David and Monika Zisskind - Page 3

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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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