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continued reasonably to believe that they had paid all taxes
respondent had asserted they owed relating to their 1980-83 tax
liabilities arising from White Rim. The parties settled
petitioners’ 1980 Tax Court case on December 8, 1997. At that
time, petitioners still believed that they had fully paid the
1980 deficiency and interest thereon.
4. Respondent’s Discovery of Petitioner’s Amended Returns
On February 23, 1998, petitioners wrote to respondent
seeking information about their 1981-82 amended returns. As a
result of petitioners’ letter, respondent realized that
respondent had lost petitioners’ 1981-82 amended returns.
Respondent found and processed petitioners’ 1981-82 amended
returns in March 1998.
On April 27, 1998, we entered a decision in petitioners’
1980 case that petitioners had a deficiency in income tax of
$39,599 for 1980. On August 21, 1998, respondent issued to
petitioners a notice of tax due for 1980 showing an assessment of
additional tax of $39,599, interest of $93,172.57, an adjustment
or credit of $74,537.94, and a balance due of $58,233.63.
B. Petitioners’ Claim for Abatement of Interest
Respondent abated interest from May 1987 to March 1998 with
respect to petitioners’ 1981 and 1982 tax years. In April 1999,
petitioners filed a claim under section 6404(e) in which they
asked respondent to abate $16,512.15 of interest for 1980 and
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