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12, 1997. Petitioner admitted to both Mr. Swartz and this Court
that she was aware that Dr. Merendino did not receive any
significant cash proceeds from the sale of the business.
Petitioner contended at trial that she expected the funds
from the overpayment would pay the 1996 liability. Dr. Merendino
stated during the Appeals process that he was notified about the
overpayment, but those funds were never available to him. There
is evidence that Dr. Merendino told petitioner that he had an
overpayment to pay the tax, but there is no evidence of when he
told her or whether petitioner had reason to believe those funds
would be available at the time the return was filed showing the
balance due. The source of the overpayment was from overpaid
Federal employment taxes of a business which was sold 2 years
earlier. Further, Dr. Merendino never received a refund from the
alleged overpayment. We believe that a prudent person would
inquire about the details of the overpayment and when it would be
paid before relying on the existence of an overpayment to pay a
tax liability that was more than $400,000. In addition, the
Merendinos’ attorney’s own statements near the time the joint
return was filed, indicating that the Merendinos wished to
negotiate a joint offer-in-compromise, diminish the plausibility
of petitioner’s vague testimony regarding the expectation of
receiving the refund from the overpayment. Given petitioner’s
other misstatements, we do not find the expectation of funds from
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