Slaying an IRS dragon

I got a happy little note from the IRS a couple months ago saying they thought I owed them about $7000. Fun, right? It had a whole packet of forms encouraging me to just go along with their findings, roll over and give them a wad of cash. It sounded wrong, so I did some hunting, called one of my brokerages and got a 1099 from 2007 which should have made the IRS leave me alone. I sent it off, assuming their humble apology letter would soon be on its way. Then I got another note from them that they couldn't calculate the cost basis of the stock based simply on a 1099, and I must immediately give them $1600 or be shipped off for water boarding camp. Could this tale get more riveting? I think not! I still have no idea how they came up with that number, but I had a secret weapon- a very friendly clerk at a brokerage firm clued me in to the mighty schedule D form. It had the full cost basis in black and white for the stock option exercise. I sent that, and a back up copy of the 1099 off to the IRS. Is the IRS dragon slain? Tune in next week when our intrepid hero refills his red Swingline stapler... of Death!