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applied to the Rosenthals’ 1997 estimated tax. The return was
prepared by Louis’s accountant, Harold Benenstock, a C.P.A. who
prepared returns for both Louis’s plumbing business and the
Rosenthals personally. Petitioner was not involved in the
preparation of the return.
Shortly before April 15, 1998, during the preparation of the
Rosenthals’ 1997 joint return, Mr. Benenstock discovered that, in
1996, Louis had withdrawn a large amount of money from his
account at Republic National Bank (formerly Crossland Savings
Bank), but Mr. Benenstock did not believe the withdrawal was
taxable. Louis suffered a stroke in August 1998 and died on
September 1, 1998. Petitioner never discussed the withdrawal
with Louis, nor was she aware of the amount prior to his death.
After Louis’s death, petitioner’s attorney, recognizing that
the withdrawal constituted a taxable distribution from an
Individual Retirement Account (IRA) (the IRA distribution),
contacted Mr. Benenstock and asked him to prepare an amended 1996
return. On November 22, 1998, petitioner submitted a Form 1040X,
Amended U.S. Individual Income Tax Return, for 1996 on behalf of
herself and Louis (the amended 1996 return). The “Explanation of
Changes to Income, Deductions, and Credits” contained the
following statement:
Taxpayer, 90 years old, transferred $90,000 from
individual retirement account. He did not receive a
1099R and did not report income on his individual
return.
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