T.C. Memo. 1996-487
UNITED STATES TAX COURT
LEE D. FROEHLICH, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15382-94. Filed October 19, 1996.
P, P’s accountant, and R’s counsel engaged in a
pretrial conference. The conference began with a
discussion of settlement. R’s counsel did not believe
that settlement would be achieved and, from his
perspective, he began what he believed to be a
discussion of matters to be stipulated for trial. P
and his accountant, who were not familiar with the
pretrial procedures of this Court, believed that the
settlement discussions had continued. The matter
discussed between R’s counsel, P, and P’s accountant
involved whether there had been a duplication of a
$400,000 amount and whether P was entitled to losses
that were capital or ordinary in character. R, at
trial, offered statements made by or on P’s behalf as
admissions against P’s interest. P contends that Fed.
R. Evid. 408 prohibits R’s offer of admissions because
the statements were made in the context of settlement
negotiations.
Held: Under Fed. R. Evid. 408 both offers of
settlement and statements made during settlement
negotiations are not admissible to prove liability or
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