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During the initial interview, Ms. Hamilton recorded in her
notes that she was told by Mr. Borawski and Ms. Maliwat that
petitioner was at risk of loss if collection of accounts
receivable was not made, that petitioner provided warranties for
the assembly services of ASAT, Ltd., and that petitioner provided
a 30-day warranty on workmanship and labor.
Ms. Maliwat explained to Ms. Hamilton that petitioner
purchased, on behalf of ASAT, Ltd., some materials and equipment.
However, the purchasing effort did not require substantial time
or effort as there were probably only five purchases a week.
IRS's Application of Section 6038A
A. Notice of Noncompliance
On November 25, 1992, respondent sent a certified letter to
petitioner and petitioner's counsel requesting that petitioner be
authorized as agent of ASAT, Ltd. pursuant to the provisions of
section 6038A(e)(1) and section 1.6038A-5 Income Tax Regs. When
respondent issued the request for authorization of agent to
petitioner, Worltek owned 95 percent of petitioner's stock.
Petitioner advised respondent by letter dated January 26, 1993,
that "agency status has not been granted to ASAT, Inc. from ASAT,
Ltd." Petitioner did, however, obtain an authorization of agent
from ASAT, Ltd., on July 26, 1995, after the notice of deficiency
was issued.
On June 14, 1993, respondent sent petitioner a certified
letter notifying petitioner that respondent was considering
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