Bernhard F. and Cynthia G. Manko - Page 4

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          Income Tax Examination Changes, marked it “Copy—Information Only”           
          and sent it to petitioners.  This document, prepared 2 years                
          after the closing agreement and almost 7 years after the end of             
          the last year at issue, reflected respondent’s computation of               
          petitioners’ tax liabilities after the agreed treatment of the              
          Comco items was taken into account.                                         
               Respondent then assessed the deficiencies shown in                     
          respondent’s Income Tax Examination Changes against petitioners             
          for the years at issue without issuing petitioners a deficiency             
          notice.  Specifically, respondent assessed a $10,763,212                    
          deficiency for 1988 and a $2,644,240 deficiency for 1989.  These            
          assessments did not meet the statutory exceptions to the                    
          requirement that a deficiency notice must first be issued before            
          assessment.  See sec. 6213(b).  Specifically, the assessments did           
          not arise out of mathematical or clerical errors, were not the              
          result of a determination that a tentative carryback or refund              
          adjustment was excessive, and were not based on the receipt of              
          any payment of tax.                                                         
               After these assessments, respondent continued to alter the             
          amounts petitioners owed for the years at issue.  Respondent sent           
          petitioners five subsequent Income Tax Examination Changes from             
          1996 through 2001.  Respondent sent the latest report to                    
          petitioners in October 2001, 12 years after the end of the last             
          year at issue and 7 years after the parties executed the closing            






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