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the parties that were excluded from admission at the trial on the
grounds of irrelevancy.
In early 1993, petitioner Michael A. Haas (Haas) severed his
employment as a certified public accountant with Dean, Petrie &
Haas, an Accountancy Corp. (DPH). Haas purchased from DPH the
right thereafter to render accounting services to a number of
former clients of DPH.
Haas then began practicing accounting in his individual
capacity and through Haas & Associates Accountancy Corp. (Haas &
Associates), a new accounting firm that Haas owned and
incorporated as a closely held professional corporation. The
former clients of DPH that Haas “took with him” from DPH were
divided between Haas’ individual accounting practice and the
corporate accounting practice of Haas & Associates.
To effect the above separation of Haas’ accounting practice
from DPH, various parties including Haas signed various written
contracts, a separation agreement, and covenants not to compete
(the transaction documents).
In June of 1996, respondent initiated an audit of Haas and
his wife’s joint individual Federal income tax return for 1993.
Later, respondent’s audit was expanded to include Haas &
Associates’ corporate Federal income tax returns for 1994 and
1995. Respondent’s audit related to the income tax treatment of
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