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meeting was the only meeting between petitioner, his attorney,
and respondent’s revenue agent.
After the above November 10, 1988 meeting, respondent’s
revenue agent considered making a fraud referral with regard to
petitioner’s original 1986 Federal income tax return.
Respondent’s revenue agent, however, did not make a fraud
referral at that time because she did not believe that she had
firm evidence of fraud.
On December 9, 1988, in connection with preparation of his
1987 Federal income tax return, petitioner met with a tax return
preparer different from the preparer used for his 1986 tax
return. Petitioner indicated to this return preparer that he
received in 1987 $20,316 in total commissions and fees from his
loan brokerage business. These commissions, along with net
income of $6,874, and zero taxable income, were reported on
petitioner’s 1987 Federal income tax return that was filed on
December 30, 1988.
On January 4, 1989, respondent’s revenue agent notified
petitioner that petitioner’s 1987 Federal income tax return was
to be audited. On January 27, 1989, petitioner filed an amended
1987 Federal income tax return and reported thereon additional
commissions and fees received in 1987 of $10,188 and an increase
in tax liability of $3,307.
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