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During the week of April 13, 1992, Mr. Sims contacted Jerry
Li (Mr. Li), another Associate Chief of Appeals in San Francisco,
about the need to assess amounts in the Thompson cases that were
less than the amounts set forth in the Tax Court's decisions.
Mr. Sims did not mention the Thompsons' participation in the
Bauspar program in his conversation with Mr. Li. Mr. Li told
Mr. Sims that he would have to check with his superiors before
processing the case. Mr. Li asked Mr. Sims for a memorandum
explaining the situation.
Mr. Sims and Mr. McWade sent Mr. Li a memorandum dated
May 8, 1992, which states:
Forwarded herewith are the administrative files
for the above-entitled cases, which were part of the
test cases in the Kersting Interest Deduction Program.
As per our discussion, the petitioners indicated a
desire to settle their cases, based upon the then
outstanding settlement offer, prior to the trial of the
test cases. Because of the stipulations of settlement
of tax shelter issues filed in the remaining non-test
cases, we felt settlement with petitioners, as test
cases, without trial was inappropriate. In lieu of a
stipulated settlement, we agreed to allow petitioners
the better of the settlement or trial results, once the
litigation was completed. Petitioners also established
their entitlement to additional actual losses
associated with another of Mr. Kersting's programs,
Balspar [sic]. We agreed to reflect the tax
consequences of such transactions in the final
determination of their tax liability for the respective
years.
The Court has now rendered its opinion in the
Kersting test case litigation and entered its decision.
In accordance with our agreement with petitioners, the
tax liabilities to be assessed in these cases, the
decision notwithstanding, are as follows:
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