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would fully pay all tax liabilities asserted by respondent
relating to their White Rim investment.
Early in 1987, petitioners told respondent’s representatives
that petitioners planned to file 1981-82 amended returns and that
they thought that, as a result, they would owe no tax for those
years. Samuel Coleman, a certified public accountant, prepared,
and in May 1987 filed, petitioners’ amended returns for 1981 and
1982 in which they carried back net operating losses (NOLs) from
1984 and 1985 to 1981 and 1982, resulting in zero tax due for
1981 and a $2,844 refund for 1982.
Respondent’s Brookhaven Service Center lost petitioners’
1981-82 amended returns in 1987. Respondent did not process them
until March 1998.
Sometime after they filed their amended returns, petitioners
wrote to respondent seeking information about their 1981 amended
return. An employee in respondent’s office in Holtsville, New
York, wrote in reply that respondent would respond more fully in
90 days. Shortly thereafter, respondent informed petitioners
that respondent had transferred the matter to respondent’s office
in Newark, New Jersey. On June 11, 1987, petitioners wrote to
respondent at respondent’s Holtsville, New York, office seeking
information about their 1982 amended return. Respondent replied
to petitioners on September 23, 1987, stating that respondent
would respond more fully in 90 days. Respondent did not contact
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