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stipulation of settled issues on December 10, 2003, that
reflected their settlement of approximately 45 out of 50 issues.
The first stipulation of settled issues stated that the only
issues remaining in dispute were (1) whether petitioners could
deduct for 1993 contract labor in excess of $463,577, (2) whether
Continuum (and thus petitioners) could deduct business expenses
for 1994 in excess of $871,480, (3) whether petitioners could
deduct for 1994 a stock loss under section 1244 as to Quest
Therapy, Inc. (Quest), (4) whether petitioners were liable for
the section 6662(a) accuracy-related penalty determined by
respondent for 1993, and (5) whether petitioners were liable for
the section 6662(a) accuracy-related penalty determined by
respondent for 1994. Montgomery did not inform either petitioner
that he had agreed to and signed the first stipulation of settled
issues on December 9, 2003, or that he had caused it to be filed
with the Court the next day, nor did either petitioner expressly
authorize him to do any of those acts. On or before Sunday,
December 14, 2003, without seeking or receiving the approval of
either petitioner, Montgomery settled the five remaining issues.
Afterwards on December 14, 2003, Montgomery called Ms. Keil
in Hawaii to obtain her acceptance of the settlements. He told
her that the settlements were a “proposal” that she need not
accept but, if she declined to do so, that petitioners would have
to try their case in the spring of 2004. Ms. Keil did not accept
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