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taxable years. The OIC provided that petitioners would pay
$32,000 to satisfy these liabilities, with $27,000 to be
initially deposited upon respondent’s acceptance of the OIC, and
$5,000 to be paid 6 months after respondent’s notice of
acceptance. As part of the OIC, petitioners were to “comply with
all provisions of the Internal Revenue Code relating to the
filing [of] returns and paying [of] required taxes for five (5)
years from the date IRS accepts the offer.” Petitioners signed
the OIC on January 30, 1997.
Respondent accepted petitioners’ OIC by return letter dated
March 28, 1997. In his acceptance letter, respondent provided
that “the conditions of the offer require [petitioners] to file
and pay all required taxes for five years from the date shown in
the upper right corner of this letter.” To avoid default on the
OIC, petitioners were required to timely file and pay their taxes
through March 28, 2002.
Over the next 5 years, petitioners either did not timely
file, and/or did not timely pay, and/or failed to report all of
their income on their Federal tax returns.
1. Taxable Year 1997
Petitioners failed to report all of their income on their
1997 Federal income tax return. Respondent issued a notice of
deficiency for taxable year 1997, which petitioners subsequently
defaulted. As a result of the default, respondent assessed an
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