- 77 -
Mr. Sanchez expected that he would be informed by District
Counsel of settlements in tax shelter project cases that deviated
from the official project settlement offer.
B. Official Kersting Project Settlement Offer (7-Percent
Reduction of Deficiency or Out-of-Pocket Expenses)
Between January 1982 and mid-1986, the terms of the official
Kersting project settlement offer were stated as follows:
You will be allowed your actual out-of-pocket
expenses, in essence, the interest you actually paid
to Henry Kersting on the prepayment loan, or leverage
loan, which amount equals approximately 7% of the
determined deficiencies in most cases. In addition,
if you reported capital gain income from the Kersting
transactions, or recaptured the difference between your
adjusted basis in the stock and your outstanding
indebtedness, then an appropriate adjustment will be
made to reflect this fact. In addition, if you are
involved in a leasing plan, to the extent there are
additional allowable I.R.C. Section 162 expenses which
were not claimed on the return, an appropriate
allowance will be made for settlement purposes. If
you were involved in the Uniform Gift to Minors Act
program, referred to as KAT-FIT (sic), to the extent
you can establish compliance with the Clifford Trust
rules, then an appropriate allowance for the deductions
will be made. The government will concede the
negligence penalties, I.R.C. Section 6653(1) and I.R.C.
Section 6653(a)(2), as well as the I.R.C. Section
6621(c) interest.
The 7-percent reduction of the deficiency reflected a deduction
equal to an average of the actual out-of-pocket expenses in
approximately 25 Kersting project cases. For this purpose, the
Commissioner treated the "interest" paid on Kersting leverage
loans as the out-of-pocket expense. From respondent's
Page: Previous 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 NextLast modified: May 25, 2011