Thomas H. Scott and Lynn D. Scott, Transferees - Page 26

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               25.  Respondent did not assert the accuracy-related                    
               penalty for a substantial underpayment, pursuant to                    
               I.R.C. � 6662(a), against MSSTA.  Attached hereto as                   
               Petitioners' Exhibit 11 is a letter written by J.                      
               William Callison concerning his request that Respondent                
               not assert such penalty.  The stipulation is expressly                 
               limited to the existence of this letter, and is not                    
               intended as a stipulation to the truth of the matters                  
               asserted therein.  Respondent specifically reserves the                
               right to object to this stipulation, including the                     
               referenced exhibit, as inadmissible pursuant to Fed. R.                
               Evid. 408.                                                             
          Respondent objects to the admission into evidence of (1) the                
          first sentence of stipulation 25, (2) petitioners' exhibit 11,              
          the letter written by Mr. Callison (Mr. Callison's letter) that             
          is referenced in stipulation 25, and (3) certain testimony of Mr.           
          Callison regarding that letter and his recollection of his                  
          discussions with the revenue agent who was auditing MSSTA's 1989            
          return.  The principal ground for respondent's objections to                
          those matters is that they are inadmissible under rule 408 of the           
          Federal Rules of Evidence (FRE 408) because they constitute "evi-           
          dence of conduct or statements made in compromise negotiations".6           
               As we understand their position, petitioners contend that              
          the evidence to which respondent objects is not excluded by FRE             
          408 because (1) respondent "had not yet asserted" that MSSTA was            

          6  Respondent also objects to the evidence in question on rele-             
          vancy grounds and on the ground that the evidence in question is            
          an attempt to go behind the notices.  As for the relevancy ob-              
          jection, we indicated at trial that, assuming arguendo that we              
          were to find the evidence to which respondent objects to be                 
          otherwise admissible, we shall give it whatever weight we deem              

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