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with Mr. DeCastro calling for reduction of the Thompsons’ total
deficiencies from the $79,293 originally determined in their
statutory notices to $64,425, a reduction of 18.8 percent.11 The
settlement also eliminated all additions to tax and the increased
interest rate under section 6621(c) for 1981. The settlement
also incorporated the burnout feature, combining the agreed
deficiencies for the years 1979 and 1980 in the year 1980.
On December 23, 1986, Mr. McWade sent Mr. DeCastro decision
documents incorporating the above-described settlement. The
transmittal letter stated:
As previously indicated, the Decision documents in
John R. and Maydee Thompson will not be filed with the
Court until the Decision becomes final in the test
cases. In the interim, the Thompsons can make an
advance payment, as discussed at our conference, and
stop the accrual of any additional liability for
interest.
Mr. DeCastro executed the decision documents on behalf of the
Thompsons. Neither Mr. McWade nor Mr. Sims communicated the
terms or existence of the Thompson settlement to their superiors
in the Office of Chief Counsel.
On December 30, 1986, the Thompsons paid $59,545 as interest
on their then-agreed deficiencies, timed to take advantage of the
full deductibility of that interest for taxable years beginning
11Respondent later indicated that Mr. McWade’s agreement to
reduce the Thompsons’ deficiencies by 18.8 percent reflected
“increased litigation hazards caused by the Motion to Suppress
Evidence” filed by Messrs. Chicoine and Hallett that was
ultimately denied in Dixon I.
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