Phyllis J. Merendino - Page 13

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          signed.  Wiest v. Commissioner, T.C. Memo. 2003-91 (citing Notice           
          98-61, sec. 3.03(2)(b), 1998-2 C.B. 756, 757); see also Rev.                
          Proc. 2000-15, sec. 4.03(1)(d), 2000-1 C.B. at 449.  Petitioner             
          contends that she did not know or did not have reason to know               
          that the liability would not be paid.  Petitioner asserted in               
          documentation submitted to the Appeals Office that she expected             
          the tax liability would be paid out of the sale of Dr.                      
          Merendino’s business and that although a portion of the                     
          outstanding liability was attributable to her, Dr. Merendino had            
          always paid the tax liabilities in previous years and she                   
          expected him to do so again for the 1996 liability.  At trial,              
          petitioner testified that she believed the funds to pay the tax             
          liability would come from the sale of Dr. Merendino’s business              
          and from the overpayment of $400,000 that Dr. Merendino made for            
          a previous year.  Petitioner further stated that she relied on              
          Dr. Merendino to file the return and pay the taxes.                         
               Petitioner’s reasons for believing that the tax liability              
          would be paid are not credible.  The return was filed in December           
          1998.  It was not reasonable for petitioner to rely on the funds            
          from the sale of Dr. Merendino’s business to pay for the tax                
          liability by the time the return was filed.  The settlement of              
          the lawsuits against Dr. Merendino’s business occurred on June              

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