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return the Form 872. In pertinent part, the Form 872 states:
“The amount of any Federal Income tax due on any return(s) made
by or for the above taxpayer(s) for the period ended
September 30, 1994, may be assessed any time before December 31,
1998.” Petitioner did not return the Form 872 or respond to the
document request. Instead, petitioner attempted to negotiate
restrictions to be incorporated into the Form 872. Revenue Agent
Grimes and her supervisors refused to restrict the Form 872 and,
on November 20, 1997, no Form 872 having been received by
respondent, the notice was issued. By letter dated December 8,
1997, Stephen P. Taylor, Chief, Exam Branch V (apparently, a
supervisor of Revenue Agent Grimes), explained respondent’s
failure to restrict the Form 872: “Conditions required under the
Internal Revenue Manual were not met. We do not restrict
statutes or the scope of an examination prior to initiating the
examination.”
Other documents in evidence establish the following: On
October 27, 1997 (the date the examination commenced), Revenue
Agent Grimes was examining petitioner’s income tax returns for
the 2 taxable years preceding 1994 (the preceding years’
examination). She completed the preceding years’ examination on
November 6, 1997. On that date, petitioner was sent a copy of
the resulting report (the report). The report shows adjustments
with respect to the following items:
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