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front page of the 30-day letter. After receiving Stevenson’s
letter, respondent agreed that petitioner had properly reported
$2,894 in bartering proceeds on Schedule D of her 1992 income tax
return.
On September 28, 1995, respondent’s District Director
mailed petitioner a 30-day letter for the 1992 tax year regarding
the State Farm class action lawsuit settlement proceeds. The
statement of examination changes accompanying this 30-day letter
proposed to treat petitioner’s State Farm class action lawsuit
settlement proceeds, in the amount of $283,117, as income from
self-employment for the 1992 tax year, and to allow legal fees of
$56,623 paid to obtain the settlement as an above-the-line
Schedule C deduction. This 30-day letter proposed no adjustment
related to bartering proceeds.
In November 1995, petitioner and her counsel signed a
Consent to Extend the Time to Assess Tax (Form 872) that extended
the period of limitations on assessment for the 1992 tax year
until June 30, 1997.
On July 17, 1996, a tax technician in respondent’s District
Director’s Office mailed petitioner’s counsel a letter enclosing
a revised examination report (not included in the record)
deleting self-employment tax on the settlement proceeds and
downgrading petitioner’s legal fees from an above-the-line
Schedule C deduction to a below-the-line itemized deduction. The
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