Hire a competent tax professional to help you resolve this
issue. You are being too emotional about this.

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"Greg Lovern" <gregl[at]gregl.net> wrote:

- quote -

Ask them to transfer the case to an Office Examination group
in your local area; then you can go in and discuss it with a
human.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Greg Lovern wrote:

- quote -

Okay; but did you right away sell that stock? If so, you
should have some documentation on the "costs" of the options
that were added to your W2.

- quote -

should be a simple matter to document this. And you
did,didn't you?

- quote -

Explaining is one thing, but documenting it is quite another
thing, and I'm guessing this is what you failed to do.

- quote -

Now I know that's what you failed to do.

- quote -

Do not agree with it if you know you're right. and......

- quote -

get some professional help in your local area. either an
Enrolled Agent (EA) or a CPA.

- quote -

see above.

ChEAr$,
Harlan Lunsford, EA n LA

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"Greg Lovern" wrote:

- quote -

Normally you must obtain it, if you have no credible way to
reconstruct what add'l amounts were in your W-2s for those
years. If it's the case here that the amt included in
income is part of your basis for the stock sold, IRS'
position is correct, at least up to this point in the
process. However, if you appeal it, Appeals will have a
problem working the case over the simple and arguably silly
matter of who is to seek the info from Microsoft and whether
it can be obtained, but they likely need do mere computer
query...and maybe even using their own software products.
:-)

If you don't supply it, then Appeals will likely bounce the
case to an Examination function more local to you to secure
it from your former employer by summons if necessary, to
remove a serious litigation hazard. The reason is that
Appeals must consider and minimize such hazards in order to
dispose of the case. However, especially in high-volume
Service Center exams, which I'm guessing this is, there's
practical reasons IRS must limit its inquires to third
parties, but your appeal forces the case one step or two
from potential trial and gives IRS little choice.

Other posters are correct that you would be unwise to handle
an appeal yourself on this issue, should for some odd reason
the documents can no longer be obtained, so it's best you
find that out first. So correspond with MS now if you
haven't done so and timely request an appeal, with or
without the add'l info. You need not necessarily hire
representation initially, because if you can't get it, then
your first phone contact with the appeals officer
(preferably) or even the first conference can be limited to
outlining the steps you took and if IRS has attempted to or
will now agree to get it. If they can't or won't, say
you'll now be engaging representation.

If you obtain the info prior to a scheduled conference, send
it to the Appeals Officer, who probably will send it to
Examination to recompute any gain or loss and seek your
agreement if not a "no change," and barring any other
technical problems you don't want to handle, you shouldn't
need representation for that manner of disposition.

- quote -

Refer to IRS Pub 5, where you are allowed to make a Small
Case Request, wherein you merely request an appeal. You may
include any add'l facts or documents not yet furnished, but
otherwise any argument or the fact you're still waiting on
Microsoft is not a good idea. Better to talk to the Appeals
Officer as advised above, as that opportunity may not arise
for even a couple months or so, allowing you enough time to
follow up with MS if necessary should they be nonresponsive.
Better to annoy them than make the case more complicated
for you and IRS to resolve.

Reg,
Fred F.

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"Barney Byrd" <Barney_Byrd[at]fictitious.org> wrote:
- quote -

Greg,

Did you send only an explanation?

Did you send an amended return?

Try this:

Complete an amended return, for an explanation state
something to the effect: 'the taxpayer inadvertently omitted
the capital transacations and associated costs noted in the
enclosed notice with the original filing'

the transactions are entered on schedule D --- include the
cost basis on that schedule.

recalculate the tax and mail.

DO NOT WAIT FOR THE 'SNOD' a/k/a death notice.

Bernie

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"Barney Byrd" <Barney_Byrd[at]fictitious.org> wrote:
- quote -

Bad, Bad advice. Why wait for them to hit you with the
hammer? I would suggest sending them ANOTHER complete
explanation. Include all documentation as you can. Write as
though you were corresponding with a 4th grader: keep it
simple and basic. Tell them that they have ignored your
correspondence. Include a complete documentation of your
situation. Keep a copy.

If they still do not respond appropriately, then you can go
to the Taxpayer Advocates office, and they will help you
out. ( go to IRS.gov and search for Taxpayer Advocate)

DO NOT WAIT for them to hit you with the Statutory Notice.
Don't go the Tax Court route... it's time consuming,
expensive and will only frustrate and enrage you with the
ever so slow way the wheels of government roll along.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Barney Byrd wrote:

- quote -

Ouch! It sounds like they have offered the poster an appeal
on a PRE SNOD basis. If that's the case, why would you
recommend that he NOT avail himself of this opportunity at
this time? Having to deal with the Tax Court simply adds yet
another layer of complexity to the problem. (Or, are you
speculating that perhaps a SNOD will never be issued and the
matter simply dropped?)

MTW

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Greg Lovern wrote:

- quote -

Given the amount of money involved, I would recommend that
you hire a professional to represent you. At the "appeals"
level you can be represented by a CPA, EA or attorney
(however, only an attorney or other court-approved
practitioner can represent you in Tax Court). The most
important thing is to find a practitioner with LOTS of
appeals experience.

MTW

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From what I remember of the original post, it sounded like
the IRS got some 1099Bs and they want the full amount of the
stock sales. The taxpayer did not account for the basis in
the stocks.

Can't he just submit an amended return with a correct
Schedule D?

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"Greg Lovern" <gregl[at]gregl.net> wrote:

- quote -

You need to provide supporting documentation for your
response, it is not good enough to "just say so."

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"Greg Lovern" <gregl[at]gregl.net> wrote:

- quote -

By law, IRS must send you a Statutory Notice of Deficiency
(SNOD) before they can assess the tax without your
agreement. Upon issuance of a SNOD, you will have 90 days
in which to petition the U.S. Tax Court for the purpose of
contesting the assessment without first having to pay the
tax. The Tax Court has no jurisdiction to consider the case
until a SNOD has been issued and even then they only have
jurisdiction when a timely petition has been filed. There
is a filing fee, I think it's $60. Only a tiny percentage
of docketed Tax Court cases actually go to trial. The vast
majority are settled after conferences with Appeals
Officers.

I recommend you do nothing until IRS sends you a SNOD, which
will arrive by registered mail. With the SNOD in hand, file
your own petition with the U.S. Tax Court. You can download
a blank petition from the U.S. Tax Court website.

http://www.ustaxcourt.gov

The process I've described above could easily drag on for 2
or more years because IRS has an acute shortage of Appeals
Offices. If you should move or change addresses at any time
during the process, make sure you notify IRS, the Tax Court,
and your local IRS Appeals Office.

Barney Byrd

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A short while back, I recieved a letter from the IRS saying
that they couldn't find the cost basis of stock sold for 5
items regarding my 2002 return. They said they would assume
a zero cost basis and charge me additional tax, fees, and
interest accordingly if I couldn't explain.

The first four items were stock options excercises with my
employer. The way stock option excercises work for that
employer is that the income is treated as additional regular
income -- taxes are withheld, and the income is added to the
amount reported on the W-2 in box 1 ("Wages, tips, other
comp."). For 2002, this is described in Publication 525,
page 11, the paragraph with the boldface heading "Dividends
recieved on restricted stock".

The employer is Microsoft -- so thousands of people are
doing the same thing. I first excercised stock options in
1997, and never had a problem with it. However, I have since
left Microsoft so I can't get help from them on this IRS
problem.

The fifth item was stock sold at a loss by my wife shortly
before we were married. She forgot to tell me about it when
I was preparing our first joint return. The cost basis was
$1,391.20, and she sold it for $1,180, so her capital loss
was $211.20.

I explained all this in my response to the IRS, and I
recieved a letter from them saying they had recieved my
response and that I would hear from them later.

Today I recieved their decision. They say I still owe the
money, and their explanation is the same as before -- "We
used the zero cost basis because we were not able to
determine the cost or the adjusted basis of the stock sold."

It's as if they never bothered to read my response!!! I know
they recieved it because they sent me a letter saying they
recieved it.

They included a response form on which I mark whether I
agree or disagree, and they included a paper titled "Your
Appeal Rights and How To Prepare a Protest If You Don't
Agree". Apparently I now need to file a written protest and
have an appeals conference.

Any suggestions on how best to go about this?

Where can I find an example of a written protest?

Do I send in the written protest along with the response
form, or do I send it separately? Do I send it to the same
address?

What documentation should I bring to the appeals conference?
For the first four items, how can I show that the money is
included in line 1 of the W-2? Do I need to get
documentation from my former employer itemizing everything
that went into line 1 of the W-2?

Do I have to pay for a lawyer or would it be reasonable to
represent myself at the appeals conference?

And finally -- how can they be so stupid???

Thanks for any suggestions.

Greg

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