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start that he had in his possession “all of the books, records,
and source documents that will be necessary to complete a 1991
and 1992 examination.” However, as of November 21, 1996,
petitioners’ representative had not shown any of this
documentation to respondent.
Both sides agree that respondent’s position is to be
evaluated in the context of what led to the formulation of that
position. See Lennox v. Commissioner, 998 F.2d 244, 247-248 (5th
Cir. 1993), revg. T.C. Memo. 1992-382; Powers v. Commissioner,
100 T.C. 457, 473-474 (1993), affd. in part and revd. in part on
other issues 43 F.3d 172 (5th Cir. 1995); see also Coastal
Petroleum Refiners v. Commissioner, 94 T.C. at 687; Golsen v.
Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir.
1971).
In analyzing the situation on November 21, 1996, both sides
focus on the events preceding the issuance of the notice of
deficiency. It may be helpful to briefly summarize the events.
In October 1994, about 2 years after petitioners filed their 1991
tax return and about 1 year after petitioners filed their 1992
tax return, respondent notified petitioners that both tax returns
would be examined. The next month, petitioners’ representative
asked respondent to change the place of audit from El Paso to
Dallas. Respondent thereupon asked petitioners to extend the
1991 tax return period of limitations to June 30, 1996.
Petitioners did so in late December 1994, respondent signed the
extension on January 5, 1995, and respondent thereupon
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