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that: The issue as to ownership of the funds is identical, the
holding of the California courts are final, petitioners were
parties in one proceeding and found to be in privity with Victor
in the earlier proceeding, the issues here were necessarily
litigated by petitioners in the State court proceeding(s), and
there has been no change in the facts or law.
We note that petitioners were ordered by the California
courts to return the $272,100 but they have not done so, and they
do not argue here that they are compelled to do so. Accordingly,
we hold that, for 1989, Arthur’s and Edgar’s receipt of $136,550
and $135,550, respectively, is income to them and does not
constitute nontaxable inheritances from their father.
Did the Period for Assessment Expire Before Respondent’s Issuance
of the Notice of Deficiency to Edgar?
Edgar contends that the period for assessment had expired
before respondent’s August 27, 1998, mailing of the notice of
deficiency for Edgar’s 1989 taxable year. Edgar executed
consents beginning on September 5, 1996, and again on May 20,
1997, which, if effective, would have extended the period for
assessment to December 31, 1998. The normal 3-year period for
assessment under section 6501(a), however, would have expired on
October 15, 1993, before the execution of the first consent to
extend the statutory period.
Respondent contends that the 3-year assessment period is not
applicable because Edgar omitted more than 25 percent of gross
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