Lance Brown - Page 11

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          reported on the original 1987 return, he should not be held                 
          liable for the fraud addition to tax for 1987.  A taxpayer’s                
          fraudulent original return, however, is not purged by the filing            
          of a subsequent amended return.  The fraud was committed when the           
          original return was prepared and filed.  Badaracco v.                       
          Commissioner, 464 U.S. 386, 394 (1984).  Petitioner amended his             
          1987 Federal income tax return only after being notified that the           
          return would be audited, and even then petitioner underreported             
          on the amended 1987 Federal income tax return his income by                 
          approximately $5,600.                                                       
               As indicated, petitioner argues that respondent audited                
          petitioner's 1986 books and records three times without providing           
          the written notice to petitioner required under section 7605(b)             
          and therefore that the notice of deficiency should be treated as            
          invalid with regard to the fraud addition to tax for 1986.  In              
          general, a taxpayer's books and records are subject to only one             
          examination per year unless respondent notifies the taxpayer in             
          writing that an additional examination is necessary.  Sec.                  
          7605(b).  A taxpayer, however, may waive this requirement by                
          failing to object to a subsequent examination without receiving             
          the written notice called for in section 7605(b).  Rife v.                  
          Commissioner, 41 T.C. 732, 746-747 (1964), revd. and remanded on            
          another issue 356 F.2d 883 (5th Cir. 1966); Rice v. Commissioner,           
          T.C. Memo. 1994-204; Anderson v. Commissioner, T.C. Memo. 1989-             
          472.  Assuming, without so finding, that a second or even third             

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