- 12 - Commissioner, supra at 472-474; Williford v. Commissioner, T.C. Memo. 1994-135. d. Respondent's Lack of Diligence Respondent erroneously assumed that petitioner had no reasonable business needs to accumulate earnings or plans to expand which would justify accumulations. Respondent did not ask to see petitioner's records or otherwise investigate petitioner's needs to accumulate funds before issuing the notice of deficiency. On July 1, 1981, Saul believed that the accumulated earnings issue was not strong for respondent. He told Hochheiser that respondent would not pursue the accumulated earnings issue. The Commissioner did not have a reasonable basis in fact and law without diligently investigating the case. Nicholson v. Commissioner, 60 F.3d at 1029; Lennox v. Commissioner, 998 F.2d 244, 248 (5th Cir. 1993), revg. and remanding T.C. Memo. 1992- 382; United States v. Estridge, 797 F.2d 1454, 1458 (8th Cir. 1986); Powers v. Commissioner, 100 T.C. at 473. The fact that respondent issued the accumulated earnings tax notice under section 534(b) 1 day before respondent issued the notice of deficiency suggests that respondent was not seriously interested in investigating the accumulated earnings tax issue.3 3 Sec. 534(b) provides: Before mailing the notice of deficiency referred to in subsection (a), the Secretary may send by certified mail or registered mail a notification informing the (continued...)Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
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