Phyllis J. Merendino - Page 4

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          respondent contacted the Merendinos concerning the filing of a              
          tax return.  On August 8, 1998, the Merendinos executed Form                
          2848, Power of Attorney and Declaration of Representative,                  
          appointing Robert D. Grossman, Jr. (Mr. Grossman), and David A.             
          Carris to be their representatives for the 1996 taxable period.             
               In late December 1998, respondent received a Form 1040, U.S.           
          Individual Income Tax Return, from the Merendinos for the taxable           
          year 1996 bearing the apparent signatures of both Merendinos, and           
          reflecting a joint filing status.  On December 22, 1998,                    
          respondent’s Revenue Agent Steven Swartz (Mr. Swartz) received a            
          telephone call from Mr. Grossman instructing Mr. Swartz not to              
          process the joint return, as the Merendinos were considering                
          refiling a return reflecting a filing status of married filing              
          separate (MFS).  Mr. Grossman confirmed the communication in a              
          letter dated December 22, 1998.  On January 4, 1999, Mr. Grossman           
          directed respondent, through Mr. Swartz, to process the received            
          joint return.  The tax shown on the return in the amount of                 
          $405,860 was unpaid.                                                        
               On January 5, 1999, Mr. Swartz called Mr. Grossman to                  
          inquire about the payment of the 1996 liability.  Mr. Grossman              
          informed Mr. Swartz that the Merendinos would not be sending a              
          payment on the 1996 liability, but rather would be seeking a                
          joint offer-in-compromise through respondent’s Baltimore office.            
          However, in a letter dated February 11, 1999, Mr. Grossman                  

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