- 21 -
with the case at hand, which was disposed of by decision entered
upon the stipulation of the parties.
Petitioners further allege that respondent used the
materials that were seized from Mr. Kersting to issue statutory
notices of deficiency to Kersting investors, including
petitioners, without a rational basis, and thereby fraudulently
tolled the statute of limitations. We find it necessary to break
this allegation down into its component parts.
It has been evident for some time that the materials that
were seized from Mr. Kersting's offices were made available to
respondent's agents for purposes of conducting civil audits of
Kersting investors. See Dixon v. Commissioner, 90 T.C. at 242.
For the sake of argument, we will assume that respondent's agents
used such materials in preparing the notice of deficiency issued
to petitioners in April 1982.12 Notwithstanding this assumption,
we are unable to conclude that the notice of deficiency issued to
petitioners lacks a rational basis.
12 Sec. 7602(a)(1) authorizes the Secretary to examine any
books, papers, records, or other data that may be relevant for
the purpose of ascertaining the correctness of any tax return.
In the absence of any allegations of fact that would support a
finding that the Kersting search was illegal, respondent's use of
the materials seized from Mr. Kersting in preparing the notice of
deficiency issued to petitioners is not per se illegal or
fraudulent, nor would it render the notice of deficiency invalid.
See, e.g., Proesel v. Commissioner, 73 T.C. 600 (1979); Petrie v.
Commissioner, T.C. Memo. 1990-168. Consistent with the
foregoing, the production of the document referred to in
Mr. Jones' affidavit is not necessary for the disposition of
petitioners' Motion for Reconsideration.
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