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attach certain documents to future tax returns to avoid any
further audits with respect to this issue. The letter states in
pertinent part:
The attached report reflects the information
regarding the taxability or non-taxability of the
$40,000 income from Deloitte & Touche. We have
received the additional information (court decision)
from Mr. McDonald [petitioners’ representative] that
validates the entries on line 22 of your 1992 Federal
Income Tax return.
We recommended to Mr. McDonald that a copy of the
court decision be attached to each year’s return so as
to avoid a continuous repetition of IRS contact
regarding this issue.
In 1996, Mr. Forste received $45,615 from DHS (then Deloitte
& Touche). Petitioners excluded this amount from gross income on
their Federal income tax return for 1996. An attachment to the
return states that the amount received from DHS was “Workmens
Compensation and non-taxable”. Petitioners followed respondent’s
tax auditor’s advice in the February 12, 1996, letter, and they
attached the letter from respondent’s tax auditor, their petition
to the Tax Court for that year, and the first page of their 1990
return to their 1996 return.10
Respondent commenced an examination of petitioners’ 1996
return at some point after July 22, 1998. He subsequently issued
a notice of deficiency to petitioners for 1996 in which he
10The parties stipulated a copy of petitioners’ joint
Federal income tax return for 1996. The copy of the return in
the record does not have attached the Tax Court decision for
petitioners’ 1990 taxable year.
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