Pepper Pot Trust, David-Keith Jacobs, Trustee - Page 3

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               On April 10, 2001, respondent issued to each trust a Final             
          Notice of Intent to Levy and Notice of Your Right to a Hearing              
          relating to each trust’s 1996-97 tax years as follows:                      
                    Pepper Pot Trust    1996      $1,671.10                           
                                        1997      27,511.54                           
                    Tuffy Ruffy Trust   1996      59,840.09                           
                                        1997      90,344.89                           
                    Susan Bell Trust    1996      11,357.75                           
                                        1997      44,049.10                           
                    Brandy Dandy Trust 1996       21,323.94                           
                                        1997      56,283.41                           
               On April 12, 2001, respondent filed with the Fresno County             
          Recorder’s Office a notice of Federal tax lien relating to each             
          trust’s income tax liabilities for tax years 1996-97.  On April             
          17, 2001, respondent sent a notice to each trust that the notice            
          of Federal tax lien had been filed.                                         
          B.   The Section 6330(b) Hearing                                            
               On May 3, 2001, the trusts each filed a Form 12153, Request            
          for a Collection Due Process Hearing, for tax years 1996-97 in              
          which they contended that:  (1) Section 861 and the regulations             
          thereunder preclude the income at issue in these cases from being           
          taxable, and (2) the regulations upon which respondent relies are           
          invalid because they were not published in the Federal Register;            
          and asked that respondent give them case citations showing that             
          income is taxable.                                                          








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