Thomas L. & C. Marlene Pias - Page 4

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               Petitioner was issued Forms W-2G, Certain Gambling Winnings,           
          totaling $38,800 by the casinos that he frequented.  On Schedule            
          C, Profit or Loss From Business, attached to petitioners’ joint             
          2001 Federal income tax return, petitioner reported this amount             
          as income and claimed deductions for gambling losses of $68,861,2           
          tolls of $149, automobile expenses of $421, and other expenses of           
          $1,157.  Petitioner claimed an overall loss of $31,788 from the             
          trade or business of gambling.  In the notice of deficiency,                
          dated March 15, 2004, respondent allowed a deduction for gambling           
          losses of $38,800 on Schedule A, Itemized Deductions, and                   
          disallowed the balance of the deductions claimed on Schedule C.             
          The amount of the deficiency was $9,934.  The notice was issued             
          from the Brookhaven Internal Revenue Service Center (referred to            
          herein as the Service Center), in Holtsville, New York.                     
          Petitioners mailed their petition to this Court on June 12, 2004.           
               By letter dated June 1, 2004, the Service Center proposed a            
          revised deficiency of $5,681.  Although the statement disallows             
          gambling losses in excess of gambling income, the proposed                  
          changes in the income and losses do not relate to either the                
          figures on petitioner’s Schedule C or the statutory notice.  The            
          letter provides that petitioners must sign and date the “total              
          agreement statement” and return it.  The total agreement                    
          statement provided:                                                         

          2  Figures are rounded to the nearest dollar.                               

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