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position respondent took in his answer was not substantially
justified because respondent failed to review the documents prior
to issuing the notice of deficiency. Respondent asserts that
petitioner did not deliver a letter or records on November 30,
1995. Respondent’s records do not contain an entry that
indicates that petitioner delivered a letter or documents on
November 30, 1995.
On August 7, 1996, respondent issued a notice of deficiency
to petitioner using the Atherton address. On January 15, 1997,
respondent mailed an additional copy of the notice of deficiency
to petitioner in Beijing, China. In the notice of deficiency,
respondent took the position that petitioner failed to report
income of $175,984 on his 1992 Federal income tax return and
failed to substantiate certain claimed deductions. Petitioner
filed a petition with this Court on April 9, 1997.
B. The Audit of the 1993 and 1994 Tax Years
Petitioner filed his 1993 Federal income tax return on
January 12, 1995, using the Atherton address. On October 13,
1995, petitioner filed his 1994 Federal income tax return using
the following mailing address: 50 Victoria Avenue, Millbrae,
California 94030 (the Millbrae address).
On April 4, 1996, respondent mailed a letter to petitioner
informing him that an audit of petitioner’s 1994 Federal income
tax return had been opened. This letter was sent to the Millbrae
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