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On August 10, 1995, the agent prepared a report that stated
that petitioner was liable for alternative minimum tax (AMT); the
agent limited the scope of his report to AMT because the
application thereof generated the maximum amount of taxes that
could be recovered for 1993. On the same day, respondent
forwarded the agent's report to Mr. Bess as part of a 30-day
letter. Petitioner had notified respondent that Mr. Lieberman
and his coworker, Mr. Bess, both served as its representatives
for purposes of the 1993 audit. On January 29, 1996, the agent,
after learning months before that he had incorrectly applied AMT
to petitioner's 1993 taxable year, prepared a second report that
stated that petitioner was not entitled to deduct any of Mr.
Ashare's "compensation". On the same day, the respondent mailed
that report to Mr. Bess as part of a second 30-day letter.
Between the dates of the 30-day letters, the agent was
considering Mr. Ashare's personal income tax liability. In
connection therewith, the agent requested petitioner's board
minutes from Mr. Lieberman, who also represented Mr. Ashare. Mr.
Lieberman delivered to the revenue agent petitioner's board
resolutions for 1993, which included the resolution mentioned
above as to the promissory note. The agent prepared his second
report on petitioner's 1993 taxable year on the basis of
information that he received from petitioner on or before August
10, 1995.
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