Peter D. Adkison - Page 3




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          transaction referred to as Bond Linked Issue Premium Structure or           
          BLIPS.                                                                      
               The Adkisons separated in December 1999 and were divorced in           
          late 2001.                                                                  
               In 2002, in response to an Internal Revenue Service (IRS)              
          announcement soliciting taxpayers to disclose their participation           
          in certain tax shelter transactions, the Adkisons informed the              
          IRS that they participated in the BLIPS transaction through                 
          Shavano during 1999.  During 2003, the IRS began an examination             
          of the Adkisons’ 1999 tax return.                                           
               In 2004, petitioner submitted to the IRS an election to                
          participate in a settlement program pertaining to the Shavano tax           
          shelter transaction.  Although the parties attempted to draft a             
          final closing agreement with regard to petitioner’s tax liability           
          for 1999, the negotiations failed when petitioner requested that            
          the closing agreement include language stating that petitioner              
          was entitled to relief pursuant to section 6015(c), which                   
          provides that taxpayers filing a joint return may seek an                   
          allocation of the tax liability associated with the return.  In             
          October 2004, petitioner remitted to the IRS $2.5 million to be             
          posted as a cash bond against his tax liability for 1999.                   
               On December 21, 2004, respondent sent a Notice of Final                
          Partnership Administrative Adjustment (FPAA) to Shavano for its             
          taxable year ended December 21, 1999.  In May 2005, a partner               







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