Thomas H. Scott and Lynn D. Scott, Transferees - Page 27

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          liable for the accuracy-related penalty at the time Mr.                     
          Callison's letter was sent to respondent's representative and               
          (2) "Mr. Callison did not make any settlement offer or concession           
          to the revenue agent in exchange for the penalty not being                  
          asserted."                                                                  
               FRE 408 provides:                                                      
                    Evidence of (1) furnishing or offering or prom-                   
               ising to furnish, or (2) accepting or offering or                      
               promising to accept, a valuable consideration in com-                  
               promising or attempting to compromise a claim which was                
               disputed as to either validity or amount, is not ad-                   
               missible to prove liability for or invalidity of the                   
               claim or its amount.  Evidence of conduct or statements                
               made in compromise negotiations is likewise not admis-                 
               sible.  This rule does not require the exclusion of any                
               evidence otherwise discoverable merely because it is                   
               presented in the course of compromise negotiations.                    
               This rule also does not require exclusion when the                     
               evidence is offered for another purpose, such as prov-                 
               ing bias or prejudice of a witness, negativing a con-                  
               tention of undue delay, or proving an effort to ob-                    
               struct a criminal investigation or prosecution.                        
               With respect to respondent's objection to the first sentence           
          of stipulation 25, which states that "Respondent did not assert             
          the accuracy-related penalty for a substantial underpayment,                
          pursuant to I.R.C. � 6662(a), against MSSTA", it is not clear to            
          what point in time during the Service's examination of MSSTA that           
          sentence is referring.  According to Mr. Callison's testimony,              
          the Service's revenue agent auditing MSSTA's 1989 return prelim-            
          inarily proposed that MSSTA was liable for certain penalties.7              

          7  It is not clear how Mr. Callison learned about what that agent           
                                                             (continued...)           




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