Kenneth C. Rathbun, et al. - Page 6

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                         Thank you for your cooperation; and if you have              
                    any further questions please contact me * * *.                    
                                        Sincerely,                                    

                                        Fred R. Rawley                                
                                        Appeals Officer                               
               On April 6, 1996, respondent served summonses on Charles and           
          Gladythe with respect to their 1993 gift tax liability.  Shortly            
          thereafter, the couple retained attorney Larry Johnson (Mr.                 
          Johnson) to represent them with respect to respondent’s                     
          examination.  On December 5, 1996, respondent’s examiner proposed           
          an alternative theory conceding that the Rathbun children, along            
          with their parents, were members of an informal partnership on              
          January 11, 1993, but that the children “gifted” a portion of               
          their interests in the lottery winnings to Charles and Gladythe             
          upon creation of the limited partnership.  Faced with                       
          respondent’s new argument, the Rathbun children also retained Mr.           
          Johnson in February of 1997.                                                
               On September 8, 1999, respondent issued additional 30-day              
          letters to Charles and Gladythe that mirrored the argument                  
          outlined in the 1995 30-day letters.  On the same day, respondent           
          issued individual 30-day letters to the Rathbun children that               
          advanced the alternative theory.                                            
               On November 10, 1999, Mr. Johnson filed a written protest to           
          the 30-day letters, and the case was reassigned to respondent’s             







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