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authority. Consequently, respondent asked the Court to apply the
18.8-percent reduction settlement to the Thompsons.15 The result
for the Thompsons would have been deficiencies of zero for
taxable year 1979, $34,425 for 1980, and $30,000 for 1981.16
Respondent’s motion papers compared the amounts of the
Thompsons’ deficiencies originally determined for the 3 years at
issue, totaling $79,293.52, with the unauthorized new agreement
reducing the deficiencies to zero, $15,000, and $15,000, or
total deficiencies of only $30,000, thus generating the refunds
used to pay Mr. DeCastro’s legal fees. These figures, without
more, indicate that the new agreement represented a 62-percent
15Respondent’s motion papers explained that the December
1986 agreement between Mr. DeCastro and Messrs. Sims and McWade
to reduce the Thompsons’ deficiencies by 18.8 percent exceeded
the terms of the standard 7-percent reduction settlement offer.
Nevertheless, respondent conceded, “Respondent’s counsel
possessed the authority to make such an offer, and such offer was
accepted by petitioners herein as well as others.” Respondent
also noted an “approximately 20 percent” reduction settlement
offer previously made to other participants. Respondent did not
revive the 20-percent reduction offer after trial. See supra
note 11.
16As things worked out, the final settlement of the
Cravenses, who were not represented by counsel, was less
favorable to them than respondent’s modified 7-percent reduction
settlement offer. In particular, the Cravenses’ correct tax
liabilities for 1979 and 1980 were $4,508 and $5,893.45,
respectively, for a total of $10,401.45. The Cravenses’
settlement, which was for $9,782.16, represents a reduction of 6
percent of the deficiencies respondent originally determined.
In addition, the Cravenses’ settlement did not include the
burnout feature. On Aug. 25, 1992, this Court entered a decision
for the stipulated total amount of the deficiencies, but the
decision included the stipulation that certain advance payments
made by the Cravenses had not yet been taken into account.
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