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messages on the Paus' telephone answering machine upon commencing
the audit. He left the initial message on July 13, 1994.
Clement spoke with Susanna for the first and only time on July
18, 1994. During that conversation, Clement told Susanna that
petitioners' 1990 return had been selected for audit and that he
wished to arrange an appointment with them. A meeting was
scheduled for July 25, 1994. On July 19, 1994, Susanna left
Clement a message on his answering machine canceling the
appointment and rescheduling it for July 27, 1994.
On July 25, 1994, Clement and petitioner spoke by telephone.
At that time, Clement asked petitioners to sign a consent form to
extend the period of limitations (Form 872) for their 1990
return, because the period was to expire on August 15, 1994.
Petitioners refused to execute the Form 872. Petitioner
erroneously told Clement that the Paus had filed their 1990 tax
return in June or July of 1991, so that the period had already
run.
Clement and petitioner engaged in another telephone
conversation on July 26, 1994, during which Clement again sought
the Paus' consent to extend the period of limitations.
Petitioner told the agent that his accountant had advised him
that the period had expired; he also indicated, without
elaborating, that the gross receipts reported on petitioners'
1990 return might have been incorrect. They discussed their
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