- 2 -
27053-83, 4201-84,
10931-84, 15907-84,
20119-84, 28723-84,
38757-84, 38965-84,
40159-84, 22783-85,
30010-85, 30979-85,
29643-86, 35608-86,
13477-87, 479-89,
8070-90, 19464-92,
621-94, 7205-94,
9532-94, 17992-95,
17993-95.
In Dixon v. Commissioner, 316 F.3d 1041 (9th Cir.
2003), revg. and remanding T.C. Memo. 1999-101, the
Court of Appeals held that the misconduct of R’s trial
attorney and his supervisor in the trial of the test
cases for the Kersting tax shelter project, in agreeing
with counsel for T, one of the test case Ps, to a
secret settlement of T’s deficiencies (not disclosed to
IRS management, to this Court, or to counsel for other
test case Ps), was a fraud on the Court. The Court of
Appeals ordered this Court to sanction R by entering
judgment in favor of the remaining test case Ps and
other Ps in the Kersting tax shelter group before the
Court on “terms equivalent to those provided in the
[final] settlement agreement with [T] and the IRS”,
leaving to this Court’s discretion “the fashioning of
such judgments, which to the extent possible and
practicable, should put these taxpayers in the same
position as provided in the [T] settlement”.
R argues that the substance of the T settlement
was a 20-percent reduction of T’s 1979-1981
deficiencies, plus the payment of T’s attorney’s fees.
Ps argue that the T settlement was, in form and
substance, a 62.17-percent reduction of T’s 1979-1981
deficiencies, plus other benefits that bring the T
settlement to a 79.92-percent reduction in the
deficiencies. The parties agree that the T settlement
also included cancellation of all additions and
penalties, including nonshelter-related additions and
penalties, and the use of a “burnout” to reduce the
accrual of interest on the remaining deficiencies. Ps
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Last modified: May 25, 2011