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On April 8, 2002, Mr. Leonard, on behalf of petitioner,
wrote a letter to Mr. Kaufman proposing, inter alia:
Of the $5,307,600 which remains in dispute regarding the
covenant not to compete signed by William Becker, 85% (or
$4,511,460) would be allowed as a deduction for the 1996
fiscal year. This would increase the net operating loss for
1996. A net operating loss carryback of $4,511,460 would be
taken for the 1993 fiscal year.
On April 18, 2002, Mr. Kaufman wrote a letter to Mr. Leonard
which stated:
I have considered your settlement proposal in your faxed
letter to me of April 8, 2002. My response is as follows:
• I am willing to allow 80% of the remaining
$5,307,000 ($4,246,000) as a deduction in the
1996 fiscal year.
• I believe that the 1993 fiscal year is open only
under a loss carryback and thus the originally
claimed 1995 bad debt could not be claimed in
that year.
• Unless the 1997 fiscal year loss has already
been examined by the Examination Division, I
cannot allow anything at this time. You may be
able to file a carryback subsequently.
• The rest of your proposal would be acceptable.
On May 28, 2002, Mr. Leonard wrote a letter to Mr. Kaufman
enclosing duplicate executed Forms 872-A, Special Consent to
Extend the Time to Assess Tax, which stated:
Enclosed please find two executed Special Consent to Extend
the Time to Assess Tax. As we have discussed, it appears
that the sole issue impeding our resolution of this matter
is the carryback of net operating loss from 1997 to 1995. I
will forward to you within the next week my research which
indicates that the 1997 loss is required to be taken in 1995
if 1995 is an open year. This letter will also confirm our
discussion that 1993 remains an open year for the purpose of
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