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of the distribution. However, petitioner did not make any
estimated tax payments during 1999.
Despite their 1999 Federal income tax return’s being due on
August 15, 2000, petitioners filed their return on December 4,
2000. Petitioners reported the distribution of income from
Mercer, total income of $154,751, taxable income of $121,530, and
total tax of $42,159. Petitioners reported zero total payments,
an estimated tax penalty of $805, and a total amount due of
$42,964. Petitioners paid only $500 with their return.
On January 1, 2001, respondent assessed the total amount
petitioners reported due, an addition to tax of $7,589 under
section 6651(a)(1) for failure to timely file, and an addition to
tax of $1,895 under section 6651(a)(2) for failure to pay the
amount shown as tax on the return.
On November 27, 2002, petitioners submitted to respondent a
Form 656, Offer in Compromise, and a Form 433-A, Collection
Information Statement for Wage Earners and Self-Employed
Individuals. Petitioners proposed to pay $14,000 to compromise
their outstanding tax liability for 1999. Respondent found that
petitioners’ Form 433-A was insufficient, questioned the source
of several deposits into petitioners’ bank account, and
questioned their involvement in at least two limited liability
companies. On July 7, 2003, respondent requested more
information from petitioners. Respondent found the additional
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