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subject to self-employment tax, it downgraded her attorney’s fees
from an above-the-line Schedule C deduction to a below-the-line
itemized deduction, which increased her adjusted gross income and
limited her available exemptions. The letter also recited the
two criteria justifying respondent’s change of the position
evidenced by the no change letter.
In response to petitioner’s counsel’s second memo of
January 16, 1997, arguing that neither of those criteria had been
satisfied and that petitioner had not been notified of the need
for a second examination, respondent’s Chief, Examination
Division, on June 16, 1997, mailed petitioner a letter belatedly
acknowledging that “We are required by law to notify taxpayers in
writing if we need to reexamine their books and records after
previously examining them” and asking petitioner to “please make
them available to us for examination”. There is no evidence in
the record that respondent ever actually reexamined petitioner’s
records or requested any additional documentation from petitioner
regarding the State Farm class action lawsuit settlement
proceeds.
Although there may be some interrelationships among
petitioner’s arguments that the notice should be invalidated on
account of respondent’s asserted failure to follow his reopening
procedures, respondent’s asserted violation of section 7605(b),
and petitioner’s claim of equitable estoppel, see Saltzman, IRS
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