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by this Court under number 3318-89. On January 4, 1995,
petitioners filed a petition in the U.S. Bankruptcy Court for the
Western District of Pennsylvania. On January 4, 1995, the
partnership proceeding under Tax Court docket No. 3318-89 was
still pending. The filing of the petition in bankruptcy
converted petitioners' partnership items to nonpartnership items
under section 6231(b)(1)(D) and (c)(2), and section 301.6231(c)-
7T(a), Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6779, 6793
(March 5, 1987). On April 11, 1995, petitioners received a
bankruptcy discharge under Chapter 7. The discharge lifted the
automatic stay under 11 U.S.C. sec. 362(a)(8) and (c)(2)(C)
(1994) and allowed this Court to enter an order on July 11, 1995,
dismissing the case at docket No. 3318-89 as moot because, due to
the effect of the bankruptcy of petitioners and another partner
and settlements of other partners, there were no partnership
items to be readjusted.
On November 13, 1995, respondent issued a notice of
deficiency to petitioners in connection with their interest in
the partnership (the 1995 notice). Petitioners did not file a
petition with this Court in response to the 1995 notice. On
February 6, 1996, respondent rescinded the 1995 notice with
petitioners' consent, under section 6212(d). On February 6,
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