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for Relief from Hardship) in which they asked that the late
payment addition for 1993-95 be abated and that a payment plan be
negotiated.
For January 1997, petitioner Nancy Flynn received gross pay
of $5,734.94 from the Tracy Elementary School District and
$1,204.49 from the Tracy Joint Union High School. Petitioners’
home was sold on April 3, 1997, due to default under a deed of
trust.
Petitioner met with Sims on April 24, 1997. After that
meeting, petitioners retained a new certified public accountant,
Ned Leiba (Leiba).
On September 2, 1998, petitioners filed an amended return
for 1994, in which petitioners reported a reduced amount of tax
of $27,708. In it, petitioners reported that they did not have
cancellation of indebtedness income in 1994 under section
108(a)(1)(B) because they were insolvent when a debt was canceled
in January 1994. On December 21, 1998, (a) petitioners paid the
late payment addition and the tax owed for 1993, 1995, and 1996,
and (b) Leiba gave Sims a letter in which petitioners requested
that respondent abate the late payment addition for 1993-97 and
refund those amounts.
Respondent accepted petitioners’ amended 1994 return as
substantially correct in that respondent reduced the amount of
tax due from $98,729.52 to $27,719.73. On January 4, 1999, Sims
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