Kenneth A. Sapp - Page 17

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          Settlement Officer Waters erred in refusing to consider                     
          challenges to the underlying liability for that year.                       
               The error was harmless in this case, however.  As part of              
          the pretrial process, respondent's counsel undertook extensive              
          efforts through formal discovery to have petitioner reveal the              
          nature of his dispute over the underlying liability for 1996, to            
          no avail.  When questioned at trial about the determination in              
          the notice of deficiency that he had income for 1996, petitioner            
          was evasive and offered no specific challenge to it.   The                  
          challenge petitioner offered at trial to the underlying                     
          liabilities for 1990-93 was that he had no tax liability for                
          those years because the income he received was not taxable                  
          because it was received in exchange for labor.  In these                    
          circumstances, we do not believe it is either necessary or                  
          productive to remand the case to Appeals for a further hearing on           
          any challenge to the underlying liability for 1996.  See Lunsford           
          v. Commissioner, 117 T.C. at 189.  Petitioner has had ample                 
          opportunity to obtain de novo review in this proceeding of any              
          legitimate challenge to the underlying liability for 1996.                  
          Appeals Employees' Impartiality                                             
               In the absentee letter, petitioner also complained that a              
          second Appeals employee participated in the terminated conference           
          between petitioner and Settlement Officer Waters in December                
          2003.  Petitioner argues that Settlement Officer Waters was                 






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