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of petitioner participants in the second generation4 of tax
shelter programs (the Kersting project) promoted by Henry F.K.
Kersting (Kersting).5 During the trial on the merits of the test
cases used to try to resolve the vast majority of the pending
cases in the Kersting project,6 respondent’s trial counsel
Kenneth W. McWade (McWade) (with the knowledge and connivance of
4In Pike v. Commissioner, 78 T.C. 822 (1982), affd. without
published opinion 732 F.2d 164 (9th Cir. 1984), this Court
sustained respondent’s disallowance of all deductions for
interest, losses, and credits claimed by participants in
Kersting’s first-generation programs.
5For additional information about the Kersting project, see
infra Parts I.A. and I.B. Before his death on Mar. 4, 2000,
Kersting and the tax shelter programs he promoted were frequently
before the courts. In addition to those cases cited supra notes
2, 3, and 4, see also, e.g., United States v. Kersting, 891 F.2d
1407 (9th Cir. 1989) (holding that an IRS summons was enforceable
against some Kersting program participants); Richards v.
Commissioner, T.C. Memo. 1997-149, Supplemental Opinion T.C.
Memo. 1997-299 (upholding Kersting project deficiency notice),
affd. without published opinion 165 F.3d 917 (9th Cir. 1998);
Gridley v. Commissioner, T.C. Memo. 1997-210 (denying
petitioners’ motions for summary judgment to obtain benefit of
Thompson settlement); Kersting v. United States, 206 F.3d 817
(9th Cir. 2000) (promoter penalties upheld); Kersting v.
Commissioner, T.C. Memo. 1999-197 (sustaining deficiencies
against Kersting personally); United States v. Kersting, 77 AFTR
96-1717 (Bankr. D. Haw. 1996) (denying Kersting bankruptcy
discharge).
6In 1986, counsel for the parties in the Kersting-related
cases agreed to a test case procedure, under which a few typical
cases are selected as test cases, while the petitioners whose
cases are not selected as test cases are encouraged to execute a
“piggyback” agreement, i.e., a stipulation to be bound by the
outcome of the test cases. The majority of petitioners in the
Kersting-related cases executed piggyback agreements. See the
discussion in Gridley v. Commissioner, supra note 5.
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