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Whether Respondent Failed To Exercise Due Diligence
In Chanik v. Commissioner, T.C. Memo. 1972-174, affd. 492
F.2d 1181 (6th Cir. 1974), the Court denied the Commissioner’s
motion to amend his answer to allege fraud rather than negligence
for the taxpayer’s 1961 tax year. The Court found that the
Commissioner failed to exercise due diligence in alleging fraud
because he investigated the taxpayer’s 1961 tax year for 6 years
before the issuance of a notice of deficiency, he issued a notice
of deficiency for 1958, 1959, and 1960 which alleged fraud for
those years shortly after issuing the 1961 notice, and the motion
to amend was made at the time of trial. Id.
In Commissioner v. Estate of Long, 304 F.2d 136 (9th Cir.
1962), the court denied a motion to amend the answer to assert
additional deficiencies in excess of the amounts determined in
the notice of deficiency. The Court found that the Commissioner
took no action for over 4 years, from the time of filing the
original answer until 2 days before the date of a hearing on an
order to show cause why the Court should not enter decisions when
the taxpayer consented to decisions based on the amounts
determined in the notice of deficiency. Id. at 143.
Respondent is not asserting additional deficiencies or
penalties as the Commissioner did in Chanik and Estate of Long.
Respondent affirmatively alleged fraud in his answer, and the
motion was made less than 4 months after the original answer was
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Last modified: March 27, 2008