$125,188

If you try to find out where the payment of $125,188 to the estate on April 21, 1991, went, I believe you will never get past the accounting entanglement of $241.81

1992.05.29   (Anthony O'Connell to Edward White) (Copies to E. A. Prichard, Forrest Balderson, Jean Nader and Sheila O'Connell)
"Thank you for your letter concerning the Seventh Trust accounting. In the future would you please send letters concerning me or the trust directly to me? It will save the beneficiaries attorney expense. I would appreciate you sending a copy to Mr. Prichard. I talked with Mr. Forrest Balderson today. Mr. Balderson prepared the account and states that the numbers are correct. He reminded me that court accounting and taxable accounting are different animals and often do not match. I believe this applies to your questions in paragraphs 1 and 2. Please feel free to call Mr. Balderson at (703) 549-7800.
I will try to address your paragraph 3. Rather than wait until the end of each year and calculate the exact net income of the trust to be distributed to my mother, I estimated the net income in April so I could make the distribution to her immediately after the trust received the annual April payment. The consequent year end adjustments were:
Third Account                $ -5,906.72 (Mother owed to trust)
Fourth Account               $  - 687.03 {Mother owed to trust)
Fifth Account                $ +5.796.98 {Trust owed to mother)
Sixth Account               $  -2.908.97 {Mother owed to trust)
Net carryover                 $ -3.705.74 {Mother owed to trust)
Seventh Account,1991  $ +5.181.71 {Trust owed to mother}
The net carryover of $-3.705.74 up to the seventh account combined with the $ +5.181.71 of the seventh account netted $1.475.97 the trust owed my mother. This is the $ 1,475.97 check I mailed to you. Mr. Balderson tells me he called you concerning the real estate taxes before he did the account and discussed it with you. Is it necessary to change it now? My trust accounting is on a cash basis. I think a per diem split of the September interest would be accrual accounting. I don't think I can mix the two methods. If the Commissioner of Accounts says it's appropriate, it's fine with me. At this point in time, I believe Mr. Balderson and I are of one mind that the estate does not owe the trust and the trust does not owe the estate.
I have a few questions concerning my mother's 1991 tax return.
1. My copy shows she should be penalized by IRS and Virginia because adequate estimated tax payments were not made after her death. I believe my sister is convinced I am responsible for this. If it is my fault, I will pay for it out of my pocket. I feel the other beneficiaries should not be charged for the negligence of another. Would you please lay out the specifics on what happened?
Please be very specific.
2. My copy also does not show the principal of $125,188.17 paid to my mother by the Lynch Note in April of 1991. It does show the interest. With a gross profit percentage of .79 on the installment sale, about S 98,898.65 of the $125,188.17 should have been reported on line 13 of the 1040 as a capital gain. It appears that this omission is up and above the penalties and interest already acknowledged. Why was it not reported? Will you amend the return?
3. On Schedule B under dividend income, what is the significance of "**BAL ON 1040 OF JEAN NADER, SSN 225 50 9052"?  I look forward to your response."
Your truly , Anthony O'Connell "

1992.06.11   (Edward White to Anthony O'Connell, copies to Jean Nader and E.A. Prichard)
'Thank you very much for your letter of June 9 and the appraisal.
I am helping Jean with the county matter and would appreciate your assistance since you certainly have much more expertise in the Accotink affair than anyone else. I agree that we must amplify the material previously sent to the county, and that the letter you enclosed is most pertinent. I had copies you sent me several years ago of the 1987 letters you wrote and received, but did not have the October letter.
Enclosed is a proposed addendum for the county which I wish you would look over, edit and add any comments that you think we should make. I am sure there are many factors that I have missed that you can add and welcome your input.
With regard to the income tax matter and the capital gain from the receipt of principal on the Lynch note in April 1991, I was following the 1990 return and simply did not pick up the fact that there was a principal payment in 1991. I will most certainly pay any interest and penalty which might accrue in this regard, and sincerely appreciate your calling it to my attention.
Again, I appreciate your help.
Sincerely, Edward J. White"

$284.74 accounting entanglement

I believe the $284.74 percentage payment is unusual and unusual is a flag. If you try to find out where the payment of $125,188 to the estate on April 21, 1991, went, I believe you will never get past the accounting entanglement of $241.81. It entangles Jean O'Connell's individual taxes, her estate, the beneficiaries, and Edward White.

1992.06.30   (Edward White to Jean Nader)
"Enclosed are: Virginia and IRS amended 1991 tax returns to be signed and mailed, letters to the IRS and Virginia, checks for each, and gift tax returns for 1989 and 1991 to be to be signed and mailed.
I will pay any interest and penalty which accrues on the amended tax return. The amount reflects the tax on the $125,188.17 principal payment made on the Lynch note in the Spring of 1991.
I never heard from Tony after my letter asking his input on the real estate tax matter. I gather from his letter to Fairfax County that he is taking it over which is fine with me.
Sincerely, Edward J. White"

1992.09.14   (Edward White to Jean Nader)
"Enclosed is the IRS reply to the amended income tax return which was filed to reflect the Lynch principal payment in 1991 which resulted in an additional $28,334.00 in federal tax.
They did not assess a penalty, but did assess interest in the amount of $526.55 for what I gather is the period from April 15 through July 7, 1992.
Since the estate would have had to pay the $28,334.00 in taxes in April, and as a result of the non payment, earned interest on the money, I have split the payment of the IRS assessment between me and the estate.
During the period of 83 days that the money was in the estate account it earned an average of 3.753% which equates to $241.81. My share is $284.74. The checks are enclosed. Please sign the estate check if you agree and mail the package to the IRS. I am sure we will hear from Virginia to a lesser degree.
Please send a copy of this letter to Tony.
Sincerely, Edward J. White"

Bk467p194, note 6
"6.  When the 1991 income tax was prepared by Edward J. White, Co- Executor, a large capital gain was omitted necessitating the filing of an amended return. $526.55 was assessed in interest by the IRS. The figure is the amount of interest earned by the estate while the amount due the IRS was in the estate bank account. The balance of the interest assessment was paid by Edward J. White.)

Justfications to the IRS and Virginia
(1991 IRS Form 1040)

I don't understand why the accountants did not report the Lynch note 1 payment of $125,188 to Jean O'Connell on April 21, 1991, until it was pointed out that they should. Edward White wrote the Deed of Trust and the Notes that describe the time for the payments. He was Trustee for the Deed of Trustee. Joanne Barnes reported the Lynch note 2 payment to the Trust u/w of H. A. O'Connell on April 21, 1991. I sent Edward White and Joanne Barnes a copy of the Lynch Notes payment schedule on April 24, 1989.

1992.04.04 (Edward White and innocent Jean Nader to IRS, on Jean O'Connell's 1040, IRS Form 2210) (estimated date based on same date as State return)
"Jean M. O'Connell 23050 6044
Form 2210
Waiver of penalty request
Mrs. O'Connell died on September 15, 1991`. Prior to that date she had made all of her estimated tax payments in a timely manner.
The nature of her income was not clear to the estate until Spring 1992.
It is requested that the penalty be waived due to unusual circumstances in which it would be inequitable to impose the penalty."

1992.06.30?) (Edward White and innocent Jean Nader to IRS, on Jean O'Connell's 1991 1040x, page 2, part 3)
"Co-executors were following the 1990 return and were unaware decedent received a principal payment on note in 1991.
Copies of schedule D and Form 6252 which should have been filed are attached.
It is requested that the penalty and interest be waived in this case."

1992.06.30 (Edward White and innocent Jean Nader to IRS)
"Enclosed is an amended return in this case. The amendment reflects the receipt of $99,337.00 of taxable income which was-due to a principal payment on a note.
This payment was received in the Spring of 1991. Mrs. O'Connell died in September 1991. The original returns were based upon her previous year's return when there was no such payment; At the time of filing the receipt of this capital gain had not been called to the attention of the Co-Executors.
It is requested that the interest and penalty in this case be waived.
Sincerely, Edward J. White    Jean M. Nader  Co-executors"