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transcript which indicated an examination was underway before
issuing the closing letter. Respondent never affirmatively
concealed the mistake. Once the mistake was discovered,
respondent immediately notified petitioner that the audit was
still underway. Petitioner has failed to demonstrate how this
isolated and careless act amounts to affirmative misconduct going
beyond mere negligence.
As for petitioner’s second argument, we do not believe that
respondent violated the Manual procedures or the closing letter’s
description of the circumstances for reopening petitioners’ case.
Under section 4023.2(1) of the Manual, there are three criteria
for reopening an audit. The third criterion is that an audit may
be reopened where “other circumstances exist which indicate
failure to reopen would be a serious administrative omission.” 1
Audit, Internal Revenue Manual (CCH), sec. 4023.2(1) at 7063-4.
Under section 4023.5 of the Manual, a “serious administrative
omission” is defined as a closed case where failure to reopen the
case could “result in serious criticism of the Service’s
administration of the tax laws”. 1 Audit, Internal Revenue
Manual (CCH), sec. 4023.5 at 7065. The closing letter stated:
“we will not reopen this return unless * * * other circumstances
exist which indicate that a failure to reopen would result in a
serious administrative omission.” The reopening letter stated
that the audit was being reopened because a “serious
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