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examination by Agent Mazon. The examination for the 1988 tax
year concerned the same unreported income issue as the 1986 and
1987 years.
On December 8, 1989, Agent Mazon met Mr. Berg and told him
that the 1988 tax year had been opened for examination. Agent
Mazon tendered IDR 5, which asked, among other things, for
information supporting certain loan repayments.
On December 19, 1989, Agent Mazon received a response to IDR
5. The response dated December 13, 1989, also asked respondent
for a second time to issue a 30-day letter.
During the course of her investigation, Agent Mazon believed
that some of what petitioner told her was not true. In
particular, petitioner told Agent Mazon that he had an
outstanding loan on which he made payments and that there was no
unreported income for the years in issue. Agent Mazon discovered
the opposite to be true–-there was no loan and there was
unreported income. These inconsistencies led Agent Mazon to
speak with her manager and fraud coordinator about the proper
course of action. She was given approval to forward the case to
respondent's Criminal Investigation Division (CID), which she did
on January 11, 1990. On April 4, 1990, Agent Mazon received a
package from CID declining the fraud referral.
On April 23, 1990, Agent Mazon mailed to Mr. Berg a Form
4549, Income Tax Examination Changes. On June 1, 1990, Agent
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