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Thompson’s retirement, the deficiency resulting from this
disallowance was only $980. There is some indication that the
notice of deficiency was mailed and that it caused an inquiry.
An internal document of the IRS (Form 4700) reflects a
handwritten entry dated May 8, 1987: “No reason to change
determination – refiling case.” Nevertheless, no petition for
the Thompsons’ 1983 taxable year was filed in this Court, and the
deficiency was never assessed or collected.
On October 6, 1987, Revenue Agent Carolyn Speers (Speers),
based in San Jose, California, audited the Thompsons’ 1984 income
tax return and noted $7,740 of Kersting deductions claimed on the
return. On that date, she wrote the Thompsons a letter proposing
to dispose of the Kersting issue identified on the return
consistent with respondent’s general 7-percent reduction
settlement proposal. In her letter, Speers also requested
additional information regarding the Thompsons’ participation in
the Kersting tax shelter programs, including a request for a copy
of the Thompsons’ 1985 income tax return.
Speers did not receive a response from the Thompsons to her
October 6, 1987 letter nor to a followup letter dated November
17, 1987. On November 27, 1987, Mr. Thompson called Speers to
report that he had forwarded her request to DeCastro.
On December 23, 1987, DeCastro sent Speers an executed copy
of the 7-percent reduction settlement agreement for 1984, along
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