Roger L. and Patricia A. Lavallee - Page 10

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            Conner's November 23, 1992, letter raised additional issues and                           
            provided additional information.  In his examination workpapers,                          
            Revenue Agent Roberts stated that petitioners had adequately                              
            substantiated the amounts of their Schedule C deductions as                               
            listed in Mr. Conner's letter.  However, Revenue Agent Roberts                            
            also concluded that he lacked the authority to allow petitioners                          
            to claim Schedule C deductions in excess of the greater of the                            
            amounts originally reported on the returns for those years or the                         
            amounts allowed by Office Auditor Barrow during her examination                           
            of petitioners' returns.10  Revenue Agent Roberts then                                    
            transferred petitioners' case to respondent's Appeals Office for                          
            a determination as to the total amount of Schedule C deductions                           
            which petitioners were entitled to claim.                                                 
                  In a letter dated May 17, 1994, Appeals Officer Robert W.                           
            Whittle advised Mr. Conner that he had scheduled a conference for                         
            June 29, 1994, in Jacksonville, Florida.  However, after                                  
            reviewing the workpapers of Revenue Agent Roberts, Appeals                                
            Officer Whittle contacted Mr. Conner to advise him that a meeting                         
            was unnecessary, as Appeals Officer Whittle was prepared to allow                         
            the amounts of Schedule C deductions originally reported on                               
            petitioners' Federal income tax returns for 1985, 1986, and 1987.                         
                  Mr. Conner indicated that he still preferred to meet on the                         

                  10In several instances, Office Auditor Barrow allowed                               
            petitioners a deduction that was in excess of the amount claimed                          
            on their return.  See appendix.                                                           

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