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longer consider settlements, other than on the basis of allowing
out-of-pocket expenses, and that out-of-pocket settlements would
no longer be available after October 3, 1988. By memorandum
dated October 19, 1988, the Acting Chief of the Tax Shelter
Branch notified the Assistant Commissioner for Examination (with
copies to the Director of the Appeals Office, Mr. McWade, and
several National Office executives) that, because the Kersting
test cases had been set for trial in January 1989, the
Kersting project settlement offer would be withdrawn, effective
October 28, 1988.
D. The Thompson Settlement
1. Initial Thompson Settlement Agreement
In early December 1986, Mr. McWade and Mr. DeCastro
discussed settlement of the cases of a number of Mr. DeCastro's
clients, including the Thompsons. Mr. Sims was aware of the
McWade-DeCastro discussions when he also met with Mr. DeCastro in
December 1986 at the Honolulu District Counsel Office and
generally discussed with Mr. DeCastro settlement arrangements for
the Thompson cases.
On December 23, 1986, Mr. McWade mailed a letter to
Mr. DeCastro enclosing proposed decision documents for the
Thompsons as well as several other taxpayers with cases before
the Court. Mr. McWade's letter states in pertinent part:
Dear Mr. DeCastro:
Enclosed herewith are the Decision documents, as
per our conference, in the above-captioned cases.
Please sign the original and one copy of the Decision
document, in the space provided, and return them to
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