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took several meetings with respondent's Appeals officer before
all the voluminous documentation required to substantiate the
claimed deductions were supplied to respondent. This
documentation was not produced during the examination. The issue
is not whether petitioners and PCCL had documentation supporting
their position. Rather, the issue is whether respondent had a
basis in fact for the position in the notices of deficiency. As
stated above, we conclude that respondent did.
Petitioners and PCCL also contend that respondent's position
was not substantially justified because petitioners and PCCL
refused to extend the statute of limitations. They contend
"respondent issued this notice * * * simply because the statute
of limitations was set to expire". Even if it were shown to be
true that respondent issued the notices to toll the running of
the statute of limitations, that is not an unreasonable action
for respondent to take.
In Chaum v. Commissioner, 69 T.C. 156 (1977), the IRS issued
a notice of deficiency to toll the running of the statute of
limitations after the taxpayers refused to consent to an
extension. We rejected the taxpayers' arguments that the IRS
action was arbitrary. Id. at 160-164. In Wasie v. Commissioner,
86 T.C. 962, 969 (1986), we found that the IRS had acted
reasonably in issuing a notice of deficiency where the taxpayer
had refused to extend the statute of limitations. See also
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