Lance Brown - Page 5

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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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