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before January 1, 1987. See TRA sec. 511(b), 100 Stat. 2246.
The payment was made with two checks, one of which, for $34,000,
was originally dishonored. The Thompsons replaced the $34,000
check early in 1987.12 On June 15, 1987, pursuant to further
negotiations, the Thompsons paid the total proposed deficiencies
of $63,000, in order to halt further accrual of interest on the
deficiencies.13 By June 1987, their payments to the Internal
Revenue Service with respect to the taxable years 1979 through
1981 totaled $121,770.
Shortly before trial of the test cases in this Court in
January 1989, Messrs. McWade and DeCastro reached an oral
agreement (the new agreement) in the Thompsons’ cases calling for
reduction of the agreed deficiencies for 1979, 1980, and 1981 to
zero, $15,000, and $15,000, respectively. The purpose of this
reduction was to generate refunds to the Thompsons from the
$121,770 they had previously paid toward satisfaction of the
12In March 1987, Mr. McWade agreed to reduce the combined
deficiency of the Thompsons for 1979 and 1980 from $34,425 to
$33,000, bringing the reduction in total deficiencies to
approximately 20 percent. The record does not disclose why Mr.
McWade agreed to that reduction, although similar 20-percent
reduction settlements were later offered to the clients of
Messrs. Chicoine and Hallett. Mr. DeCastro communicated this
proposed reduction to his clients, but apparently he did not
execute decision documents confirming the Thompsons’ acceptance
of this lowered amount.
13The Thompsons paid this amount with a check for $63,000;
respondent credited $775 to their taxable year 1988, a year not
then before the Court. The balance of $62,225 was credited to
their liabilities for their taxable year 1979.
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