Rhett Rance Smith and Alice Avila Smith - Page 9

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          years.  However, while petitioners apparently also claimed non-             
          cash-contribution deductions on their 2002 return, the issue was            
          not raised in the examination, nor were the deductions disallowed           
          in the 2002 deficiency notice.                                              
               The 2002 year (Omaha case) moved though the normal                     
          administrative procedures and became docketed in this Court at a            
          time when the earlier years’ cases (Phoenix cases) were at a more           
          advanced stage of development.  The Omaha and Phoenix cases were            
          being handled by different Government counsel, and different                
          cities had been requested for trial.  In a routine manner, the              
          Omaha case was assigned to Appeals for settlement, and, after               
          exchanges with Appeals, petitioners sent a letter proposing                 
          settlement.  Coincidentally, a few weeks later, Government                  
          counsel in the Phoenix cases moved to continue the cases from the           
          scheduled Phoenix trial session.  After not being able to obtain            
          a response from Appeals to their 2002 year offer, petitioners               
          contacted Government counsel in Omaha, who was not aware of the             
          non-cash-contribution issues in the Phoenix cases and was not               
          familiar with the details of the negotiations or settlement offer           
          during the Appeals process.  When petitioners’ counsel asked                
          respondent’s Omaha counsel about the status of the settlement               
          offer, Government counsel made some affirmation that the matter             
          was settled (per petitioners) or that settlement was likely (per            
          respondent).  Considering that scenario with those two possible             






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