Tax Type
Individual Income Tax
Description
Jeopardy assessment
Topic
Collection of Delinquent Tax
Date Issued
04-16-1987
April 16, 1987
Re: §58.1-1821 Application, Individual Income Tax
§58.1-313 Jeopardy Assessment;
Dear ********************
This is in response to your letter of January 12, 1987, in which you applied for correction of an erroneous assessment of income tax for 1986.
The assessment was based on information obtained from police sources that the taxpayer had been observed making sales of cocaine for a period of about eight months prior to his arrest. The police stated that information from confidential informants indicated that the taxpayer had been 3 major source of cocaine and that the amount of cash seized, $ ************* was about one week's profit.
We understand that ************* stated to the police at the time of his arrest that the money seized was personal savings accumulated from earnings as an apple picker and from gambling winnings and that he had been unemployed for the period between September, 1985, and his arrest in May of 1986
Examination of our records indicated that the taxpayer had filed joint returns for 1983 and 1984 reporting federal adjusted gross income of $ *********for 1983 (accompanied by W-2 statements for wages totaling $***** and $ ******* for 1984 (accompanied by W-2 statements for wages totaling ***********. Although gambling winnings are taxable income, it appears that no income from gambling was reported in 1983 or 1984. No return has been filed to this date reporting earnings for 1985 from apple picking, gambling or any other source.
Based on this information we estimated the taxpayer's income from sales of cocaine for the first 19 weeks of 1986. We determined that collection was in jeopardy based on the fact that no 1985 return had been filed; the fact that had ********not registered as a dealer or filed a Retail Sales and Use Tax return although he had been observed making sales of tangible personal property over an eight month period; the large amount of cash in the taxpayer's possession compared with the reported income for 1983 and 1984; the fact that********* had been observed earning substantial amounts of income in 1985 and 1986 which had not been reported; the fact that, even by the taxpayer's own statements, there existed a substantial amount of unreported income from gambling; and the risk that the cash might be seized by other creditors or dissipated by the taxpayer if prompt action were not taken.
However, upon further investigation in response to your application, we discovered that we had misunderstood information received over the telephone. Instead of representing one week's profit, the cash seized actually represented two week's profit. Accordingly the estimate of income has been revised and the assessment will be reduced. Attached is a schedule showing how the revised assessment was computed.
In the absence of returns for 1983, 1984, 1985 and 1986 reporting income consistent with the circumstances and the statements by ********* the assessment, as adjusted, appears to be based on the best information obtainable at this time. Enclosed are copies of the returns filed by******* for 1983 and 1984 (with accompanying W-2 statements) which may assist you in preparing returns for 1985 and 1986.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner