Phillip and Gladies Aaron - Page 4

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          Income, Credits, Deductions, etc., reported $447,653 as                     
          petitioner’s share of the income from BP Concessions for 1997.              
          Petitioners’ Tax Returns                                                    
               On their Form 1040, U.S. Individual Income Tax Return, for             
          1997, petitioners reported a Schedule K-1 distributive share of             
          $447,653 of nonpassive income from BP Concessions and a total tax           
          of $103,708.2  On their Form 1040 for 1998, petitioners reported            
          a distributive share of $21,336 of nonpassive income from                   
          Schedule K-1 from BP Concessions and a total tax of $35,909.                
          They sought a refund of $5,825.  On March 29, 2000, petitioners             
          signed both returns.                                                        
               Petitioner decided to report the distributive share of                 
          income from BP Concessions on his Form 1040 for 1997 so that he             
          would not be viewed as underreporting his income.  Petitioner               
          intended to amend his return and “correct the situation at a                




               2  On their 1997 return, petitioners reported that they had            
          overpaid their taxes by $217,952 and sought a refund of $192,952            
          and application of $25,000 to their 1998 estimated taxes.  This             
          alleged overpayment was based on petitioners’ belief that the               
          Internal Revenue Service (IRS) owed them a refund of $300,000               
          plus interest.  The alleged refund arises from a prior dispute              
          with the IRS concerning petitioner’s personal liability on unpaid           
          employment taxes for his corporation, National Waste Co., Inc.              
          Petitioners claimed a refund on their 1997 return of $300,000               
          plus interest on the basis of their allegation that the IRS sold            
          their personal residence at below market value when it foreclosed           
          on their house to collect the unpaid employment taxes.                      
          Petitioners never filed a claim for refund with a U.S. District             
          Court.                                                                      





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