Opinion ID: 729795
Heading Depth: 2
Heading Rank: 3

Heading: The Litigation and Settlement

Text: 8 As noted, MTH filed suit in tax court in December 1989 contesting the adjustments. Over the next five years, the parties settled or conceded all the IRS's adjustments except those described above, relating to stock option and repo transactions. 9 Approximately one week before trial was scheduled to begin, the parties agreed to settle all the remaining issues based on two adjustments to MTH's tax returns. In a letter dated February 23, 1995, MTH's counsel wrote to the IRS to confirm that [MTH has] accepted the settlement offer that [the IRS] conveyed to me. The letter stated: 10 Petitioners and the IRS have agreed to settle all issues in these consolidated cases based upon the following adjustments: (i) a reduction of $1,000,000 in interest deductions claimed for the tax year ended December 31, 1982 and (ii) a recharacterization from ordinary to capital of $2,000,000 in losses claimed for the tax year [ended] December 31, 1983. 11 On February 28, the parties informed the tax court that they had reached a settlement and provided a copy of the settlement letter to the court. The court stated its understanding of the settlement agreement as follows: [T]he parties have agreed to ... a reduction of a million dollars in interest deductions for 1982 and a recharacterization from ordinary [to] capital of $2 million in losses for the year 1983. Both parties responded that this was correct. The court ordered the parties to file decision documents reflecting the adjustments by March 30. 1