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ordinary and necessary to your business, we have disallowed the
amount shown."
On February 3, 1995, respondent sent a 30-day letter to
petitioners proposing that petitioners were liable for a $14,939
deficiency in 1993 income tax and a $2,988 penalty under section
6662(a).4 Respondent issued the subject notice of deficiency on
April 20, 1995, reflecting her determination of a deficiency and
penalty in the same amounts as proposed in the 30-day letter.
The deficiency and penalty shown in the notice of deficiency are
primarily due to the adjustments mentioned above. Before the
notice of deficiency was issued, petitioners did not present
respondent with any substantiation for the disallowed deductions
or any explanation concerning the fact that the $21,025 of wages
shown on the Form W-2 from EP Management Services, Inc., was not
includable in their 1993 gross income.
On June 12, 1995, petitioners' counsel, Stuart S. Lipton,
mailed a letter to an Internal Revenue employee at an Internal
Revenue office in Los Angeles, California. This letter states:
Dear Patty:
This is to confirm that there will be a meeting in
Room 4336 in the offices of the IRS at 300 North Los
Angeles Street at 12:45 p.m. on June 27, 1995, at which
Charles Thiras, accountant for the taxpayer, will
present documentary evidence to support the validity of
4 Petitioners claim that this 30-day letter was the first
notice that they received alerting them that respondent was
auditing their 1993 Federal income tax return.
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