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Year Deficiency Additions to Tax
1979 $3,606.40 ---
1980 6,175.76 ---
The $3,606.40 figure for 1979 represents a 20-percent reduction
of the $4,508 deficiency that respondent determined against the
Cravenses for that year. However, the derivation of the
$6,175.76 figure for 1980 is not known; it exceeded the correct
deficiency of $5,893.45 for 1980, including adjustments
eliminating both the capital gains that the Cravenses reported
for that year and respondent's alternative determination that the
Cravenses failed to report dividends paid to them by Candace.
The sum of the two figures ($9,782.16) is equal to the total tax
deficiency Messrs. Cravens and McWade had previously agreed
to, as shown by Mr. Cravens' letter of December 16, 1986, to
Mr. McWade.
Mr. Sims approved Mr. McWade's decision to forward decision
documents to the Cravenses for their signature 1 month before
trial of the test cases, believing that the Cravenses had
accepted the 20-percent settlement offer. When Mr. Cravens
testified at the trial of the test cases, Mr. Sims continued to
believe that Mr. Cravens was entitled to the 20-percent
settlement. On December 23, 1988, the Cravenses signed the
decision documents and returned them to Mr. McWade.
When Mr. Cravens appeared at the trial of the test cases, he
was surprised and suspicious when Mr. McWade informed him that he
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