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could result in the imposition of an accuracy-related penalty
under section 6662.
After receiving the prefiling notice, petitioner visited
Barnes at Elk Grove Ranch. Barnes told petitioner that the
letter was a part of an “ongoing bitter battle” and that Hoyt was
still an enrolled agent. Barnes took petitioner on a tour of Elk
Grove and the Laguna office and showed him a copy of the Bales
case and other documents.
On February 24, 1997, respondent sent petitioner a letter
indicating that petitioner’s 1994 and 1995 tax years were under
examination.
On May 3, 2001, respondent sent petitioner a notice of
deficiency. Respondent disallowed all of petitioner’s Schedule F
deductions for 1994 and 1995 and determined that the “Farm
income, sales of livestock” listed on the Schedules F were not
includable in income.6 As a result, respondent determined
deficiencies in petitioner’s Federal income taxes of $11,106 and
$17,410 for 1994 and 1995, respectively. Respondent further
determined that the underpayments of tax were attributable to
gross valuation misstatements, and therefore petitioner was
liable for 40-percent accuracy-related penalties under section
6662(h) of $4,442 and $6,932, respectively.
6 Petitioner has conceded that he did not receive farm
income and is not entitled to any Schedule F deductions for 1994
and 1995. See supra note 2.
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