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At some point prior to December 1995, respondent was
examining petitioners' 1992 Federal income tax return. The
revenue agent conducting the examination mailed a copy of the
proposed statement of income tax changes to petitioners with a
letter dated December 1, 1995, that invited petitioners to
discuss the matter further. Petitioners responded that further
discussion would be a "waste of time" and requested that a notice
of deficiency be issued to them for the year under examination.
Sometime in 1996, the revenue agent forwarded petitioners'
1992 administrative file to Joseph Pierce, the Internal Revenue
Service (IRS) employee generally responsible for the preparation
of notices of deficiency in the district and specifically
responsible for the preparation of the notice of deficiency
relevant here.
The process that preceded the issuance of a notice of
deficiency in Mr. Pierce's district was as follows. Upon receipt
of a taxpayer's administrative file, Mr. Pierce would review the
revenue agent's report for mathematical errors and prepare a
draft of the notice of deficiency, which typically included a
cover letter, waiver, and supporting schedules. Mr. Pierce
researched the taxpayer's last known address. After he
determined the taxpayer's last known address, Mr. Pierce added it
to the draft of the notice of deficiency. Mr. Pierce's work was
checked by other IRS employees, and an original and three copies
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