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petitioner and defendants entered into a Confidential Settlement
Agreement and General Release (settlement agreement) wherein
petitioner would receive $75,000 for pain and suffering regarding
the alleged claims. Petitioner received $75,000 in settlement
proceeds from Woody’s Wharf in 1998. Woody’s Wharf issued a
Form-1099 MISC, Miscellaneous Income, to petitioner and reported
the payment to the Internal Revenue Service.
II. Tax Return
Petitioner timely filed a 1998 Federal income tax return
reflecting a tax liability of $3,460. There was no remittance
with the return. In March 2000, petitioner paid in full the
outstanding tax liability, plus accruals of interest and an
addition to tax for failure to timely pay the tax shown on the
return.
III. Adjustments and Notice of Deficiency
On July 26, 2000, respondent issued a 30-day letter to
petitioner proposing changes to her 1998 return, resulting in an
additional tax liability due from petitioner of $25,466.
Petitioner disagreed with the proposed changes.
On December 6, 2000, respondent issued a notice of
deficiency for 1998 determining a deficiency of $19,024, and an
accuracy-related penalty under section 6662(a) of $3,805.
Petitioner did not file a petition with this Court, but on
December 12, 2000, petitioner’s counsel submitted a letter to
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Last modified: May 25, 2011