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respondent a 16-page memorandum arguing that the State Farm class
action lawsuit settlement proceeds received by petitioner are
excluded from gross income under section 104(a)(2). On April 25,
1994, respondent mailed petitioner a “no change” form letter
(Letter 590 (DO) (Rev. 4-92)) stating: “We examined your tax
return for the above period and made no changes to the tax year
reported.” Respondent’s form letter goes on to advert to the
possibility of a later change in the taxpayer’s tax if the
taxpayer is a shareholder of an S corporation, a beneficiary of a
trust, or a partner in a partnership whose return is changed on
examination.
Respondent and petitioner never executed a closing
agreement, pursuant to section 7121, for petitioner’s 1992 tax
year.
On March 29, 1995, respondent’s Fresno Service Center mailed
petitioner a 30-day letter regarding her alleged failure to
report bartering proceeds of $2,894 on her 1992 income tax return
for the 1992 tax year. The 30-day letter regarding the bartering
proceeds was unrelated to the examination regarding the State
Farm class action lawsuit settlement proceeds. On April 19,
1995, petitioner’s representative, David W. Stevenson, C.P.A.
(Stevenson), in response to this 30-day letter, mailed a letter
to respondent’s Fresno Service Center, attaching thereto copies
of the Schedule D of petitioner’s 1992 income tax return and the
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