Sam F. and Ingrid D. Ford - Page 9

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               In the same memorandum, District Counsel further requested:            
          "Please obtain a copy of the transcript of the allocution                   
          hearing.  * * *  The transcript is a matter of public record; it            
          is not grand jury material."2                                               
               Respondent thereafter drafted the statutory notice of                  
          deficiency issued to petitioners for their taxable year 1986,               
          using the figures as corrected to match those in exhibit 3.  In             
          the notice of deficiency, respondent determined that, for 1986,             
          petitioners had failed to report capital gains totaling                     
          $5,084,483.  Respondent accordingly determined a deficiency of              
          $998,754 in petitioners' Federal income tax for their taxable               
          year ended December 31, 1986, plus an addition to tax for fraud             
          under section 6653(b)(1)(A) of $749,066 and a time-sensitive                
          penalty for fraud under section 6653(b)(1)(B).                              
               On January 29, 2001, respondent obtained an order, pursuant            
          to rule 6(e)(3)(C)(i), from the U.S. District Court for the                 
          Southern District of New York.  The order grants respondent                 
          access to grand jury information from petitioner's criminal                 
          proceeding for purposes of the instant case.                                
               Proceedings Before This Court                                          
               During the course of substantial pretrial activities before            
          this Court, respondent, on February 8, 2002, served upon                    

               2Although the evidence in the present proceedings contains             
          the transcript of proceedings in the Fatico hearing, it includes            
          few, if any, of the exhibits introduced during that hearing.                

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