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returns. The adjustments treated KSCI as a personal holding
company under section 542, and the proposed tax deficiencies for
KSCI were computed as if KSCI were a C corporation. The proposed
increases in the tax liabilities of KSCI and the Chans totaled
more than $103,000, plus interest and penalties, and were
primarily based on the premise that KSCI was a personal holding
company and not an S corporation.
On February 2, 1996, petitioner mailed a certified letter to
the IRS seeking an administrative appeal of the examination
changes. On March 21, 1996, the IRS transferred the Chans’ case
to its Appeals Office in Long Island, New York. From February 2,
1996, until January 15, 1997, the IRS did not respond in writing
to the request by KSCI and the Chans for an Appeals Office review
of the adjustments proposed by Mr. Matos.
Petitioner and William J. Peter (Mr. Peter), the Appeals
Officer assigned to review the tax returns of KSCI and the Chans,
had a meeting scheduled for April 9, 1997. The meeting, however,
was postponed because Mr. Peter was selected for jury duty. On
July 24, 1997, Mr. Peter and petitioner held a conference to
discuss the proposed adjustments.
On July 29, 1997, Mr. Peter sent the Chans a letter and
enclosed agreement forms for them to sign reflecting the
adjustments agreed upon during petitioner’s and Mr. Peter’s July
24 conference. In the computations reflected in the Form 870-AD,
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