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D. The Settlement Process - Petitioners’ Case
On November 24, 1993, Rowland sent to petitioners the
following settlement letter.
Dear Mr. and Mrs. Goettee:
This case has been referred to us by District Counsel in
Louisville, Kentucky, to offer you a settlement in your tax
shelter dispute concerning Thompson Equipment Associates.
Please consider this settlement in view of the Tax Court
decisions in Thomas J. Leger, T.C. Memo. 1987-146, Harris
Cashman, T.C. Memo. 1989-533, and Marvin Chupack, T.C. Memo.
1989-548.
The terms in offer of settlement are:
1. 50% of cash investment is allowed as a loss in 1981;
2. no investment tax credit (ITC) is allowed;
3. no other loss, deduction, or credit will be allowed;
4. no negligence penalty under Section 6653(a) will be
applied;
5. the overvaluation penalty, Section 6659, will be 20%
of the ITC used;
6. no understatement penalty under Section 6661 will
apply;
7. tax motivated interest under Section 6621(c) will
apply to the entire deficiency.
There is no documentation in the file which substantiates
your actual cash investment in this tax shelter. Please
forward copies of your cancelled checks verifying your cash
investment, within the next ten days. After this
verification is received, you will receive the computations
of the settlement offer, showing the tax effects if you
accept the offer.
Please contact me if you have any questions or concerns. A
return envelope is provided for your convenience.
This was the first time petitioners received a settlement
offer from the Internal Revenue Service.
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