Royce A. Ellis - Page 2

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          section 6651(a)(2) of $964,823, and under section 6654(a) of                
               After concessions,2 the issues for decision are:  (1)                  
          Whether respondent violated petitioner’s due process rights when            
          he failed to provide petitioner or his representative a notice of           
          bypass pursuant to section 601.506(b)(1), Statement of Procedural           
          Rules, and a 30-day letter pursuant to section 601.105(d)(1),               
          Statement of Procedural Rules; (2) whether respondent’s use of              
          the bank deposits method to reconstruct petitioner’s income for             
          the years at issue was arbitrary and unreasonable; (3) whether a            
          Service Center’s closing notice for 2001 was a closing agreement            
          within the meaning of section 7121; (4) whether respondent’s                
          examination of petitioner’s 2001 tax year violated section                  
          7605(b); (5) whether petitioner substantiated Schedule C, Profit            
          or Loss From Business, costs of goods sold or deductions for the            

               1 Unless otherwise indicated, all section references are to            
          the Internal Revenue Code, as amended, and Rule references are to           
          the Tax Court Rules of Practice and Procedure.  Amounts are                 
          rounded to the nearest dollar.                                              
               2 Respondent concedes that petitioner’s Schedule C, Profit             
          or Loss From Business, gross receipts for 2000 were $9,009,882.             
               Respondent concedes petitioner properly reported his 2001              
          Schedule C gross receipts of $4,196,750.                                    
               Respondent concedes that because petitioner’s extension for            
          filing for 2001 was sought and granted, petitioner is liable for            
          a 15-percent addition to tax under sec. 6651(a)(1) for 2001                 
          instead of the 25-percent addition proposed in the notice of                

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