- 3 -
to his original investment.2 As a result of the increase in
petitioner's adjusted gross income, respondent also made a
computational adjustment to petitioner's allowable casualty loss
deduction. In the statutory notice of deficiency, respondent
determined petitioner's Federal income tax liability for 1994 to
be $10,238.
After the statutory notice of deficiency was issued on
February 25, 1997, petitioner communicated with respondent's
Ogden Service Center by letter of February 27, 1997, and by
telephone on April 1, 1997, to discuss the adjustments determined
in the statutory notice.
In a letter to petitioner dated April 9, 1997 (the letter),
from a member of respondent's Problem Resolution Staff, which
enclosed a report that purportedly supplemented the February 25,
1997, notice of deficiency, the letter explained to petitioner
the reasons for the adjustments made in the statutory notice. It
further informed petitioner that it was determined that he was
entitled to an additional gambling loss in the amount of $126.
In recalculating petitioner's 1994 Federal income tax liability,
2 Petitioner received annuity payments from the OPM
Retirement Program in the total amount of $2,359 during 1994.
Petitioner's original contributions to the OPM Retirement Program
amounted to $2,511. At trial, respondent's counsel stated to the
Court that respondent would be able to calculate the excludable
portion of the annuity payments from petitioner's responses to
her line of questioning with respect to this matter. We
therefore direct respondent to take into account the excludable
amount of the annuity payments in the Rule 155 computation.
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