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Virginia had filed their 1996 tax return. Virginia gave
petitioner a Form 1099 that he filed away for their 1997 tax
return. Petitioner claims that Virginia told him that the Form
1099 pertained to the 1997 taxable year. Petitioner apparently
never looked at the form. Virginia received monthly statements
from Legg Mason, but petitioner did not review the statements in
preparing their 1996 tax return. Petitioner did not include any
income from Legg Mason in the 1996 tax return.
On July 20, 1998, respondent sent a Notice CP-2000, Proposed
Changes to Income or Withholding Tax, a so-called CP-2000 letter,
to petitioner and Virginia notifying them that they had
unreported interest and/or dividend income of $14,248. By letter
dated July 21, 1998, petitioner wrote respondent to “contest any
and all interest charges because your office should have notified
me during calander [sic] year 1996 and no later than the month of
August of 1996.” At least by July 1998, petitioner knew that the
deficiency had been proposed, but he wanted to “investigate it
before * * * [he replied].” By the end of September 1998,
petitioner knew that the proposed deficiency was correct.1
On February 5, 1999, respondent sent a notice of deficiency
to petitioner’s and Virginia’s last known address determining a
1 Petitioner later testified that he concluded that he owed
the tax only after the file was sent to New Orleans, Louisiana.
For reasons discussed infra, we believe that his earlier
testimony more accurately reflected what happened.
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