The accountants did not report the April 21, 1992, payment of $545,820 to the estate and did not plan to pay the taxes. After it was pointed out that it is taxable they apparentltly paid the taxes on the estate's fiduciary return. They continued to report the Lynch note on the estate tax return's amendments as if the $545,820 payoff had never been made; as if the note had continued on it's original schedule to it's April 21, 1995, maturity date.
"The Lynch note will not produce any capital gain since it was taxed in the estate as part of your mother's assets."
(1992.11.13 Edward White to Anthony O'Connell, Jean Nader, and Sheila O'Connell, in part.)
"The Lynch Note to the estate, a result of the installment sale of my mother's residence on 4/21/88, carries with it a taxable capital gain. The IRS requires that this capital gains tax be paid by the estate or the beneficiaries if the taxable capital gain is passed through the estate to the beneficiaries before the end of the tax year.
The gross profit percentage on the sale was seventy-nine percent (79%). The payoff of the Lynch note to the estate on 4/21/92 was $545,820.42 of which $45,067.74 was income and $500,752.68 was capital. Of that $500,752.68 in capital, 79% or $395,594.62 is taxable capital gain."
O'Connell to Edward White, in part.)
"Regretfully I have to amend my letter of Friday. There is no "stepped up basis" on the Lynch note according to the accountants who are preparing the fiduciary income tax return."
(1992.11.16 Edward White to Anthony O'Connell, Jean Nader, and Sheila O'Connell, in part)
Can we expose the accounting trails for the Lynch payment of $545,820.43 to the estate on April 21, 1992. and find out where the money went?