Gary C. and Maru E. Johansen - Page 13

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          963, 966 (1988); sec. 301.7430-1(g), Example (11), Proced. &                
          Admin. Regs.                                                                
          Qualified Offer                                                             
               Because the Court has found that petitioners failed to                 
          exhaust their available administrative remedies, the Court need             
          not decide whether the qualified offer provision under section              
          7430(c)(4)(E) applies.  The Court nevertheless notes that the               
          application of the qualified offer provision would have been                
          precluded by the settlement limitation under section                        
               Section 7430(c)(4)(E)(ii)(I) provides that the qualified               
          offer provision does not apply where the parties settle a tax               
          adjustment rather than litigate and obtain a court determination            
          of the adjustment.  In this case, the entire tax liability was              
          settled by the parties before this matter was brought before the            
          Court.  Therefore, any judgment in this case will be issued                 
          pursuant to a settlement rather than a judicial determination.              

               1The statutory language in sec. 7430(c)(4)(E) reflecting the           
          settlement limitation to the qualified offer provision, in                  
          relevant part, provides:                                                    
               (ii) Exceptions.--This subparagraph shall not apply to–-               
                    (I) any judgment issued pursuant to a settlement * * *            

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