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respectively. On October 3, 1997, 30-day letters were sent to
SCC, Mikes, and Hamilton. The letters proposed to increase
Mikes’s and Hamilton’s income for 1993 and 1994 by the amounts of
$2,680,313 and $2,253,256 respectively and to increase the income
of SCC by $272,840 for 1993 and $74,426 for 1994. Those proposed
changes would have resulted in deficiencies for Mikes and
Hamilton of $398,101 for 1993 and $130,892 for 1994.
On March 27, 1998, a reviewer in respondent’s Quality
Measurement Staff submitted a proposed notice of deficiency (the
reviewer’s proposal) with respect to the 1993 and 1994 Federal
income tax returns of Mikes and Hamilton. The reviewer’s
proposal was to be reviewed by the Office of District Counsel
(District Counsel) in Jacksonville, Florida. The reviewer’s
proposal recommended an increase in the income reported on the
1993 and 1994 returns of FCC and SCC and also proposed increases
to the income reported on the 1993 and 1994 returns of Mikes and
Hamilton in the amounts of $2,698,549 and $2,300,647,
respectively.
On May 29, 1998, District Counsel rejected the reviewer’s
proposal and advised her to obtain petitioners’ agreement to
extend the statutory period of limitations for assessment, which
would allow the staff time to further explore the facts of the
case. Petitioners consented to extend the statutory period of
limitations until June 30, 1999. Consequently, respondent did
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