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with a power of attorney executed by the Thompsons for the
taxable years 1984 and 1985, and a Form 872-A, Special Consent to
Extend the Time to Assess Tax. Because DeCastro did not include
the requested additional information or a copy of the Thompsons’
1985 return, Speers declined to proceed on the basis of the 7-
percent reduction settlement. Instead, by letter to DeCastro
dated January 12, 1988, Speers proposed to dispose of the
Thompsons’ 1984 year by disallowing the claimed Kersting interest
expense deductions in their entirety. She again requested a copy
of the Thompsons’ 1985 return “to verify that interest from
Kersting was not deducted in this year.”
Beginning October 6, 1987, and continuing through
February 24, 1988, Speers documented (in her case history
worksheet) telephone or written contact in the course of her
examination of the Thompsons’ 1984 income tax return with the
Thompsons, DeCastro, Philip Hoskins (of DeCastro’s firm), and an
accountant named “Rick.” Speers’s case history worksheet
reflects no contacts with McWade, Sims, or any other of
respondent’s counsel.
By letter dated February 22, 1988, DeCastro agreed to a
complete disallowance of the $7,740 of Kersting deductions
claimed by the Thompsons for 1984 and the resulting deficiency of
$1,863. The Thompsons paid the deficiency and interest; by
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