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This distinction among the various components of
petitioner’s 1998 liabilities was consistently maintained by
respondent in the Form 12257 memorializing the agreement. The
document stated: “It has been determined to decrease the tax
liability from $6,997 to $5,247.75. The $1,399 penalty will be
abated in full.”
In addition, rather than implying that a final payment
amount had been calculated, the correspondence sent by respondent
repeatedly indicated that further adjustments could be
forthcoming. The May 29, 2002, letter accompanying the Form
12257 explained: “After Appeals closes the case it will be sent
to the Service Center for the agreed changes to be processed.
The Service center will then send an adjustment notice to the
taxpayer with the exact amount due.” The Form 12257 itself noted
that “The taxpayer will pay the balance due after receipt of the
adjustment from the Service Center.” The July 9, 2002, letter
confirming respondent’s approval of the settlement and sent after
receipt of petitioner’s $4,244.75 check is even more explicit:
“We will adjust your account and figure the interest. If you
haven’t paid the full amount due, the IRS Center will send a bill
for any additional amount you owe. If you are due a refund, the
IRS Center will mail it to you.”
Moreover, Ms. Hornstein’s testimony at trial reflects that
she at no time considered interest, or settlement thereof, to be
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