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informed her that she made a mistake on her return and that the
Social Security benefits, as reported, were not taxable.
Petitioner then explained the amounts and sources of her income
for 1997, including the unemployment compensation. The IRS
employee said that the refund was a final determination and it
was hers to enjoy.
Petitioner was uneasy with the IRS’s oral confirmation of
her right to the refund in the higher amount so she called a
second time to inquire about the appropriate amount of her
refund. In response, another IRS employee said the IRS would
send petitioner a letter regarding the taxation of Social
Security benefits. After receiving the letter, petitioner called
the IRS a third time and repeated that she did not receive Social
Security benefits. Rather, petitioner stated, she received only
unemployment compensation and she could provide the IRS written
proof of its receipt.
After the tax refund of $1,206 was deposited in petitioner’s
bank account, petitioner did not spend the money for 7 or 8
months because she feared the IRS would ask for the money to be
returned. After IRS employees repeatedly confirmed that the
refund belonged to petitioner, she spent the money only when she
encountered severe financial difficulties.
Two years later, the IRS determined a deficiency of $720 in
petitioner’s 1997 Federal income tax. The deficiency is
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Last modified: May 25, 2011