Neil Malcolm Cowie and Karen Christine Shunk - Page 3




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               Mr. Cowie provided regular reports regarding the investments           
          to Dr. Cowie.  Likewise, Mr. Cowie provided the information                 
          necessary for Dr. Cowie to complete his annual tax returns.                 
               Mr. Cowie and Dr. Cowie reported their respective shares of            
          the taxable transactions from Mr. Cowie’s brokerage account on              
          their tax returns.  The brokerage firm, however, issued only one            
          Form 1099-B, Proceeds From Broker and Barter Exchange                       
          Transactions 2003, to Mr. Cowie reporting all of the account’s              
          taxable activity.                                                           
               On February 7, 2005, respondent sent petitioners a draft               
          CP2501 notice listing 75 items where a discrepancy occurred                 
          between the amounts reported by the brokerage firm on Form                  
          1099-B, and those reported on petitioners’ return for taxable               
          year 2003.  On March 31, 2005, petitioners responded, stating               
          that the full amount of each transaction was reported by Mr.                
          Cowie and Dr. Cowie on their respective returns and providing               
          supporting information.                                                     
               Petitioners received a CP2000 notice dated June 20, 2005,              
          stating that respondent had not received a response to the                  
          February 7, 2005, notice.  On June 22, 2005, petitioners sent               
          their response again.  Subsequently, petitioners received a                 
          letter dated August 22, 2005, that requested that petitioners               
          provide information on a completed Schedule D, Capital Gains and            
          Losses.                                                                     







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