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Petitioner sold the Woodside property for $1.6 million and
acquired the Portola Valley property for $4 million. He
estimated that the Portola Valley property was worth $6.5 million
when he bought it and $10 million at the time of trial in May
2002. He applied available funds to the debt on his Portola
Valley residence rather than to his outstanding tax liabilities
(acknowledged at $67,000) because of the perceived necessity of
maintaining his residence and his lifestyle for business reasons.
On February 3, 1999, Rausch sent a 30-day letter explaining
proposed deficiencies for 1995. In response, Stone filed a
timely protest requesting that the proposed deficiency for 1995
be reviewed by the IRS Appeals Division. Appeals Officer
Lawrence Dorr (Dorr) of the San Francisco Appeals Office
undertook the requested review. Beginning in April 1999, he sent
at least four contact letters to Stone and spoke with her on the
telephone on at least one occasion. During the course of their
discussions, Stone did not inform Dorr that petitioner had moved
from the Woodside address shown on his 1997 return.
Stone did, however, send to Dorr a facsimile cover sheet
requesting more time to submit information. On June 25, 1999,
Dorr replied in a letter stating that, if his office did not see
some progress on the matter within 2 weeks, it would be necessary
to issue a notice of deficiency. Stone did not reply to that
letter, and, on August 19, 1999, the San Francisco Appeals Office
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