Phillip Lee and Carolyn F. Allen - Page 8




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          she had not attended the settlement conference and may not have             
          remembered the situation correctly.                                         
               Petitioners’ amended return and attachment, the complaint              
          against the insurance company, and settlement agreement and                 
          accompanying memorandum were sufficient to create substantial               
          doubt regarding whether petitioners’ settlement included punitive           
          damages.  Even though respondent had the opportunity to consider            
          the credibility of the witnesses, a witness’ testimony is not               
          necessarily conclusive as to the outcome of a factual issue.  See           
          Williams v. United States, 26 Cl. Ct. 1031, 1032 (1992).  That is           
          especially so where, as here, there is contradictory evidence.              
          Respondent could have reasonably decided to go to trial in the              
          hope that the Court would have found the documentary evidence               
          supporting respondent’s view more persuasive than the contrary              
          oral testimony supporting petitioners’ view.                                
               Additionally, there is no indication that the evidence                 
          relied on by respondent was “unusually scanty or unworthy of                
          belief” or that “respondent had taken his position for any                  
          purpose other than to prevail in the litigation.”  VanderPol v.             
          Commissioner, 91 T.C. 367, 370 (1988).  Nor did respondent “offer           
          a novel or unsupported interpretation of the law or unreasonably            
          rely upon a statutory interpretation that already had been                  
          rejected by this or another court.”  Williams v. United States,             
          supra at 1031-1032.  Respondent’s position was substantially                





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