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the parties prepare stipulations for trial, as required by this
Court’s Rules of Practice and Procedure. The IRS attorney
suggested that the parties meet or otherwise correspond by mail
or telephone. Petitioners provided some of the information
respondent’s counsel had requested. Counsel telephoned
petitioners for the additional information and suggested that
they meet with an IRS agent near their home and, if necessary,
counsel was available for a conference call during such a
meeting. Petitioners did not comply with this request. The IRS
counsel then prepared a proposed stipulation of facts that was
forwarded to petitioners along with a request for production of
documents. Petitioners thereafter met with an IRS agent on
October 3, 1994, and presented their case according to the
suggestions in the Appeals Officer's July 5 letter. As a result
of the meeting, the Appeals officer was satisfied that some of
the shifted items of income were properly allocable to
petitioners’ closely held business entities and not to
petitioners personally. Further, the Appeals officer determined
that petitioners were entitled to many of the claimed itemized
deductions, rental expenses, and depreciation deductions.
However, the Appeals officer was satisfied that respondent’s
remaining determinations were proper. Accordingly, the Appeals
officer made petitioners a settlement offer proposing that
respondent’s determinations be adjusted to reflect deficiencies
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