Lee D. Froehlich - Page 14

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          $400,000 amounts involved in the questioned transactions.  These            
          documents were photocopied by respondent's counsel and an                   
          assistant.                                                                  
               The conference began with a settlement discussion between              
          petitioner and respondent's counsel.  The brief settlement                  
          discussion was followed by the consideration of the merits of               
          respondent's legal stance.  During the conference, respondent's             
          counsel informed petitioner and his accountant about the Tax                
          Court's stipulation requirement.  Towards the end of the meeting,           
          respondent's counsel advised petitioner to obtain counsel.  After           
          the meeting, petitioner and respondent's counsel engaged in a               
          series of telephone conversations discussing whether there were             
          two separate $400,000 amounts claimed in the 1990 Federal income            
          tax return or whether there had been a duplication of a $400,000            
          amount.                                                                     
               Prior to trial, the counsel who represented respondent                 
          during the pretrial phase withdrew to enable him to testify about           
          statements made by or on behalf of petitioner at the conference.            
          New counsel represented respondent at the trial.                            
                                       OPINION                                        
           The primary issue for our consideration is whether petitioner's            
          loss of $400,000 resulting from his guaranty is deductible as               
          "ordinary" or "capital".  Preliminary to considering the merits             
          of the primary issue, we consider an evidentiary matter.                    





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