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3. The Thompsons’ 1983 Kersting Deficiency
and the Disappearing Statutory Notice
Concerning the year 1983, matters are substantially
different. Unlike 1982, the Thompsons’ 1983 tax return did not
slip through the cracks. Instead, respondent’s Fresno Service
Center had prepared a statutory notice of deficiency dated March
17, 1987, disallowing Kersting deductions and asserting a
deficiency of $980. The statutory notice appears to have been
issued; notations in respondent’s administrative records indicate
that respondent received an inquiry regarding that notice in May
1987. Nonetheless, no petition on behalf of the Thompsons was
filed in this Court regarding the deficiencies proposed for 1983.
Nor, moreover, did respondent assess or collect the deficiency
determined in the statutory notice. Instead, for reasons not
explained, respondent’s determination for 1983 was ignored, and
the year was allowed to lapse.
Early in 1987, when the Thompson statutory notice of
deficiency for 1983 was being prepared, McWade and DeCastro were
actively involved in resolving the Thompsons’ tax matters
pursuant to their original settlement. In March 1987, McWade
provided a sweetener of the original settlement that slightly
reduced the determined deficiencies for the years before the
Court to bring the reduction up to 20.55 percent. Additionally,
during the prior December and January, he had helped process the
Thompsons’ interest payments for 1986.
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