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2. Respondent’s Failure To Address the
Bauspar Issue in the Thompsons’ Statutory
Notice for 1981
As discussed above, the Thompsons began participating in the
Bauspar program in 1981. Respondent’s notice of deficiency with
respect to the Thompsons’ 1981 tax year did not disallow the
$8,000 claimed by the Thompsons on their 1981 return as home
mortgage interest, interest that was probably attributable to the
Bauspar program. By August 1985, when the Thompsons filed their
petition in this Court for 1981, respondent was generally
precluded from revising the statutory notice to include the
Bauspar issue. See sec. 6212(c)(1). Because that cutoff date
predates the Thompsons’ retention of DeCastro by more than a
year, respondent’s failure to include the Bauspar issue in the
statutory notice for 1981 could not have been part of the secret
settlement agreement between DeCastro and McWade.56
E. Benefits to the Thompsons Relating to Years
Other Than 1979-1981
1. In General
Respondent maintains that the only years covered by the
Thompson settlement were the Thompsons’ 1979-1981 taxable years
before the Court in this proceeding. Petitioners, on the other
56Respondent presumably could have raised the Bauspar issue
later by seeking leave to amend his answer in the Thompsons’ 1981
Tax Court case. See sec. 6214(a); Rule 41(a); Rule 142(a)
(shifting the burden of proof to the Commissioner with respect to
the increased deficiency). For reasons discussed infra in Part
II.E.4., we need not concern ourselves with that possibility.
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