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Petitioner and Mr. Greenspan believed that the case could be
settled if it could be established that there were two distinct
elements in petitioner's 1990 Federal income tax return--the
$400,000 capital contribution taken as a loss and the $400,000
bad-debt deduction. Petitioner and Mr. Greenspan brought records
to substantiate this particular contention. During this meeting,
the records were photocopied by respondent's counsel and his
assistant. This, in addition to the obvious settlement
discussion in the beginning of the meeting, caused petitioner to
believe that the entire session was for the purpose of
settlement.
Respondent's counsel, who is sophisticated and experienced
in such matters, delineated between the initial settlement
discussion and the beginning of the process of stipulating facts
for trial. Petitioner and Mr. Greenspan, however, were not
sophisticated and experienced in such matters. It was only
toward the end of the meeting, when respondent's pretrial counsel
advised petitioner to obtain counsel, that it could have become
clear to them that the subject matter had turned to preparation
for trial as opposed to settlement discussions. In addition, the
subsequent telephonic discussions between petitioner and
respondent's counsel concerned the question of duplicated
$400,000 amounts and could have given petitioner the impression
that the possibility of settlement was still under discussion.
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