Larry J. and Patricia A. Sumrall - Page 8

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          The Civil Investigation                                                     
               At the conclusion of the criminal investigation, Revenue               
          Agent Stufflebeam became responsible for resolving petitioners’             
          civil tax liabilities for the audit years.  In the process of               
          resolving those liabilities he received both written and oral               
          communications from Mr. Barker.  Mr. Barker did not file with him           
          any claim for an NOL carryback from 1992.                                   
               By a letter dated May 1, 1996 (the May 1 letter), sent by              
          Mr. Barker to the Ogden Service Center, Mr. Barker advised the              
          IRS that he was preparing income tax returns for petitioners for            
          their 1991 through 1994 tax years, but that those returns were              
          “on hold to await the outcome of settlement with the Internal               
          Revenue Service out of the Reno area.”  He states:  “To finalize            
          these years there was required a settlement on the exact                    
          inventory, and other critical capitalized amounts to present an             
          accurate return.”                                                           
               On June 18, 1996, Revenue Agent Stufflebeam memorialized in            
          handwritten notes (the June 18 notes) a phone conversation that             
          had taken place that day between himself and Mr. Barker.  As                
          memorialized in the June 18 notes:  Mr. Barker stated that, based           
          on the cost of goods sold used in the criminal case against                 
          petitioner, petitioners would have NOL carrybacks in later years.           
          Revenue Agent Stufflebeam told Mr. Barker that he could complete            

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