Leon L. Sicard and Eleanor Sicard - Page 8

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               As noted above, respondent decided to rely exclusively on              
          the accounting method theory 2 weeks prior to the trial of the              
          instant case, after petitioners had complied with respondent's              
          discovery requests and respondent had rejected petitioners'                 
          offers to settle the case.4  Although respondent claims that the            
          change constituted a "narrowing" of theories that resulted from             
          development of the facts through discovery during the course of             
          the Tax Court proceeding, respondent does not set forth any                 
          specific facts that prompted the change when respondent became              
          aware of them, and petitioners contend that no facts were                   
          developed that would form the basis of a new position.                      
          Petitioners allege, and respondent does not deny, that the theory           
          respondent ultimately advanced at trial was adopted shortly after           
          it was suggested to respondent's counsel by "IRS experts in                 
          Washington".                                                                
               Petitioners also allege, and respondent does not deny, that,           
          on the day when respondent informed petitioners' counsel that               
          respondent would rely on the accounting method theory,                      
          respondent's counsel acknowledged that her research on it was               

          4    Respondent indicates that the case was not settled because             
          certain facts crucial to petitioners' claims were only                      
          established by petitioner's testimony at trial and that                     
          petitioners' ability to establish those facts turned on                     
          petitioner's credibility.  Respondent has not suggested that the            
          information contained in petitioner's testimony was not available           
          prior to the trial.  Moreover, respondent's abandonment 2 weeks             
          prior to trial of the contention that the payment in issue was              
          not a guaranteed payment suggests that respondent believed that             
          petitioners would be able to establish that claim.                          




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