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Mr. Seery selected two or three test cases, including the
Cravenses and the Hongsermeiers.
In an effort to find the best cases for trial from
petitioners' point of view, Mr. Seery selected test cases by
reference to the manner in which the taxpayers had reported the
transactions. Mr. Seery selected test cases that he thought he
could win, but, as he testified at the evidentiary hearing, he
had difficulty identifying such cases in addition to the
Cravenses and the Hongsermeiers.21
Mr. Kersting and Mr. Cravens discussed having Mr. Cravens'
case serve as a test case. Mr. Kersting told Mr. Cravens that
Mr. Seery wanted to use him as a test case because, unlike other
Kersting program participants, the Cravenses had reported a
capital gain when they surrendered their stock in the Kersting
holding company in conjunction with the annual termination of the
Kersting program. The Cravenses' reporting position was
consistent with Mr. Kersting's advice to program participants
that distributions by Kersting holding companies used by program
participants to pay the principal amount of leverage loans were
tax-free returns of capital rather than taxable dividends.
Mr. Seery viewed the Cravens cases as "unique" in this respect.
Mr. Cravens believed that he had a choice whether his case
would serve as a test case. When Mr. Cravens agreed to have his
21 Mr. Seery's testimony: "I was having trouble selecting
cases beyond those two that I thought would be good vehicles for
that."
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