David Daniel and Annette Daniel - Page 5

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            loss data recorded on the Form 4684 was calculated by Mr. Rabassa                            
            and was entered on the form by him.  One of the items on the Form                            
            4684 calculated by Mr. Rabassa pertained to flood damage to                                  
            carpeting in petitioners' home.  Mr. Rabassa calculated                                      
            petitioners' carpeting loss to have been $5,940.  Mr. Rabassa                                
            explained how he arrived at that figure:                                                     
                        Annette (Mrs. Daniel) said that she had her family                               
                  room redecorated and that she had carpeting put in, and                                
                  I asked the approximate size of the family room.  And                                  
                  my original calculation showed a $14 per square yard                                   
                  and she asked me to move it to $21 a square yard.                                      
                  After I completed that calculation, I remembered that                                  
                  my math was incorrect in the fact that it's length time                                
                  width divided by nine from feet to get square yards.                                   
                  And it came out to be 309 square yards; which was                                      
                  obviously wrong, because that's 2700 square feet, which                                
                  is bigger than most people's houses, so--                                              
                  The Court:  You remembered that length times width                                     
                  divided by nine gives you square yards?                                                
                  (Mr. Rabassa):  Yes, sir.  And I failed to divide by                                   
                  nine, so instead of having a smaller number, it came up                                
                  to 309 square yards.  And I believe if you take 309                                    
                  square yards times $21 it comes back to 54--I don't                                    
                  have my calculator, but it had to be somewhere in that                                 
                  neighborhood.                                                                          
                  Mrs. Daniel discussed her 1992 Federal income tax liability                            
            with Mr. Rabassa on April 13, 14, and 15, 1993.  Approximately 2                             
            weeks later, after having assisted Mrs. Daniel in preparing                                  
            petitioners' 1992 return, Mr. Rabassa contacted the Inspection                               
            Division of IRS to report that petitioners had filed a fraudulent                            
            return for 1992.                                                                             
                  For a considerable period of time prior to May 26, 1993, Mr.                           
            Rabassa's employee performance was the subject of criticism.  In                             
            a memorandum to Al Rabassa, Tax Examiner/Team A, from Annette                                



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