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substantially justified until the case was called for trial at
the May 18, 1998, calendar.
The notice of deficiency was sent to petitioners on May 23,
1997. Respondent’s Appeals officer requested a meeting with
petitioners’ representative in a letter dated February 2, 1998.
Petitioners’ counsel replied that a meeting was inconvenient at
that time but that documents could be provided by mail. The
Appeals officer agreed and provided counsel with a list of needed
information. The requested information was not provided until
April 14, 1998.
After a timely review of the requested information,
respondent’s Appeals officer concluded on May 1, 1998, that
petitioners were entitled to a refund and forwarded a proposed
settlement computation to petitioners’ counsel. Petitioners’
counsel indicated his agreement by return facsimile that same
day.4 On May 11, 1998, however, petitioners’ counsel was advised
by the Appeals officer that his supervisor refused to approve the
proposed settlement. The case was forwarded to the Internal
Revenue Service (IRS) District Counsel on May 11, 1998, 1 week
before calendar call.
Shortly after being informed that there would be no
settlement with the IRS Appeals Office, petitioners’ counsel
4 Although the settlement proposal required petitioners to
concede deductions to which they were arguably entitled, the
settlement was accepted to avoid the further expense of trial.
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