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IRS sent a notice proposing changes to petitioners’ return.
After petitioners objected to the proposed changes, the IRS
recognized it had failed to include $515 of the $1,250
petitioners now acknowledge is the portion of their Tier 1
benefit which is includable in their gross income. The IRS
corrected this error and sent petitioners a new notice of
proposed changes.
The IRS’ reconsideration of petitioners’ tax return and
accompanying schedules does not constitute an inspection of their
books of account. See Curtis v. Commissioner, supra at 1351;
Benjamin v. Commissioner, 66 T.C. 1084, 1097 (1976), affd. 592
F.2d 1259 (5th Cir. 1979). Likewise, respondent’s comparison of
petitioners’ return with the information returns of a third party
does not constitute an inspection of petitioners’ books of
account. See Digby v. Commissioner, supra at 447-448.
There is no evidence that petitioners’ books of account were
ever examined much less that they were examined for a second time
without the notice required by section 7605(b). Thus, respondent
has not violated section 7605(b).
We now turn to respondent’s computation of petitioners’
income tax liability. Petitioners have conceded that $1,250
(85 percent) of their Tier 1 railroad retirement benefit is
includable in their 1997 gross income. Petitioners do not
dispute that their Tier 2 and supplemental annuity benefits are
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Last modified: May 25, 2011