Jeffrey Chou and Cindy Chou - Page 4




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          owe”, the sum of $1,928,732 was reported.  Mrs. Chou’s signature            
          on the return appeared approximately 1-1/2 inches below the line            
          for “amount you owe”.  Her occupation was shown as interior                 
          designer.                                                                   
               On November 19, 2001, petitioners filed an offer-in-                   
          compromise (OIC) on “Doubt as to Liability” for 2000, citing                
          pending Federal legislation.  On December 6, 2001, while their              
          OIC was pending, the Internal Revenue Service sent them a notice            
          of intent to levy for 2000.  They ultimately withdrew their OIC             
          for 2000 based on “Doubt as to Liability”, and, on February 4,              
          2002, submitted an OIC based on “Effective Tax Administration”              
          or, in the alternative, “Doubt as to Liability with Special                 
          Circumstances”.  Their OIC was rejected on August 26, 2002, and             
          petitioners sought review by the Appeals Office.  On March 20,              
          2003, the Appeals Office sustained rejection of the OIC for 2000.           
          Petitioners sought judicial review of that rejection more than              
          30 days after the offer was rejected.                                       
               Petitioners’ Federal income tax return for 2001 was timely             
          filed in April 2002.  On or about July 20, 2003, petitioners                
          filed joint amended returns for 2000 and 2001, claiming that the            
          transaction involving the Cisco shares originally reported on               
          their 2000 tax return should have been reported in 2001.                    
          Petitioners explained their position as follows:                            
                    Taxpayers amend their 2001 personal income tax                    
               return to report their * * * [AMT] preference in tax                   






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