Estate of Kevin J. Lorenz, Deceased, Elizabeth J. Lorenz, Personal Representative and Elizabeth J. Lorenz - Page 11

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            the 75 percent and a reasonable person would not have settled the                           
            case on the terms respondent claims; and (c) respondent should                              
            have told petitioners that the Government would collect the                                 
            entire 75 percent from both the estate and the individuals.                                 
                        a.    Mutual Mistake                                                            
                  General principles of contract law govern the compromise and                          
            settlement of Federal tax cases.  Dorchester Indus. Inc. v.                                 
            Commissioner, 108 T.C. 320, 330 (1997); Robbins Tire & Rubber Co.                           
            v. Commissioner, 52 T.C. 420, 435-436 (1969); Brink v.                                      
            Commissioner, 39 T.C. 602, 606 (1962), affd. 328 F.2d 622 (6th                              
            Cir. 1964); Saigh v. Commissioner, 26 T.C. 171, 177 (1956); Davis                           
            v. Commissioner, 46 B.T.A. 663, 671 (1942).                                                 
                  Mutual mistake occurs when both parties to a transaction                              
            share an erroneous belief and their acts do not accomplish their                            
            mutual intent.  Healy v. Rich Prods. Corp., 981 F.2d 68, 73 (2d                             
            Cir. 1992).  We may reform a contract if there is clear and                                 
            convincing evidence of mutual mistake.  Id.  Unilateral mistake                             
            occurs when only one of the parties to a transaction is in error.                           
            Id.  We do not reform a contract based solely on unilateral                                 
            mistake.  Id.                                                                               
                  Petitioners contend that mutual mistake occurred here                                 
            because the parties had agreed that the fraud penalty for Mrs.                              
            Lorenz and the estate of Mr. Lorenz would apply to one-half of                              

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