- 2 -
taxes for 1979 through 1983. Respondent's principal basis for the
deficiencies is the disallowance of claimed deductions for losses
and interest expense on straddles and Government security
repurchase agreements entered into by Bernhard F. Manko
(petitioner) both directly and through Arbitrage Management
Investment Co. (Arbitrage Management) and related entities.
I. Background
In Manko v. Commissioner, T.C. Memo. 1995-10 (Manko I), we
held that: (1) Respondent made a blanket settlement offer to all
Arbitrage Management investors; (2) petitioners accepted the offer;
and (3) respondent and petitioners reached a binding settlement
agreement no later than January 21, 1988. In reaching this
conclusion, we found that pursuant to this settlement agreement,
the Internal Revenue Service (IRS) would: (1) Allow the deduction
of 20 percent of the challenged losses (or, at the taxpayer's
option, out-of-pocket cost plus 15 percent); (2) eliminate capital
gains in an amount commensurate with the disallowed losses; and (3)
forgo the assertion of penalties. Manko I involved tax year 1978.
II. The Parties' Pleadings
Petitioners filed the petition herein on December 10, 1993,
and, except for further pleadings, the case was held in abeyance
pending the Court's decision in Manko I. On February 22, 1996,
petitioners filed a motion for partial summary judgment requesting
the Court to determine that there was a binding settlement
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011