Collin L. Dugan - Page 10

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          Byron Stout, an employee at the processing division at the                  
          Service Center.  During this discussion Mr. Crabtree requested              
          that Mr. Stout forward the protest letter to respondent's Appeals           
          Office in Nashville, Tennessee.                                             
               Because the protest letter was not received by respondent's            
          examination division within the designated period, preparation of           
          the notices of deficiency began on March 3, 1994.  Notices of               
          deficiency for years 1988 and 1991 were mailed to the Dugans on             
          March 22, 1994.  In the notice of deficiency for 1991, the                  
          passthrough loss attributable to NTI was disallowed upon the                
          ground that NTI's S corporation election was not effective until            
          January 1, 1993.  The notice of deficiency for 1988 disallowed              
          the net operating loss carryback that was generated in 1991 by              
          the passthrough loss.  The deficiency notices indicated that if             
          the Dugans took the position that NTI had timely filed a Form               
          2553 effective for 1991 they could provide as acceptable                    
          verification:  (1) A certified mail receipt reflecting that the             
          form was timely mailed; (2) a Form 2553 with date stamp                     
          acknowledging receipt; or (3) an IRS letter stating that Form               
          2553 had been accepted.  Prior to the issuance of the notices of            
          deficiency, respondent's administrative file did not disclose the           
          receipt of a request for an Appeals conference made by or on                
          behalf of the Dugans.                                                       
               On June 10, 1994, Mr. Crabtree mailed a letter to respondent           
          requesting that the notices of deficiency be rescinded.  In                 




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