- 12 - Schedule K-1 was incorrect because Mr. Dunne still owned 50 percent of FRC. On August 14, 2001, petitioners jointly filed a Form 1040 for 1999. This return was due on April 15, 2000. The Transfer of Legal Title On October 30, 2000, Mr. Dunne, Mr. Marcus, and FRC entered into an agreement and release of claims to settle all disputes between them. Pursuant to the agreement, Mr. Dunne endorsed and delivered his FRC stock certificates to Mr. Marcus, and Mr. Marcus and FRC paid Mr. Dunne the balance of the funds due to him under the arbitration award. Respondent’s Examination In mid-2001 the Internal Revenue Service (IRS) began examining petitioners’ 1997, 1998, and 1999 Federal income tax returns. Petitioners provided the examining agent with a large number of documents. Petitioners also gave the examining agent a summary of their position, which concluded that Mr. Dunne transferred beneficial ownership of his FRC shares on May 8, 1997. In her April 15, 2002, examination report the examining agent concluded that petitioners had deficiencies of $822,298 and $2,566 for 1997 and 1999, respectively. The examining agent also concluded on the basis of the arbitration award that the settlement date for the stock sale was June 22, 1998; thus petitioners were required to include all of the amounts reportedPage: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 NextLast modified: March 27, 2008