Re:       New Client–Jon Jonsen (SS# XXX-XX-XX56)

Our new client, Jon Jonsen, is a respected lumberyard owner and amateur real estate developer in Bath, Wisconsin.  On February 1, 2023, Mr. Jonsen received a Statutory Notice of Transferee Liability (“SNTL”) from the local Internal Revenue Service (“IRS”) office, accompanied by a revenue agent’s report (“RAR”).

The SNTL alleges that Mr. Jonsen is responsible for the unpaid 2014 and 2019 federal income taxes of another developer, Mr. Schmeggegy.  The proposed 2014 liability includes $75,000 for unpaid taxes plus $30,250 in interest and $18,750 in penalties, while the 2019 proposed liability includes $100,000 for unpaid taxes plus $10,000 in interest and $25,000 in penalties.

According to the RAR, the revenue agent determined that on January 2, 2020, Mr. Schmeggegy sold undeveloped property to Mr. Jonsen for $100,000.  The January 2020 sale price was significantly below the fair market value.  The RAR noted that on June 15, 2021 Mr. Jonsen re-sold the same property for its fair market value of $460,000.  According to the RAR under section 6901 of the Internal Revenue Code of 1986, because Mr. Jonsen benefited from the below-market purchase price of Mr. Schmeggegy’s property, he is responsible for Mr. Schmeggegy’s outstanding federal tax obligations.

According to Jon Jonsen, Mr. Schmeggegy was a friendly business rival for many years and was aware of Mr. Schmeggegy’s recent financial problems.  At the time of the 2020 sale, Mr. Schmeggegy told Mr. Jonsen that he would take anything so that he could “settle his debts.”  Mr. Jonsen knew that he was getting a deal because he received a qualified appraisal in December 2019 indicating the property’s fair market value was $225,000. 

Mr. Jonsen believes that the property’s fair market value both before and after the June 2021 transaction were positively affected by the change in the property’s zoning.  During the time Mr. Schmeggegy owned the property, he was unable to get approval of his re-zoning requests, leading him to sell the property in January 2020.  Mr. Jonsen, on the other hand, had good relations with several of the members of the zoning board and was able to get the property re-zoned shortly after he purchased the property.

Please prepare for my signature an appropriate formal protest letter to the Appeals division of the IRS.  Include any other documents you believe are necessary for me to proceed in this matter. In addition, if you believe there are any matters that we should consider that are NOT included in your protest (e.g., alternate arguments that are not included in the formal protest). An email response is due to me without fail no later than March 20, 2023, at 6:15 p.m.

Jon Jonsen

990 Lane

Troy, Michigan 48007

RAR: 51123452011

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