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We later emphasized in Clapp v. Commissioner,
however, that the kind of review exercised in Scar is
applicable “only where the notice of deficiency reveals
on its face that the Commissioner failed to make a
determination.” In Clapp, we determined that the
notices of deficiency were adequate to establish
jurisdiction where they indicated various adjustments
to income and the fact that these adjustments were
based upon the disallowance of deductions. The
taxpayers in Clapp attempted to show that the
Commissioner had not made an actual determination of
their deficiency by introducing internal IRS documents
which suggested that at the time the notices were
issued, the IRS had not decided which legal theory it
would rely upon to secure a deficiency judgment. We
nevertheless refused to question the Commissioner's
determination because there was no indication on the
face of the notices that a determination had not been
made. The disallowed deductions did not refer to
unrelated entities, nor had the tax rate been
arbitrarily set. [Emphasis added; citations omitted.]
See also Johnston v. Commissioner, T.C. Memo. 2000-315 (“the
Court * * * has limited the application of Scar to the narrow
circumstances where the notice of deficiency reveals on its face
that no determination was made.”). In Meserve Drilling Partners
v. Commissioner, 152 F.3d 1181 (9th Cir. 1998), affg. T.C. Memo.
1996-72, the Court of Appeals for the Ninth Circuit made clear
that all the Commissioner must do is examine the taxpayer’s
returns and consider the taxpayer’s deductions. Recently, in an
unpublished opinion, the Court of Appeals for the Ninth Circuit,
in a case argued by petitioner’s counsel, rejected petitioner’s
argument that Scar applies where, as in the case at hand, the
notice of deficiency shows how the deficiency was computed.
Staggs v. Commissioner, 25 Fed. Appx. 566 (9th Cir. 2001).
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