Paul A. and Marilyn J. Grothues - Page 26




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                    1.  Agreed Judgment                                               
               Petitioners claim the agreed judgment is evidence that theft           
          occurred.  As a result of the agreed judgment, SWAS was entitled            
          to recover from Mr. Kanz for what he admitted were embezzlement             
          losses.  In Qualley v. Commissioner, supra, we held the                     
          introduction of lower court cases on the issue of theft was not             
          sufficient proof of theft because the cases were settled.                   
          Similarly, in this case, the agreed judgment was entered as a               
          result of a settlement between petitioners and Mr. Kanz and does            
          not prove theft actually occurred.12                                        
                    2.  Mr. Kanz’s Admissions                                         
               Petitioners argue Mr. Kanz’s admissions prove theft                    
          occurred.  Even though an admission was sufficient to prove theft           
          in Monteleone v. Commissioner, supra, the facts and circumstances           
          in this case are distinguishable.  The circumstances of Mr.                 
          Kanz’s admissions indicate he was not forthright.  Mr. Kanz                 
          settled SWAS v. Kanz in 1993.  At about the same time, he and Mr.           
          Grothues executed the collateral agreement in which Mr. Grothues            
          agreed not to attempt collection in exchange for Mr. Kanz’s                 
          assistance in resolving petitioners’ tax problems.13  Both Mr.              

               12Petitioners did not argue that collateral estoppel could             
          prohibit respondent from seeking another determination of the               
          litigated issue in this subsequent action.                                  
               13Even though the collateral agreement was not dated,                  
          according to the stipulation of facts submitted by the parties,             
                                                             (continued...)           





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