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agreement between respondent and petitioners, and that the
settlement terms (1) allowed them to deduct 20 percent of the
Arbitrage Management losses and expenses and to exclude 80 percent
of the Arbitrage Management gains they reported on their 1979-83
returns, and (2) precluded respondent from imposing any additions
to tax (including fraud), other than additional interest.
On April 25, 1996, respondent filed a notice of objection
contending that this Court's findings in Manko I related only to
petitioners' 1978 tax year and not to the years involved herein,
which were not docketed at the time of the settlement. Respondent
also contended that Manko I did not affect the applicability of the
fraud additions to tax herein because respondent had not determined
fraud for 1978 (and the Court in Manko I could not have intended to
eliminate the fraud additions for 1982 and 1983). On brief,
respondent further argued that: (1) Respondent did not authorize
his representatives to settle nondocketed years; and (2)
petitioners are bound by the finding of the U.S. District Court for
the Southern District of New York in a 1991 criminal case involving
petitioner, which stated that there was no settlement between
petitioners and respondent for petitioners' 1982 or 1983 tax years.
On May 1, 1996, petitioners filed a reply to respondent's notice of
objection.
The Court held a hearing on September 9 and 10, 1996, with
regard to petitioners' motion for partial summary judgment.
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