Estate of Eileen K. Brocato - Page 6




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               This is not a formal closing agreement under Section                   
               7121 * * *.  However, we will not reopen this return                   
               unless:  (1) There is evidence of fraud, malfeasance,                  
               collusion or misrepresentation of a material fact; (2)                 
               a substantial error, based upon an established service                 
               position, existing at the time of the prior closing; or                
               (3) other circumstances exist which indicate that a                    
               failure to reopen would result in a serious                            
               administrative omission.                                               
               A clerk at the Ogden Service Center issued the closing                 
          letter without referring to the transcript of petitioner’s                  
          account which would have revealed that an examination was in                
          progress and a closing letter should not be issued.                         
               On May 20, 1996, petitioner sold 2360 Chestnut.  Neither               
          petitioner nor its counsel contacted Mr. Samuelson or any other             
          IRS employee to seek an explanation of the closing letter before            
          selling 2360 Chestnut.                                                      
               Unaware of the erroneous closing letter, on June 24, 1996,             
          Mr. Samuelson sent petitioner’s counsel a letter informing him              
          that the IRS was still in the process of hiring an appraiser.               
          On July 2, 1996, petitioner’s counsel responded and stated that             
          the continuing audit was contrary to the closing letter.  On                
          August 19, 1996, the IRS notified petitioner of its intent to               
          reopen the examination of decedent’s estate tax return on the               
          grounds that a serious administrative omission had occurred which           
          “would result in criticism, undesirable precedent, or                       
          inconsistent treatment.”                                                    








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