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Quadrino & Schwartz asserted a lien of 50 percent against the
recovery paid by Connecticut General, asserted a lien against
every monthly disability benefit payment paid by Connecticut
General to petitioner, and maintained that amount in the escrow
account until resolution of the dispute.
Quadrino & Schwartz maintained the escrow account at
Citibank in 2002. The escrow account schedule reflects that
interest of $3,186.49 was earned on the account from July 3,
2002, through February 14, 2005. Petitioner also maintained an
individual bank account at Citibank.
Petitioner was married to Lucy Lejin Qi Connors
(Mrs. Connors) on February 14, 2001. Neither petitioner nor
Mrs. Connors filed a Federal income tax return for 2002 or paid
any taxes for that year. A substitute return under section
6020(b) was prepared by the Internal Revenue Service for that
year on February 1, 2005. Petitioner was a cash basis taxpayer
in 2002.
Procedural Matters
Respondent sent a notice of deficiency for 2002 to
petitioner on May 27, 2005. Petitioner filed the petition in
this case on August 15, 2005. The petition placed in issue only
the insurance proceeds, alleging:
4. The determination of the tax set forth in the
said notice of deficiency is based upon the following
errors:
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