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for 1998, the refund due us from 1997 that was applied
to a year charged off, was reclaimed as a deduction in
1998. Evidently your account specialist did not agree
with our accountant’s reclaiming that refund, so arose
the outstanding tax debt. [Reproduced literally.]
On May 14, 2001, respondent held a telephonic Appeals Office
hearing with petitioners. On August 9, 2001, the Appeals Office
mailed to petitioners a notice of determination regarding the
Federal tax lien that respondent had filed with respect to
petitioners’ unpaid liability for each of their taxable years
1994, 1995, and 1998. That notice stated in pertinent part:
Summary of Determination
You protested the filing of the Notice of Federal Tax
Lien (NFTL) because you believed 1994 and 1995 tax
years had been discharged in a bankruptcy proceeding.
The 1998 tax liability is also in dispute.
You are incorrect in your assumption that 1994 and 1995
were discharged in bankruptcy. They did not qualify as
dischargeable debts and survived the bankruptcy. The
liability for 1998 arose from a disallowed deduction
and is considered a valid liability.
* * * * * * *
Relevant Issues Presented by the Taxpayer:
You believe the 1994 and 1995 liabilities were dis-
charged under the bankruptcy proceeding docketed as 98-
43339. The bankruptcy petition was filed on 05/08/1998
and listed these and prior years. The discharge was
dated 09/28/1998. Thus, the lien for these two years
would be erroneous.
You further believe that a refund due to you for tax
year 1997 was improperly applied to the liability for
1990, a year that was discharged. When you filed your
1998 return you claimed the amount of the refund as a
deduction. This claim was disallowed and the liability
arose. It is your contention that the refund is due to
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