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petitioner itemized deductions in excess of those allowed in the
notice of deficiency.
On March 19, 1995, petitioner's attorney provided more
information to respondent in response to the March 3, 1995,
letter. Based on this documentation, respondent, in a letter
dated March 22, 1995, conceded additional income adjustments and
the substantial understatement penalty under section 6661. In
the same letter, respondent sent copies of a proposed stipulation
settlement.
By letter dated March 29, 1995, respondent's Appeals Officer
confirmed by letter to petitioner's attorney a basis for
settlement of the case for 1988 and included an audit statement
reflecting the settlement and a decision to be filed with the
Court. The decision was signed by the parties and filed with the
Court as a Stipulation of Settlement in view of petitioner's
simultaneous filing of the motion for litigation costs. Rule
231(c).
With respect to the 1989 tax year, petitioner was first
informed by letter dated December 8, 1992, that her 1989 return
would be examined. Attached to that letter was an IDR requesting
petitioner to provide certain information that included bank
records and information on nontaxable income. On December 18,
1992, the IRS agent assigned to the case met with petitioner's
attorney to discuss some of the issues in the case. However,
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