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C. The Taxable Year 1994
1. Petitioner’s 1994 Tax Return and Examination Report
Petitioner timely filed a Federal income tax return for
1994. See sec. 6072(a).
On or about August 9, 1996, petitioner was notified of the
examination of her 1994 income tax return. Notification of the
examination apparently prompted petitioner to make an advance
payment of $500, which was posted to petitioner’s account on
September 19, 1996.
By an examination report dated October 1, 1996, respondent
proposed a deficiency in petitioner’s income tax of $3,966, which
was principally attributable to the disallowance of gifts to
family members of $21,815. Petitioner agreed to the proposed
deficiency. Accordingly, on October 28, 1996, respondent
assessed a $3,966 deficiency in income tax, together with
interest of $509.86. On that same date, respondent also sent
petitioner a notice of balance due of $3,975.86 (i.e., deficiency
of $3,966, plus interest of $509.86, less advance payment of
$500).
2. Payment of Petitioner’s Account Balance
As indicated, petitioner’s account balance as of October 28,
1996, was $3,975.86. By April 3, 1997, petitioner’s account was
fully paid through: (1) A subsequent payment by petitioner; and
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