Thomas L. & C. Marlene Pias - Page 7

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          activity for the production of income for a livelihood.  To be              
          sure, the volume of the activity may have gotten out of hand, but           
          the underlying purpose for the activity did not change.                     
          Petitioner was not in a trade or business of gambling.                      
               Petitioner also contends that he settled this case pursuant            
          to the June 1, 2004, letter.  If we treat the letter as a                   
          prepetition settlement attempt, the requirements of sections 7121           
          and 7122 (settlement agreements) have not been satisfied.  See              
          Dormer v. Commissioner, T.C. Memo. 2004-167.  If we treat the               
          letter as a postpetition offer of settlement, that offer was                
          contingent on petitioners executing the total agreement                     
          statement, and there is no evidence that they complied with that            
          requirement.  In this regard, petitioner testified that he did              
          not know, until October 2004, that section 165(d) disallows                 
          gambling losses that exceed gambling income and that he then told           
          the Appeals officer in Wisconsin that he “was going to agree to             
          that assessment and pay the tax and the interest.”  There can be            
          no question that petitioners had not previously accepted any                
          offer to settle.  It seems most likely that petitioner was trying           
          to play both ends against the middle, and when he learned of                
          section 165(d) he then attempted to resuscitate the offer that              
          they had ignored.  We do not find that the offer in the June 1,             
          2004, letter, assuming it constituted a valid offer, was timely             

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