Melvin J. Laney and Carolyn A. Laney - Page 21

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                  Petitioners timely filed tax returns for 1986 and 1988.                             
            Petitioners timely filed for an automatic extension of time,                              
            until August 15, 1988, to file their 1987 tax return.  On August                          
            15, 1988, petitioners timely filed a request for a further                                
            extension, until May 5, 1989, to file their 1987 tax return.                              
            Petitioners were granted an extension only until October 17,                              
            1988.  Petitioners filed their 1987 tax return on May 11, 1989.                           
            Petitioners did not file their 1987 tax return, or a “first”,                             
            “initial”, or “preliminary” 1987 tax return, before the May 11,                           
            1989, filing referred to supra.                                                           
                  After petitioners filed their petition in the instant case,                         
            they dealt with an Appeals officer.  After petitioner and the                             
            Appeals officer failed to settle the case, petitioners sent a                             
            letter to the Secretary of the Treasury, urging him to enter into                         
            a section 7121 closing agreement with petitioners.  The letter                            
            and accompanying materials were referred to the Philadelphia                              
            Internal Revenue Service Center.  An employee at this Center                              
            somehow came to the conclusion that the Appeals Office and                                
            petitioner had entered into a binding settlement agreement and                            
            thus a section 7121 closing agreement would not be appropriate.                           
                  Respondent did not audit petitioners’ 1983, 1984, and 1985                          
            tax returns.                                                                              
                  On May 5, 1988, the Maryland Tax Court issued an Order and                          
            Memorandum of Grounds for Decision in a proceeding involving                              

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