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treatment of the State Farm class action lawsuit settlement
proceeds or the raising of the bartering proceeds issue was a
prohibited second inspection. A second inspection would require,
at a minimum, that respondent have access to and physically view
petitioner’s books and records for the 1992 tax year. See
Benjamin v. Commissioner, 66 T.C. 1084, 1098 (1976), affd. on
other grounds 592 F.2d 1259 (5th Cir. 1979).
Petitioner argued, in her counsel’s memo of January 16,
1997, that respondent had failed to notify her in writing of the
need for a second inspection. Respondent, through the Chief,
Examination Division, belatedly responded, in respondent’s letter
of June 16, 1997, reciting the section 7605(b) requirements and
asking petitioner to “please make [her books and records]
available to us for examination.” Respondent’s response was
wholly unnecessary. There is no evidence in the record that
respondent actually reexamined petitioner’s records or requested
or received any additional documentation from petitioner
regarding the State Farm class action lawsuit settlement proceeds
after issuance of the no change letter.
Apparently recognizing the weakness of her original position
on the issue, petitioner on the day of trial chose to rely on
respondent’s inquiry raising the bartering proceeds issue as the
prohibited second examination. On this score, petitioner fares
no better. In resolving the bartering proceeds issue, respondent
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