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E. Validity of Notices of Deficiency
In Dixon II, the Court considered and rejected arguments by
the test case petitioners represented by Mr. Izen that the
notices of deficiency issued to them were invalid under Scar v.
Commissioner, 814 F.2d 1363 (9th Cir. 1987), revg. 81 T.C. 855
(1983). After the evidentiary hearing in these proceedings, the
Court rejected the Scar argument advanced by Mr. Jones on behalf
of a Kersting participant who had settled his case before the
trial of the test cases in Dixon II. See Richards v.
Commissioner, T.C. Memo. 1997-149, supplemented by T.C. Memo.
1997-299, affd. without published opinion 165 F.3d 917 (9th Cir.
1998).16
F. Errors in Notices of Deficiency
Although this Court rejected the argument that notices of
deficiency issued to Kersting program participants were invalid,
it is evident that some notices of deficiency issued to Kersting
program participants did contain errors. For instance, in
Richards v. Commissioner, supra, it appears that respondent
overstated the deficiency using an excessive tax rate of 70
percent. In addition, the petition filed in the Richards case
included an allegation that respondent disallowed interest
16 Although Luis C. DeCastro had negotiated the settlement
on behalf of Mr. and Mrs. Richards, he did not participate in the
filing or prosecution of Mr. Jones' motion to vacate the decision
entered in their case.
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