Jerry and Patricia A. Dixon, et al. - Page 8

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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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