Joseph Paul Freije - Page 7

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               The Freijes timely filed a joint Federal income tax return             
          for the 1999 taxable year (1999 return) reporting a tax due of              
          $12,507.05, listing withholding credits of $4,318.96, and                   
          claiming estimated tax payments of $15,616.6  On or about May 29,           
          2000, respondent issued a notice to the Freijes, at the address             
          they entered on the 1999 return, concerning the 1999 return and             
          entitled “We Changed Your Estimated Tax Total--You Have An Amount           
          Due".  The notice indicated that the 1999 return had been changed           
          as follows:  (i) Taxable income had been increased from the                 
          $43,531 reported to $53,399, resulting in an increase in the tax            
          shown as due on the return from $12,507.05 to $15,265; and (ii)             
          estimated tax payments had been reduced from the $15,616 reported           
          to $6,000.  On the same date as the notice, respondent assessed             
          the increased tax of $15,265, without issuing a statutory notice            
          of deficiency to the Freijes.                                               
               On December 27, 2000, respondent sent a letter to the                  
          Freijes with attached workpapers that explained in greater detail           
          the foregoing changes made to the 1999 return.  With respect to             
          the reduction in the claimed estimated tax payments, the letter             
          advised that the Freijes' 1999 account showed 1999 estimated tax            
          payments of only $6,000, consisting of two payments of $3,000 on            

               6 According to the Forms 4340 in the record, the total                 
          remittances made by the Freijes during 1999, exclusive of the               
          $3,000 payment submitted with the 1998 return, were $15,087.                
          Insofar as the record discloses, these remittances were not                 
          designated by the Freijes for any taxable year.                             

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