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refunded $88,000 to petitioner.5 Subsequently, respondent
suspected that the refund was erroneous and began an audit of
petitioner’s employment tax compliance.6 Respondent’s revenue
agent Beth Nichols conducted the audit from approximately spring
2001 to 2003 when respondent issued the notice of determination.
During the examination, Revenue Agent Nichols unsuccessfully
attempted to obtain petitioner’s books and records, including its
bank records, from petitioner’s agent, Dolores Rudd. After
discovering that petitioner was using bank accounts in other
names, Revenue Agent Nichols summoned the bank records from those
accounts.7 Revenue Agent Nichols analyzed the bank records and
conducted additional investigation of petitioner’s business
activities. On the basis of her analysis, Revenue Agent Nichols
concluded that petitioner was still in business8 and that
5Petitioner subsequently filed a refund claim for its 1999
employment taxes, which respondent ultimately denied.
6In 2002, the United States instituted legal proceedings
against petitioner for the return of the erroneous refund.
7Respondent summoned bank records for accounts not in
petitioner’s name but in the names of entities traceable to
petitioner and into which petitioner’s receipts were deposited.
Respondent traced activity in those accounts to petitioner’s
business location and attributed the activity to petitioner for
tax purposes.
8Petitioner does not dispute that business activity similar
to petitioner’s regular business activity in 1999 occurred at
petitioner’s business location in 2000 and 2001. Ms. Rudd
testified that at least some of the same workers who performed
services for Colorado Mufflers in 1999 performed similar services
at petitioner’s business location in 2000 and 2001.
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Last modified: November 10, 2007