 1980-83. Respondent (R) determined that Ps
were not entitled to deduct losses from White Rim.
In 1987, Ps filed amended returns for 1981-82.
Without Ps’ knowledge, R lost those returns for almost
11 years. In March 1998, R found and processed those
amended returns. If R had timely processed those
returns, overpayments from 1985-87 and a refund from
1982 would have been available to pay Ps’ 1980 tax
liability. Ps believed in 1987 that, as a result of
tax payments they had made and carrybacks to which they
were entitled, they had paid all or substantially all
of the amounts R said Ps owed for 1980-83.
R abated interest for 1981-82 that accrued while
the returns were lost, but did not abate interest for
1980. Ps filed a claim for R to abate interest on
their income tax liability for 1980 and additional
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