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we would not be applying the equivalent of the Thompsons’ 1979-
1981 settlement; instead we would be applying essentially the
same 20-percent reduction settlement that McWade extended to
other taxpayers, including other clients of Chicoine and Hallett
and DeCastro, the monetary benefit of which respondent would have
been content to allow the Thompsons to retain. We believe the
modest deficiency reduction percentage urged by respondent would
not provide an appropriate sanction for misconduct that the Court
of Appeals has held to be a fraud on this Court. To adopt
respondent’s view would be to ignore the financial terms and
effects of the final settlement that was sweetened for the
illicit purpose of creating the fund from which DeCastro’s trial
fees could be paid.
We conclude that the Court of Appeals intended that the
Thompsons’ “secret agreement” with respect to 1979-1981, to the
extent it reflected the reduction of deficiencies to $30,000 for
those years, is to be applied as a reduction of 62.17 percent in
the Kersting deficiencies of the affected taxpayers, rather than
the 20-percent reduction urged by respondent, or some
intermediate percentage based upon the actual or expected amounts
of the refunds to be retained by the Thompsons after payment of
DeCastro’s fees. See supra note 51. In terms of the “settlement
fraction” discussed above, we begin with a numerator of $30,000
(the total 1979-1981 tax deficiency the Thompsons paid) and a
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