Robert B. Kemp, Jr. - Page 3

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               On or about February 21, 1995, petitioner filed an amended             
          Federal income tax return for 1990, reporting additional taxable            
          income of $134,859.                                                         
               Petitioner paid all of the additional tax due and accrued              
          interest with respect to the foregoing amended returns.                     
               At some point between June 1994 and April 1995, petitioner’s           
          1993 taxable year was added to the examination covering 1992.  In           
          April 1995, petitioner’s examination was assigned to a new                  
          revenue agent, who discussed the examination of 1992 and 1993 on            
          two occasions with petitioner’s representative.  No additional              
          information was obtained from petitioner by respondent after                
          August 10, 1995.                                                            
               On or about August 25, 1995, the revenue agent examining               
          petitioner’s returns initiated a civil fraud referral for 1992              
          and 1993, and on September 12, 1995, the agent issued a 30-day              
          letter to petitioner proposing civil fraud penalties for those 2            
          years.                                                                      
               On September 20, 1995, a special agent from respondent’s               
          Criminal Investigation Division met with the revenue agent                  
          conducting petitioner’s 1992 and 1993 examination regarding                 
          petitioner’s case, and all civil action concerning those years              
          ceased.  On December 15, 1995, the special agent issued a                   
          memorandum to respondent’s Examination Division advising it to              
          suspend or not initiate any civil action against petitioner for             






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