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clarified in mid-1995 by the Supreme Court’s opinion in
Commissioner v. Schleier, 515 U.S. 323 (1995). Petitioner
acknowledges that the State Farm class action lawsuit settlement
proceeds constitute gross income, and we are satisfied that
respondent was authorized to pursue all recipients of such
proceeds, including petitioner, for all open years. For
respondent not to have done so might well have resulted “in
serious criticism of the Service’s administration of the tax
laws” and would have resulted “in inconsistent treatment of
similarly situated taxpayers”, thereby satisfying the first and
third criteria for application of the “serious administrative
omission” test. Petitioner’s anecdotal testimony that some
members of the class got away with noninclusion of their
settlement proceeds because respondent failed to pursue them does
not change our conclusion that the third test was satisfied.
Section 4023.5 of the Manual, in its “Definition of
Reopening Criteria”, contains neither the conjunction “and” nor
the disjunctive connector “or” between the second and third
criteria. 1 Audit, Internal Revenue Manual (CCH), sec. 4023.5,
at 7065. We are satisfied that the three criteria are to be
interpreted and applied as setting forth their requirements in
the disjunctive. What this means is that the satisfying of any
one of the three criteria suffices to satisfy respondent’s
“serious administrative omission” reopening test. Inasmuch as at
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