Peter S. Pau and Susanna H. Pau - Page 12

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          meeting set for July 27, 1994.  However, petitioners and Clement            
          never met that day or at any other time prior to October 31,                
          1995, although they did have a telephone conversation on August             
          1, 1994. Clement and petitioner discussed the receipt of the                
          $840,000 from Sanrio.  Petitioner did not provide a direct answer           
          to Clement's inquiry about this sum.  This conversation was                 
          Clement's last personal contact with either petitioner before               
          respondent issued the notice of deficiency.                                 
               On August 2, 1994 petitioner left a voice message for                  
          Clement, informing him that petitioners had received an                     
          appointment letter, a Form 872, and an information document                 
          request (IDR) seeking books and records needed to audit the                 
          return.  Petitioner once again stated that the Paus would not               
          extend the period and that they would be unable to obtain the               
          documents requested because of the short time left in the period.           
          Clement then served a summons on petitioners on August 5, 1994,             
          for the records identified in the IDR.  Prior to the issuance of            
          the notice of deficiency, the Paus did not produce any books and            
          records requested from them by the IDR.                                     
               In addition to the summons served on petitioners, Clement              
          issued summonses to financial institutions and a title company.             
          He received the books and records from these entities after the             
          notice of deficiency had been mailed to petitioners.                        

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