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IRS Examinations
Mr. Arberg’s 1999 tax return was examined by the IRS, and a
notice of deficiency was issued to Mr. Arberg on June 19, 2002.
In the notice, the IRS disallowed the $20,754 in travel expenses
and $2,790 of car and truck expenses claimed on the Schedule C
and instead recharacterized those amounts as miscellaneous
unreimbursed employee expenses on Schedule A, Itemized
Deductions. The changes resulted in a deficiency of $135.
Mr. Arberg on July 3, 2002, signed a Form 5564, Notice of
Deficiency Waiver, agreeing to immediate assessment and
collection of the proposed deficiency, which waiver was received
by the IRS in August of 2002.
Meanwhile, on September 18, 2001, the IRS commenced an
examination of petitioners’ joint return for 2000. During that
examination, in March of 2002, petitioners provided the IRS with
an unsigned joint Form 1040X, Amended U.S. Individual Income Tax
Return, for 2000 and an unsigned revised Form 1040 for 2000
reflecting the changes noted on the Form 1040X. The returns were
not intended to be filed or processed but purported to set forth
petitioners’ position for purposes of the audit. As relevant
here, the principal difference between the original and the
revised returns pertained to the reporting of the originally
claimed Schedule C loss.
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Last modified: November 10, 2007