William S. Fairey, Jr., and Susan R. Fairey - Page 10

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          explanation of the purpose of petitioner’s payment of $27,000 to            
          Pekas.  Petitioner sent a letter, received by Hughs on April 1,             
          2002, in which he asked her to answer 28 questions, including               
          whether she had proof that all administrative steps required by             
          the Internal Revenue Code had been followed, whether statutory              
          authority for the audit existed, which Internal Revenue Code                
          section allowed her to solicit information, whether she could               
          explain the relevance of the material she sought, and whether               
          compliance with the audit was voluntary or mandatory.                       
               On April 2, 2002, Hughs requested additional documents from            
          petitioners concerning their deduction of legal, travel and                 
          employee business expenses and job search costs for 1999 and                
          2000.  Petitioner postponed a meeting that Hughs had scheduled.             
               On April 30, 2002, petitioner asked that the audit of                  
          petitioners’ 2000 income tax return be reassigned to someone                
          other than Hughs because petitioners believed that Hughs had lost           
          her objectivity.                                                            
               3.   Examination of Petitioners’ 2001 Tax Return                       
               Hughs sent a letter dated June 4, 2002, to petitioners and a           
          second letter to Susan Fairey concerning the audit of                       
          petitioners’ 2001 income tax return.  In those letters, Hughs               
          requested records of petitioner’s Schedule C income and expenses,           
          and petitioners’ employee business expenses and itemized                    
          deductions.  Hughs sent copies of a letter to each petitioner               






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