Joseph D. & Elizabeth M. Dunne - Page 12
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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.
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 reported
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Last modified: March 27, 2008