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that petitioners’ amended income tax returns failed to properly
report Mr. Wadsworth’s alleged distributive share of the income
of Gold Coast.
On June 13, 2005, petitioners timely petitioned this Court
for a redetermination of the 2001 and 2002 deficiencies. In
their petition, petitioners argued that the notice of deficiency
was invalid because: (1) The notice of deficiency is vague and
incomprehensible; and (2) the adjustments at issue are subject to
the partnership-level proceedings of sections 6221 through 6233,
and respondent therefore lacks authority to assert a deficiency
against an individual partner before the issuance of a notice of
final partnership administrative adjustment (FPAA).
After receiving an extension of time to file, respondent
timely filed his answer to the petition on August 29, 2005.
Paragraph 8 of respondent’s answer consists of detailed
allegations regarding Gold Coast’s income for 2001 and 2002 and
Mr. Wadsworth’s involvement in Gold Coast. Respondent alleges,
inter alia, that Mr. Wadsworth was a 50-percent partner in Gold
Coast; that Gold Coast had only two partners, both of whom were
individuals; that Gold Coast operated a pharmacy that provided
medical products and services to eligible beneficiaries of the
California Medical Assistance Program; that the California
Department of Health Services (DHS) conducted an audit of Gold
Coast’s records for the period from January 1, 2001, through
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