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thereof, and cannot rely on information contained in respondent's
records in determining a deficiency. Relying on Kong v.
Commissioner, T.C. Memo. 1990-480, petitioner alleges that this
Court held in that case that respondent was required physically
to examine a taxpayer's return in determining a deficiency and
was not entitled to rely on information recorded in its
databases. We disagree.
In Kong, as in Scar v. Commissioner, supra, respondent had
computed the tax due in the notice of deficiency at the maximum
rate. In Kong, respondent contended that it relied on the
taxpayer's administrative file, which also included a transcript
of account, in computing the tax due in the notice of deficiency.
This Court, however, found that respondent disregarded the
transcript of account in determining the deficiency because
respondent had merely multiplied the disallowed deduction by the
maximum rate and ignored other information available in the
transcript of account. In short, respondent in Kong, was not
prohibited from using information stored in its databases, but he
was prohibited from misusing or disregarding such stored
information. This Court stated:
Respondent did not use the return information to determine
the deficiency. * * * He ignored the relevant tax and income
data in the transcript of account. Indeed, all respondent
determined was that he did not have sufficient information
to avoid sending a notice of deficiency based upon
disallowance of a presumed loss claimed, utilizing the
maximum tax bracket. Kong v. Commissioner, supra.
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