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(e) Exception to requirement that party pursue
administrative remedies. If the conditions set forth
in paragraphs (e)(1), (e)(2), (e)(3), or (e)(4) of this
section are satisfied, a party's administrative
remedies within the Internal Revenue Service shall be
deemed to have been exhausted for purposes of section
7430.
* * * * * * *
(2) In the case of a petition in the Tax
Court--
(i) The party did not receive a notice
of proposed deficiency (30-day letter) prior
to the issuance of the statutory notice and
the failure to receive such notice was not
due to actions of the party (such as failure
to supply requested information or a current
mailing address to the district director or
service center having jurisdiction over the
tax matter); and
(ii) The party does not refuse to
participate in an Appeals office conference
while the case is in docketed status.
[Emphasis added.]
Section 301.7430-1, Proced. & Admin. Regs., fails to define the
phrase "does not refuse to participate".
Respondent's arguments suggest that section 301.7430-
1(e)(2), Proced. & Admin. Regs., is to be interpreted as
requiring an affirmative act by petitioners; i.e., a request for
an Appeals Office conference. Petitioners, on the other hand,
contend that the proper interpretation is one that puts the
burden on respondent, requiring that she act affirmatively.
Petitioners reason that they cannot "refuse to participate" in an
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