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On January 20, 1994, two separate letters (the 30-day
letters) with accompanying examination reports proposing changes
to their 1988 and 1991 joint Federal income tax returns were
mailed to the Dugans. The proposed changes resulted primarily
from the disallowance of the passthrough loss from NTI in 1991
upon the ground that a valid S corporation election had not been
filed by the corporation for that year. The 30-day letters
listed Toni Williams as the contact person and were signed by
Connie Hailey, Chief, Service Center Examination Branch.
Responses to the 30-day letters were due on or before Tuesday,
February 22, 1994.
At some point prior to February 18, 1994, Ms. Tidwell
referred the Dugans to Larry D. Crabtree, attorney, for
assistance in connection with the proposed adjustments made in
the 30-day letters. Mr. Crabtree responded to the 30-day letters
by letter dated February 22, 1994 (the protest letter), which was
sent by certified mail to the "District Director, Memphis Service
Center". In the protest letter, Mr. Crabtree requested an
Appeals conference to discuss the proposed adjustments set forth
in the 30-day letters. In addition, Mr. Crabtree contended that
the relevant Form 2553 had been timely mailed so that NTI's S
corporation election should have been effective for its 1991
taxable year.
In a telephone conversation that took place on or about
March 17, 1994, Mr. Crabtree discussed the protest letter with
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