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to the 1986 tax year is whether the period of limitation on
assessment has expired. We conclude that assessment is barred,
and, therefore, the other issues are moot. All section
references are to the Internal Revenue Code in effect for 1986,
and all Rule references are to the Tax Court Rules of Practice
and Procedure.
FINDINGS OF FACT
At the time John Maloney and Mary Maloney filed their
petition, they resided in Perkiomenville, Pennsylvania. Mr.
Maloney is a mechanical engineer, and from approximately 1969 to
1989, he operated a sole proprietorship and employed the
accounting services of Robert Butler. Each year, Mr. Maloney
provided Mr. Butler with check stubs, bank statements, and
information relating to his accounts receivable and payable. Mr.
Butler used this information to prepare balance sheets, income
statements, trial balances, general ledgers, cash disbursement
journals, and, ultimately, petitioners' Federal income tax
returns. Mr. Maloney believed that Mr. Butler used the accrual
method of accounting to prepare these records and returns.
From 1984 through 1986, Mr. Maloney was the project engineer
for a prison being constructed in Montgomery County,
Pennsylvania. During this period, Mr. Maloney on a monthly basis
billed the county, which in turn, paid him by check. In 1984,
the county paid Mr. Maloney $409,624.55. In early 1985, the
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