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certain programs that were the subject of this Court's opinion in
Dixon II, the Thompsons, along with some 40 other investors,
including Mr. Provan, participated in a transaction arranged by
Mr. Kersting in early 1978 to acquire First Savings and Loan
Association of Hawaii (First Savings).
The Thompsons filed joint Federal income tax returns for
1979, 1980, and 1981 in which they claimed interest deductions
attributable to their participation in certain Kersting programs.
On May 5, 1983, June 13, 1984, and May 31, 1985, respondent
mailed notices of deficiency to the Thompsons determining
deficiencies in and additions to their Federal income taxes for
the taxable years 1979, 1980, and 1981, as follows:
Additions to Tax
Sec. Sec. Sec. Sec.
Year Deficiency 6651(a) 6653(a) 6653(a)(1) 6653(a)(2)
1979 $18,161.00 --- $908 --- ---
1980 24,838.00 --- --- --- ---
1981 36,294.52 $4,934.32 --- $1,958.28 50 percent of
the interest due
on the deficiency
Respondent further determined that the Thompsons were liable for
increased interest for 1981 pursuant to section 6621(d).13 The
12(...continued)
due, in part, to their failure to attach to the return a Form W-2
showing the amount of tax that Continental Airlines had withheld
from Mr. Thompson's wages. In early to mid-1986, the Thompsons'
counsel, Samuel M. Huestis, negotiated a settlement of their tax
liability for 1978. The record does not disclose the terms of
the settlement.
13 Sec. 6621(d) was redesignated sec. 6621(c) by sec.
1511(c)(1)(A)-(C) of the Tax Reform Act of 1986 (TRA), Pub. L.
99-514, 100 Stat. 2744. We will hereinafter refer to the
(continued...)
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