Sather v. Commissioner

T.C. Memo. 1999-309

UNITED STATES TAX COURT

LARRY L. SATHER, DONOR, ET AL.,1 Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket Nos. 22141-97, 22142-97, Filed September 17, 1999.
22143-97, 22144-97,
22145-97, 22146-97,
469-98, 470-98,
471-98.

L, J, D, and R are brothers. L, J, and D are each
married, and each married couple has three children. R
is not married and has no children. L, J, D, their
wives, and R own S-co, a family-owned candy
distribution business. They wanted to pass S-co to the
next generation in a way that would have minimal tax

1
Cases of the following petitioners are consolidated
herewith: Sandra Sather, docket No. 22142-97; John R. Sather,
docket No. 22143-97; Kathy J. Sather, docket No. 22144-97; Duane
K. Sather, docket No. 22145-97; Diane R. Sather, docket No.
22146-97; Duane K. Sather Irrevocable Trust, docket No. 469-98;
Larry L. Sather Irrevocable Trust, docket No. 470-98; and John R.
Sather Irrevocable Trust, docket No. 471-98.
 - 2 -

consequences. L, J, D, and their wives each made
transfers of S-co stock to their own children and gifts
to each of their nieces and nephews, on the same date
and in equal amounts. The transfers to the nieces and
nephews were just under the $10,000 annual exclusion
per donee of sec. 2503(b), I.R.C., and each donor
claimed nine annual exclusions (three for their
children and six for the nieces and nephews). After
the transfers, each niece and nephew was left with the
same amount of S-co stock from his and her aunts and
uncles. On the same date, R also made gifts of S-co
stock in equal amounts to L, J, D, their wives, and his
9 nieces and nephews.
Held: Under the reciprocal trust doctrine, L and
J (and their wives K and S) are treated as the donors
of the stock that each of his or her children
ultimately received from his or her aunts and uncles,
and each donor is entitled to three annual exclusions
under sec. 2503(b), I.R.C. R's unilateral gifts have
no effect on the reciprocal nature of the gifts by the
other donors. Held, further, the accuracy-related
penalty under sec. 6662(a), I.R.C., is not sustained as
to L and J and is sustained as to K and S.

Richard M. Colombik and Mark E. Menacker, for petitioners.

Donna C. Hansberry, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

LARO, Judge: These cases are before the Court consolidated

for trial, briefing, and opinion. Respondent determined the

following deficiencies in gift tax and accuracy-related

penalties:
 - 3 -

Accuracy-related penalty
Donor Year Deficiency sec. 6662(a)

Larry L. Sather 1993 $9,915 $1,983
(Larry)
Sandra Sather 1993 22,184 4,437
(Sandra)
John R. Sather 1993 9,678 1,936
(John)
Kathy J. Sather 1993 22,160 4,432
(Kathy)
Duane K. Sather 1993 9,679 1,936
(Duane)
Diane R. Sather 1993 22,170 4,434
(Diane)

Before trial, respondent conceded the deficiencies and

accuracy-related penalties as to petitioners Duane and Diane due

to expiration of the period of limitations.

Respondent also determined the following trusts were liable as

transferees for unpaid gift tax and penalties relating to gifts

made by the following donors:

Accuracy-related penalty
Transferee Donor Year Deficiency sec. 6662(a)

Duane K. Sather
Irrevocable Trust Diane 1992 $22,190 $4,438
(Duane Trust)
Larry L. Sather
Irrevocable Trust Kathy 1992 22,190 4,438
(Larry Trust)
John R. Sather
Irrevocable Trust Sandra 1992 22,190 4,438
(John Trust)

After concessions by the parties, we decide the following issues:

1. Whether certain gifts of stock in 1992 and 1993 by

Larry, Kathy, John, Sandra, and Diane in trust for the benefit of

their respective nieces and nephews were, in substance, gifts by

each of them to his or her own children. We hold they were.
 - 4 -

2. Whether the Larry Trust, the John Trust, and the Duane

Trust are liable as transferees for the unpaid 1992 gift tax and

penalties owing by Kathy, Sandra, and Diane. We hold they are.

3. Whether Larry, Kathy, John, Sandra, and Diane are liable

for the accuracy-related penalty under section 6662(a) as

determined by respondent. We hold Larry and John are not and

Kathy and Sandra are.

Section references are to the applicable versions of the

Internal Revenue Code. Rule references are to the Tax Court

Rules of Practice and Procedure.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found.

The stipulation of facts and the exhibits submitted therewith are

incorporated herein by this reference. Sathers, Inc. (Sathers),

is a candy distribution business that has been in business since

1946. Since its inception, Sathers has been owned directly or

indirectly by the Sather family. For at least the past 10 years,

Neil Kaplan (Kaplan), a certified public accountant, has served

as accountant for Sathers, and Nancy Bender-Keller (Bender-

Keller), an attorney, has been its counsel. Kaplan worked as an

accountant for more than 30 years. His experience includes

employment at the Internal Revenue Service, and he was previously

a partner in the tax department of Deloitte & Touche.
 - 5 -

Larry, John, Duane, and Rodney Sather (Rodney) are brothers

(the brothers). Larry is married to Kathy, John is married to

Sandra, and Duane is married to Diane. Each of the married

couples has three children.2

The brothers all received their stock in Sathers from their

parents, who started the company. The brothers similarly desired

to pass Sathers to the family's next generation, and, in 1991,

the brothers met with Kaplan to discuss how this could be

accomplished with minimal tax consequences. Kaplan conferred

with Bender-Keller and, after several discussions between one or

more of the brothers and Kaplan, the following occurred. In

1991, Larry created the Larry Trust with his three children as

beneficiaries and Rodney as the trustee, John created the John

Trust with his three children as beneficiaries and Rodney as

Trustee, and Duane created the Duane Trust with his three

children as beneficiaries and John as the Trustee. The brothers

and their respective wives then made the following transfers of

Sathers stock on December 31, 1992.

1992 Reported Gifts

Larry and Kathy

Larry transferred: (1) To each of his three children into

the Larry Trust, 344.3 shares of Sathers stock valued at $75,378

2
With respect to any one married couple, we refer to the
children of the other two couples as the nieces and nephews.
 - 6 -

per gift, and (2) to each of his six nieces and nephews into the

John Trust and the Duane Trust, 45.6 shares of Sathers stock

valued at $9,997 per gift.

Kathy transferred: (1) To each of her three children into

the Larry Trust, 45.6 shares of Sathers stock valued at $9,997

per gift, and (2) to each of her six nieces and nephews into the

John Trust and the Duane Trust, 45.6 shares of Sathers stock

valued at $9,997 per gift.

John and Sandra

John transferred: (1) To each of his three children into

the John Trust, 347.3 shares of Sathers stock in trust valued at

$76,035 per gift, and (2) to each of his six nieces and nephews

into the Larry Trust and the Duane Trust, 45.6 shares of Sathers

stock valued at $9,997 per gift.

Sandra transferred: (1) To each of her three children into

the John Trust, 42.3 shares of Sathers stock in trust valued at

$9,267 per gift, and (2) to each of her six nieces and nephews

into the Larry Trust and the Duane Trust, 45.6 shares of Sathers

stock valued at $9,997 per gift.

Duane and Diane

Duane transferred: (1) To each of his three children into

the Duane Trust, 342.3 shares of Sathers stock valued at $74,940

per gift, and (2) to each of his six nieces and nephews into the
 - 7 -

Larry Trust and the John Trust, 45.6 shares of Sathers stock

valued at $9,997 per gift.

Diane transferred: (1) To each of her three children into

the Duane Trust, 45.6 shares of Sathers stock valued at $9,997

per gift, and (2) to each of her six nieces and nephews into the

Larry Trust and the John Trust, 45.6 shares of Sathers stock

valued at $9,997 per gift.

Larry, Kathy, John, Sandra, Duane, and Diane each filed a

separate gift tax return for 1992 reporting the transfers as

gifts. Each of the donors claimed nine $10,000 exclusions under

section 2503(b), and each of the men claimed application of the

unified credit under section 2010 for the excess amount over the

allowable exclusion. None of them reported any gift tax due for

1992. The total value of transfers from each married couple to

their nieces and nephews and the total value of property received

by each niece and nephew from his or her aunts and uncles are

summarized as follows:

Reported Value of Reported Value of
Stock Transferred to Stock Received from
Transferors Nieces and Nephews Transferees Aunts and Uncles

Larry and Kathy $119,964 Nephew $39,988
Nephew 39,988
Nephew 39,988
119,964

John and Sandra 119,964 Niece 39,988
Niece 39,988
Nephew 39,988
119,964

Duane and Diane 119,964 Niece 39,988
Nephew 39,988
Nephew 39,988
119,964
 - 8 -

On January 5, 1993, the brothers and their respective wives

made the following transfers.

1993 Reported Gifts

Larry and Kathy

Larry transferred: (1) To each of his three children into

the Larry Trust, 70 shares of Sathers stock valued at $15,323 per

gift, and (2) to each of his six nieces and nephews into the John

Trust and the Duane Trust, 91.3 shares of Sathers stock valued at

$19,994 per gift. Kathy transferred to each of her three

children into the Larry Trust, 15 shares of Sathers stock valued

at $3,283 per gift.

John and Sandra

John transferred: (1) To each of his three children into

the John Trust, 69.7 shares of Sathers stock valued at $15,250

per gift, and (2) to each of his six nieces and nephews into the

Larry Trust and the Duane Trust, 91.3 shares of Sathers stock

valued at $19,994 per gift. Sandra transferred to each of her

three children into the John Trust, 15 shares of Sathers stock

valued at $3,283 per gift.

Duane and Diane

Duane transferred: (1) To each of his three children into

the Duane Trust, 68 shares of Sathers stock valued at $14,886 per

gift, and (2) to each of his six nieces and nephews into the

Larry Trust and the John Trust, 91.3 shares of Sathers stock
 - 9 -

valued at $19,994 per gift. Diane transferred to each of her

three children into the Duane Trust, 15 shares of Sathers stock

valued at $3,283 per gift.

Larry, Kathy, John, Sandra, Duane, and Diane each filed a

gift tax return wherein they reported these transfers as gifts,

and each married couple elected to have all the gifts made by

them treated as made one-half by each of them for gift tax

purposes. See sec. 2513. After application of the $10,000

exclusion per donee (nine claimed by each donee), none of the

donors paid any gift tax. The total value of transfers from each

married couple to their nieces and nephews and the total value of

property received by each niece and nephew are summarized as

follows:

Reported Value of Reported Value of
Stock Transferred to Stock Received from
Transferors Nieces and Nephews Transferees Aunts and Uncles

Larry and Kathy $119,964 Nephew $39,988
Nephew 39,988
Nephew 39,988
119,964

John and Sandra 119,964 Niece 39,988
Niece 39,988
Nephew 39,988
119,964

Duane and Diane 119,964 Niece 39,988
Nephew 39,988
Nephew 39,988
119,964

On December 31, 1992, and January 5, 1993, Rodney made gifts

of Sathers stock to each of his nine nieces and nephews in equal

amounts, and to Larry, Kathy, John, Sandra, Duane, and Diane in
 - 10 -

equal amounts. Each of the gifts was worth less than $10,000,

and Rodney paid no gift tax.

None of the brothers have any background in accounting or

tax. Kaplan advised the brothers to make the transfers and

advised them that these transfers would be nontaxable gifts.

None of the brothers' wives ever met with Kaplan, and he never

advised the wives. Kaplan prepared all gift tax returns at

issue.

Respondent's Determinations

Gift Tax Liability

Respondent determined that the January 5, 1993, transfers by

Larry, Kathy, John, and Sandra to their respective nieces and

nephews in trust were, in substance, gifts made by each donee to

his or her own children in trust. Consequently, respondent

determined that each donee was entitled to only three (the number

of children each donee has) exemptions under section 2503(b).

Respondent disallowed six of the exemptions claimed by Larry,

Kathy, John, and Sandra on their 1993 gift tax returns relating

to the transfers to the nieces and nephews. Respondent also

determined that Larry, Kathy, John, and Sandra were liable for

the accuracy-related penalty under section 6662(a).

Donee Liability

By notice of transferee liability to the Larry Trust, the

John Trust, and the Duane Trust, respondent determined the

December 31, 1992, transfers of Sathers stock by Kathy, Sandra,

and Diane to each of their respective nieces and nephews in trust
 - 11 -

were, in substance, transfers to each of their own children in

trust.3 Respondent determined Kathy, Sandra, and Diane were each

entitled to three exemptions under section 2503(b), and

respondent disallowed the six exemptions claimed regarding

transfers to the nieces and nephews. Consequently, respondent

determined that the Larry Trust, the John Trust, and the Duane

Trust were, as the recipients of the transferred property, liable

as transferees for the unpaid gift tax liability of Kathy,

Sandra, and Diane.

OPINION

We must peel away the veil of cross-transfers to seek out

the economic substance of the foregoing series of transfers.

Petitioners bear the burden of disproving respondent's

determination as to the tax deficiencies and accuracy-related

penalties. See Rule 142(a); Welch v. Helvering, 290 U.S. 111,

115 (1933). Respondent bears the burden of proving the elements

for transferee liability. See sec. 6902(a).

Section 2501(a) imposes a tax “on the transfer of property

by gift”, and section 2511(a) provides that “the tax imposed by

section 2501 shall apply * * * whether the gift is direct or

indirect”. Section 2503(b) excludes from the definition of

“taxable gifts” the first $10,000 of gifts to any person during

3
As to the underlying liability, respondent has never issued
a notice of deficiency to any of the related donors; namely,
Kathy, Sandra, and Diane.
 - 12 -

the year. The simultaneous, circuitous transfers of identical

property to the various nieces and nephews constitute gifts by

the transferors to their own children. See, e.g., Furst v.

Commissioner, T.C. Memo. 1962-221. Petitioners' attempt to

manufacture exclusions under a taxing statute that reaches both

direct and indirect gifts is unavailing.

We are led to the inescapable conclusion that the form in

which the transfers were cast, i.e., gifts to the nieces and

nephews, had no purpose aside from the tax benefits petitioners

sought by way of inflating their exclusion amounts. The

substance and purpose of the series of transfers was for each

married couple to give to their own children their Sathers stock.

After the transfers, each child was left in the same economic

position as he or she would have been in had the parents given

the stock directly to him or her. Each niece and nephew received

an identical amount of stock from his or her aunts and uncles and

was left in the same economic position in relation to the others.

This was not a coincidence but rather was the result of a plan

among the donors to give gifts to their own children in a form

that would avoid taxes. We hold the number of exclusions under

section 2503 is limited by the number of children in each

petitioner's family.

Our conclusion is supported by the doctrine of economic

substance as embodied in the reciprocal trust doctrine. In

United States v. Estate of Grace, 395 U.S. 316 (1969), the
 - 13 -

decedent created a trust for the benefit of his wife and, at the

same time, his wife created a trust of equal value for his

benefit. The trusts had identical terms granting the other

spouse a life estate with the remainder to their children. The

Supreme Court applied the reciprocal trust doctrine which

requires that where two settlors simultaneously create trusts

with the same provisions and with similar property for the

benefit of each other, each settlor will be considered the

creator of the trust that is in form created by the other. See

id. The Supreme Court clarified that subjective intent of the

settlors is irrelevant and held the doctrine applies if the two

trusts: (1) Are interrelated, and (2) leave the settlors in

approximately the same economic position as they would have been

in had they created trusts naming themselves as beneficiaries.

See id.; Estate of Bischoff v. Commissioner, 69 T.C. 32 (1977).

This Court and other courts have applied the principles of

the reciprocal trust doctrine to gift tax cases under facts

similar to those of this case, see, e.g., Schultz v. United

States, 493 F.2d 1225 (4th Cir. 1974); Furst v. Commissioner,

supra, and we apply those principles herein. The gifts to the

nieces and nephews are interrelated. They are identical in type

and amount and were executed at the same time. Indeed, the gifts

were all part of a plan designed and carried out by petitioners

as a group. It is clear that the purpose of the plan was for

each married couple to benefit their own children. It is also
 - 14 -

clear that the gifts in trust left each beneficiary (the nieces

and nephews), to the extent of mutual value, in the same position

as they would have been in had their parents given the property

directly to them. In relation to one another, the nieces and

nephews all were left in the same economic position. The fact

that petitioners routed the gifts to their own children through

their nieces and nephews is immaterial, and we ignore that

routing for tax purposes. We sustain respondent's determinations

of gift tax for 1993 relating to Larry, Kathy, John, and Sandra.

For the same reasons, we also agree with respondent that Kathy,

Sandra, and Diane are each entitled to only three exclusion

amounts under section 2503 on their respective gift tax returns

for 1992.

Petitioners argue that the entire series of transactions

should be respected for tax purposes because Rodney gave property

on the same dates in 1992 and 1993, and he received nothing in

return. Petitioners argue that application of the step-

transaction doctrine mandates this result. That doctrine

requires that interrelated yet formally distinct steps in an

integrated transaction may not be considered independently of the

overall transaction. See Commissioner v. Clark, 489 U.S. 726,

738 (1989). When the step-transaction doctrine is applied,

separate steps of a transaction are collapsed into one taxable

event if the steps of the series are really prearranged parts of

a single transaction. See id.; Penrod v. Commissioner, 88 T.C.
 - 15 -

1415, 1429 (1987). As we understand it, petitioners' argument is

that all transfers by Larry, Kathy, John, Sandra, Duane, Diane,

and Rodney, in each year, were really separate steps of a single

transaction. Therefore, petitioners argue, the transaction must

be viewed and taxed as a “whole”, and Rodney's participation

destroys the reciprocal nature of the entire transaction because

he received nothing in return for his gifts.

To the extent petitioners suggest that Rodney's unilateral

gift giving somehow validates the entire transaction and destroys

the reciprocal nature of the gifts, we disagree. Rodney is a

separate taxpayer whose gifts have not been challenged. That his

gifts may have passed scrutiny does not dictate the result as to

the other taxpayers. Rodney's participation in the gift giving

in no way lends economic reality to the form in which the other

donors structured the transfers, and his participation does not

immunize the questioned transfers from application of the

doctrine of economic substance or the reciprocal trust doctrine.

This leaves the issue of whether the Larry Trust, the John

Trust, and the Duane Trust are liable as transferees for the

unpaid gift tax and additions to tax of Kathy, Sandra, and Diane,

respectively. The second sentence of section 6324(b)4 provides

4
SEC. 6324. Special Liens for Estate and Gift Taxes.

(b) Lien for Gift Tax.-- * * * unless the gift tax
imposed by chapter 12 is sooner paid in full or becomes
unenforceable by reason of lapse of time, such tax
(continued...)
 - 16 -

that if the gift tax is not paid when due, the donee is

personally liable for the gift tax to the extent of the value of

the gift. See Mississippi Valley Trust Co. v. Commissioner, 147

F.2d 186, 187-188 (8th Cir. 1945), affg. a Memorandum Opinion of

this Court; O'Neal v. Commissioner, 102 T.C. 666, 675 (1994).

Section 6324(b) imposes liability at law upon a donee. See

O'Neal v. Commissioner, supra; Fletcher Trust Co. v.

Commissioner, 1 T.C. 798 (1943) (construing the predecessor to

section 6324(b)), affd. 141 F.2d 36, 40 (7th Cir. 1944).

Respondent did not in this case, and is not required to, first

assert deficiencies against the donors or take other steps to

collect from the donors. See Mississippi Valley Trust Co. v.

Commissioner, supra at 188; O'Neal v. Commissioner, supra.

Likewise, there is no requirement under section 6324(b) that the

period of limitations on assessment of tax against the donor be

open at the time the notice of transferee liability is issued to

the donee. If the tax “is not paid when due”, the donee is

personally liable for the tax to the extent of the gift under

section 6324(b). See O'Neal v. Commissioner, supra at 676.

4
(...continued)
shall be a lien upon all gifts made during the period
for which the return was filed, for 10 years from the
date the gifts are made. If the tax is not paid when
due, the donee of any gift shall be personally liable
for such tax to the extent of the value of such gift. *
* *
 - 17 -

The parties stipulated that the 1992 gift tax due from

Kathy, Sandra, and Diane is not paid. All elements necessary for

the imposition of liability under section 6324(b) are satisfied,

and we hold the Larry Trust, the John Trust, and the Duane Trust

are liable as transferees for the unpaid gift tax and penalties5

of Kathy, Sandra, and Diane, respectively.

As to the accuracy-related penalties, we first turn to

whether Larry, Kathy, John, and Sandra are liable for the 1993

amounts. Section 6662(a) and (b)(1) imposes a penalty equal to

20 percent of the portion of an underpayment that is attributable

to, among other things, negligence. Petitioners will avoid this

penalty if the record shows that they were not negligent; i.e.,

they made a reasonable attempt to comply with the provisions of

the Internal Revenue Code, and they were not careless, reckless,

or in intentional disregard of rules or regulations. See sec.

6662(c); Accardo v. Commissioner, 942 F.2d 444, 452 (7th Cir.

1991), affg. 94 T.C. 96 (1990); Drum v. Commissioner, T.C. Memo.

1994-433, affd. without published opinion 61 F.3d 910 (9th Cir.

1995). Negligence connotes a lack of due care or a failure to do

what a reasonable and prudent person would do under the

circumstances. See Allen v. Commissioner, 92 T.C. 1 (1989),

affd. 925 F.2d 348 (9th Cir. 1991); Neely v. Commissioner, 85

T.C. 934, 947 (1985). The accuracy-related penalty of section

5
Our discussion on the accuracy-related penalty is set forth
below.
 - 18 -

6662 is not applicable to any portion of an underpayment to the

extent that an individual has reasonable cause for that portion

and acts in good faith with respect thereto. See sec.

6664(c)(1). Such a determination is made by taking into account

all facts and circumstances, including whether the taxpayer

relied reasonably on a professional tax adviser. See sec.

1.6664-4(b)(1), Income Tax Regs.

Larry and John seek relief from the penalty by arguing they

relied reasonably on advice from Kaplan. Reasonable reliance on

the advice of counsel or a qualified accountant can, in certain

circumstances, be a defense to the accuracy-related penalty for

negligence. See, e.g., Ewing v. Commissioner, 91 T.C. 396, 423-

424 (1988), affd. without published opinion 940 F.2d 1534 (9th

Cir. 1991); Jackson v. Commissioner, 86 T.C. 492, 539-540 (1986),

affd. 864 F.2d 1521 (10th Cir. 1989); Pessin v. Commissioner, 59

T.C. 473, 489 (1972); Conlorez Corp. v. Commissioner, 51 T.C.

467, 475 (1968). In those cases, the taxpayer must establish:

(1) The adviser had sufficient expertise to justify reliance, (2)

the taxpayer provided necessary and accurate information to the

adviser, and (3) the taxpayer actually relied in good faith on

the adviser’s judgment. See Ellwest Stereo Theatres v.

Commissioner, T.C. Memo. 1995-610.

In the instant case, Larry and John have used the accounting

services of Kaplan for over 10 years and have always relied on

Kaplan with respect to tax matters. Kaplan prepared all returns
 - 19 -

at issue and testified he is knowledgeable on taxes and that he

advised the brothers to make the reciprocal transfers.

Respondent's counsel asked no questions on cross-examination.

The record demonstrates that the brothers relied on that advice,

and we conclude that reliance was reasonable under the

circumstances. We hold that Larry and John are not liable for

the accuracy-related penalty.

As to Kathy and Sandra, however, we find no such reliance.

Their gift tax returns were separate from their husbands', and we

must look to whether they exercised due care or whether

reasonable cause existed as to their returns. Neither Kathy nor

Sandra appeared for trial, and there is no evidence in this

record as to what steps they took to ensure their returns were

proper. Although all of the brothers testified at trial, none of

them mentioned Kathy or Sandra in their testimony, and there was

no suggestion that the brothers conveyed to Kathy and Sandra what

transpired at any of the meetings with Kaplan.6 We are unable to

find on this record that either Kathy or Sandra relied on the

advice of Kaplan or any other professional. We sustain

respondent's determinations as to Kathy and Sandra.

Respondent also determined in the notices of transferee

liability for 1992 that Kathy, Sandra, and Diane are liable for

6
On brief, petitioners' requested findings of fact on the
issue of reasonable reliance relate only to the four brothers,
and there is no mention of any reliance by Kathy or Sandra.
 - 20 -

the accuracy-related penalty. On this record, there is similarly

no evidence that reasonable cause existed or that they were not

negligent when they filed their respective 1992 gift tax returns.

Accordingly, we sustain respondent's determinations against the

transferees, the Larry Trust, the John Trust, and the Duane

Trust, as to Kathy, Sandra, and Diane's liability for the

accuracy-related penalty.

In reaching our holdings herein, we have carefully

considered all arguments made by the parties for a contrary

result and, to the extent not discussed herein, find those

arguments irrelevant or without merit. To reflect the foregoing,

Decisions will be

entered for respondent with respect

to the deficiencies and for

petitioners with respect to the

penalties in docket Nos. 22141-97

and 22143-97; decisions will be

entered for respondent in docket

Nos. 22142-97, 22144-97, 469-98,

470-98, 471-98; and decisions will

be entered for petitioners in

docket Nos. 22145-97 and 22146-97.