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perspective, the 7-percent settlement offer was equivalent to
allowing a deduction for a theft loss in the year of payment.39
Under the 7-percent settlement offer, the Commissioner
would: (1) Concede the negligence addition to tax and increased
interest imposed on tax-motivated transactions pursuant to
section 6621(c); (2) concede an annual deduction under section
162 or 212 to leasing program participants for expenses that
exceeded the out-of-pocket adjustment; (3) concede the deficiency
in full to participants in the CAT-FIT program who could provide
information on how the funds paid to the minor child were used
and establish that such use did not give rise to constructive
receipt of income by the parents; and (4) make appropriate
adjustments if the taxpayer had reported capital gains upon the
surrender of stock certificates to Mr. Kersting. The purpose of
these concessions and adjustments was to provide similar
treatment of all Kersting program participants who wished to
settle their cases.
C. Deviations From Official Project Settlement Offer
1. Modified 7-Percent Settlement Offer
Between April and September 1986, Mr. McWade and Mr. Seery
conducted settlement negotiations that led Mr. McWade to offer a
settlement that deviated from the official project settlement
39 Respondent's position represented a concession insofar
as the allowance as a deduction of a theft loss of payments
induced by misrepresentation is postponed until the year of
discovery. See sec. 165(e); Bellis v. Commissioner, 61 T.C. 354,
357 (1973), affd. 540 F.2d 448 (9th Cir. 1976).
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