- 103 -
Although Mr. Cravens intended to accept the modified 7-
percent settlement offer, the Cravenses' settlement was less
favorable to them than the modified 7-percent settlement offer.
In particular, the Cravenses' correct tax liabilities for 1979
and 1980 were $4,508 and $5,893.45, respectively, for a total of
$10,401.45.50 Thus, the Cravens settlement in the amount of
$9,782.16 represents a reduction of approximately 6 percent of
the correct amount of the Cravenses' deficiencies. In addition,
the Cravens settlement was not structured to include the burnout
feature. At the time that Mr. Cravens settled his cases, Messrs.
Sims and McWade were offering 20-percent settlements with the
burnout feature to Mr. DeCastro's clients and Chicoine and
Hallett's clients.
Mr. McWade was aware that Mr. Cravens was a test case when
he spoke to Mr. Cravens about settling his cases. Mr. McWade
told Mr. Cravens that the Cravenses would have to continue as
test case petitioners as a condition of the settlement.
Mr. McWade did not tell Mr. Cravens to cooperate with the
Government in the trial of the test cases, or to keep his
settlement a secret. Mr. McWade did not tell Mr. Cravens that he
had to settle so-called open years, nor did Mr. McWade examine
50 The $4,508 figure for 1979 is consistent with the
deficiency notice issued to the Cravenses for that year. The
$5,893.45 figure for 1980 represents the Cravenses' correct tax
liability after eliminating the dividend adjustment set forth in
the notice of deficiency for 1980 and backing out the tax on the
capital gain that the Cravenses had reported on their 1980 tax
return.
Page: Previous 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 NextLast modified: May 25, 2011