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additional information on the Vallecito property, including
verification that the escrow statement referencing the $11,104.67
deposit related to the Vallecito property and not to another.
The letter also states that "there appears to be conflicting
evidence as to whether the taxpayers resided in the Vallecito
property."
On January 11, 2000, Appeals faxed to Mr. Brown an offer in
settlement of the disputed items for the 1995 and 1996 tax years.
A number of items were included in the settlement. Among those
agreed upon was the cost of goods sold adjustment for 1996 of
$8,412. It was reduced by $9,097, the US Bank check amount of
$11,104.67 less $2,008.06 of expenditures previously allowed as
capital items that for settlement purposes were to be allowed as
expense deductions in 1995. Under the proposed settlement, the
1996 adjustment for legal and professional fees of $625 would be
conceded by the IRS as well as the utilities adjustment of $547
for 1995. The letter makes an inquiry as to: "What is the
additional $153 of utilities (700-547)?" That same day the
parties participated in a telephone conference regarding the
settlement offer.
A revised settlement offer was accepted on January 19, 2000.
On February 10, 2000, the Court issued its notice setting
petitioners' case for trial at the May 4, 2000, trial calendar in
Reno, Nevada. The documents embodying the settlement agreement
were signed by petitioners on February 22, returned to
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