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The Hansens' 1987 Federal income tax return had reflected an
overpayment which they had elected to have applied to their 1988
tax liability. Accordingly, there was a credit balance in the
Hansens' 1988 income tax account, and respondent caused the
frivolous return penalties to be paid by transferring $1,000 out
of that account.
Meanwhile, the Hansens had sent in postal money orders for
$1,000 in payment of the frivolous return penalties. The record
contains copies of transcripts of the Hansens' accounts from 1979
through 1990, and the receipt of the money orders did not appear
on any of those transcripts. Accordingly, as the Court
requested, counsel for respondent caused a search to be made of
the respondent's records to determine if the postal money orders
had been received and, if so, what had happened to them. In a
status report filed with the Court, respondent advised that the
money orders had been received, but nothing had been done with
them. As a result of the discovery, respondent had the Post
Office issue new postal money orders to replace the now outdated
ones, and deposited the proceeds. Consequently, $1,000 was
restored to the Hansens' 1988 income tax account.
The basis of settlement reached by the parties was that the
information contained on the 1988 return would be accepted.3
3 The parties' settlement includes the recognition that
there is no addition to tax due from petitioner for the taxable
year 1988 under the provisions of sec. 6651(a)(1).
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