MEMORANDUM OPINION
DOWD, District Judge.
The above-captioned case is before the Court on the joint stipulation of facts (Docket # 15) and briefs of the parties (Docket ## 17, 19, 20).
I. BACKGROUND1
Pursuant to an audit, by letter dated December 4, 1987, the District Director of Internal Revenue proposed deficiencies and penalties in the 1984 and 1985 income taxes
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