Rhett Rance Smith and Alice Avila Smith - Page 4

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               government views as its hazards.  Although we feel that                
               the right answer given the facts is that the taxpayers                 
               are entitled to the deduction in full, we recognize                    
               that as a practical matter proving that entitlement at                 
               this point through litigation would likely be cost-                    
               prohibitive.                                                           
               Please contact me with any questions or to discuss.  I                 
               would appreciate a response by the end of the month.                   
          Shortly thereafter, on January 26, 2006, Ms. Durning moved to               
          continue the trial of the Phoenix cases, and the Court gave                 
          petitioners until February 21, 2006, to respond to respondent’s             
          continuance motion.3                                                        
               Between January 6 and February 21, 2006, petitioners’                  
          attorney, on several occasions, unsuccessfully attempted to                 
          contact Ms. Gonzalez by telephone.  On February 21, 2006,                   
          Attorney Robert Stientjes, a counsel for petitioners, contacted             
          Mr. Carriger, counsel for respondent in the Omaha case, to                  
          solicit a response to the January 6, 2006, offer made to Ms.                
          Gonzalez.                                                                   
               At this point, the parties’ allegations as to what                     
          transpired are diametrically opposed.  Petitioners contend that,            
          during the February 21, 2006, telephone conversation, Mr.                   


               3 Although petitioners attempt to link respondent’s                    
          continuance motion in the Phoenix cases to the Omaha case and the           
          purported acceptance of their offer to settle, the circumstances            
          we consider do not support such a connection.  Even if                      
          petitioners could show or believe such a connection existed, we             
          do not find that fact decisive one way or the other with respect            
          to whether there was a meeting of the minds and a settlement of             
          the cash contribution issue or the Omaha case.                              





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