McBroom v. Commissioner

T.C. Memo. 1995-485

UNITED STATES TAX COURT

PERRY D. McBROOM, DECEASED, AND JACKIE S. McBROOM, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 18847-87. Filed October 5, 1995.

Margaret A. Martin, for respondent.

MEMORANDUM OPINION

GOLDBERG, Judge: This case was assigned pursuant to the

provisions of section 7443A(b)(3) and Rules 180, 181, and 182,1

and is before the Court on respondent's Motion for Summary

Judgment and Motion to Dismiss as to Petitioner Perry D. McBroom

for Lack of Prosecution.

Respondent determined a deficiency in petitioners' Federal

income tax for the taxable year 1982 in the amount of $8,288, and

1
All section references are to the Internal Revenue Code
in effect for the year in issue. All Rule references are to the
Tax Court Rules of Practice and Procedure.
 - 2 -

additions to tax under sections 6653(a)(1) and 6659 in the

respective amounts of $414.40 and $2,457.30, and under section

6653(a)(2) in the amount of 50 percent of the interest due on the

underpayment of tax attributable to negligence or intentional

disregard of rules and regulations. Respondent also determined

that interest due on the deficiency for 1982 would be computed

pursuant to the increased interest rate imposed under section

6621(c). For the reasons discussed below, we grant respondent's

motions.

Background

The income tax adjustments at issue relate to the

disallowance of the investment tax credit and of a partnership

loss claimed with respect to petitioners' investment in Florin

Farms #6. This case is part of a larger group of cases

designated as the Hoyt Farms group, named after the organizer and

operator of numerous cattle and sheep breeding partnerships, W.J.

Hoyt Sons, and/or Walter J. Hoyt III.

At the time of the filing of their petition, petitioners

were pro se. However, on November 13, 1987, an entry of

appearance was filed on their behalf by Messrs. Jim B. Dismukes

and Joel Drum. This case was set for a pretrial hearing in San

Francisco, California, on May 26, 1993, for the purpose of

determining whether the case would be tried, and, if so, the most

expeditious manner to proceed in light of the case of Bales v.
 - 3 -

Commissioner, T.C. Memo. 1989-568. The Bales case involved like

cattle breeding partnerships formed by Walter J. Hoyt III.

At the pretrial hearing, Jim B. Dismukes filed a motion to

withdraw as counsel, which was granted. In addition, respondent

filed an Amendment to Answer in which she determined an increased

deficiency and additions to tax. On October 12, 1993, respondent

filed a status report informing the Court that petitioner Perry

D. McBroom (Mr. McBroom) died on April 16, 1989, and that

petitioner Jackie S. McBroom (petitioner) was interested in

settling the case with respondent. Mr. McBroom died intestate in

California, a community property State, and was survived by

petitioner and adult children residing in Texas.

Petitioner accepted respondent's Appeals Office offer, on or

about September 27, 1993. However, petitioner failed to comply

with the terms of the settlement offer. On June 30, 1994,

respondent served on petitioner and her counsel, Joel Drum,

Respondent's First Request for Admissions Addressed to the

Petitioner Jackie S. McBroom requesting that the facts set forth

therein be admitted or denied. Pursuant to Rule 90, respondent's

request was filed with this Court on July 5, 1994. Petitioner

did not respond.

The case was calendared for trial at a special session

beginning on October 26, 1994, in San Francisco, California. On

August 12, 1994, respondent filed the pending Motion for Summary

Judgment, wherein she concedes the additions to tax under
 - 4 -

sections 6653(a)(1) and (2) and 6659, and the increased interest

under section 6621(c). Respondent further concedes the increased

deficiency and additions to tax asserted in her amended answer.

The motion was calendared for hearing at the special session.

On September 19, 1994, Joel Drum, the sole remaining counsel

for petitioners, filed a Motion to Withdraw, which was granted.

At the special session on October 26, 1994, there was no

appearance by or on behalf of petitioner. Subsequently, Michael

A. Bickford filed his entry of appearance on behalf of petitioner

on January 31, 1995. To date, petitioner has not contested

respondent's Motion for Summary Judgment.

On April 28, 1995, respondent filed a motion to dismiss,

insofar as it pertains to petitioner Perry D. McBroom, for lack

of prosecution. As grounds in support of the motion, respondent

alleges that respondent was advised by petitioner that all

property belonging to Mr. McBroom passed on to her as his

surviving spouse, and, as a result, no estate was created and no

personal representative was appointed. On May 1, 1995, the Court

received notice from petitioner's counsel that petitioner would

"not be filing any further papers or requests of the Court at

this time dealing with" the case.

In a supplemental motion to dismiss filed August 28, 1995,

respondent requested that we find a deficiency in income tax for

the taxable year 1982 due from Perry D. McBroom, deceased, in the

amount of $8,288. Respondent also conceded all additions to tax
 - 5 -

under sections 6653(a)(1) and (2) and 6659, the increased

interest rate under section 6621(c), and the increased deficiency

and additions to tax asserted in the amended answer. Petitioner

had no objection to the granting of this motion.

Motion for Dismissal

Our jurisdiction over a case continues despite the death of

a taxpayer even though there is no personal representative to act

in the place of the decedent. Nordstrom v. Commissioner, 50 T.C.

30, 31-32 (1968). Citing section 7459(d), we stated in Nordstrom

that, under circumstances such as those in the instant case, one

method of bringing the case to a conclusion is for the

Commissioner to move to dismiss the case for lack of prosecution.

Id. We went on to state:

It must be recognized, we think, that even though no
representative of the decedent has come forward to press for
the relief sought by the decedent when he was alive and
filed his petition for redetermination, there may be
survivors whose monetary interests are capable of being
affected by satisfaction of the liabilities which will be
determined consequent upon a dismissal for lack of
prosecution. In recognition of the affectability of those
interests, it seems appropriate to give notice of the
proceedings to those whose interests stand to be affected,
so that they may have an opportunity to be heard if they so
desire or, perhaps, to seek the appointment of a personal
representative by the appropriate court having jurisdiction
over the decedent's estate.

Id. at 32. Under this reasoning, we issued an order directing

the taxpayer, her counsel, and the Commissioner to provide the

Court with the names and addresses of the heirs at law of the

decedent, as determined by the law of the jurisdiction wherein
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the decedent was a resident at the time of his death, insofar as

they could be reasonably ascertained. Until potential heirs were

identified and notified, we held the Commissioner's motion under

advisement.

In the instant case, Mr. McBroom resided in California at

the time of his death. Under California law, on the death of a

married person, one-half of the decedent's community and quasi-

community property belongs to the surviving spouse, and the other

half belongs to the decedent. Cal. Prob. Code secs. 100, 101

(West 1991). In the case of intestate succession, if the

decedent leaves no child surviving, the one-half which belongs to

the decedent passes to the surviving spouse, leaving the

surviving spouse with all of the community and quasi-community

property. Id. sec. 6401(a) and (b).

Where a decedent leaves more than one child living, the

intestate share of the surviving spouse in separate property

equals one-third of the intestate estate. Id. subsec. (c)(3)(A).

The remainder of the intestate estate passes to the issue of the

decedent. Id. sec. 6402(a). Under section 5110 of the

California Civil Code (West 1983), "community property" is

defined as all real property situated in California and personal

property acquired during the marriage by a married person while
 - 7 -

domiciled in California, unless it is the separate property of

the husband or the wife.2

Neither party in this case presented information to indicate

that any of the property of Mr. McBroom was his separate

property, rather than community property, or that Mr. McBroom has

heirs at law whose interests may be affected by our decision in

this case. Under State law, all of Mr. McBroom's property passed

upon his death to petitioner as his surviving spouse.

Consequently, we are not presented with the problem faced in

Nordstrom v. Commissioner, supra. Based on the foregoing, and

because there is no one willing or able to prosecute this case on

behalf of Mr. McBroom, we grant respondent's motion to dismiss

for lack of prosecution as supplemented.

Summary Judgment

In the Motion for Summary Judgment, respondent contends that

all of the facts necessary for our decision are set forth in

respondent's first request for admissions, filed July 5, 1994.

Respondent notes that petitioner did not respond to respondent's

first request for admissions, and, thus, pursuant to Rule 90(c),

each matter set forth therein was automatically deemed admitted

30 days after service of the request. Morrison v. Commissioner,

2
Cal. Prob. Code sec. 5110 (West 1991). On Jan. 1,
1994, this section was repealed, along with other sections of the
Civil Code and sections of the Code of Civil Procedure, Evidence
Code, and Probate Code. The repealed provisions were then
incorporated into the new California Family Code. See Cal. Fam.
Code sec. 760 (West 1994).
 - 8 -

81 T.C. 644, 647 (1983); Freedson v. Commissioner, 65 T.C. 333,

334-336 (1975), affd. on other grounds 565 F.2d 954 (5th Cir.

1978). Respondent contends that she is entitled to a decision

under Rule 121 as a matter of law.

The Court may grant summary judgment "if the pleadings,

answers to interrogatories, depositions, admissions, and any

other acceptable materials, together with the affidavits, if any,

show that there is no genuine issue as to any material fact and

that a decision may be rendered as a matter of law." Rule

121(b); Bond v. Commissioner, 100 T.C. 32, 36 (1993); see Naftel

v. Commissioner, 85 T.C. 527, 529 (1985). Respondent, as the

moving party in this case, bears the burden of proving that there

is no genuine issue of material fact and that a decision may be

rendered as a matter of law. Rule 121(b); Bond v. Commissioner,

supra at 36; Preece v. Commissioner, 95 T.C. 594, 596 (1990);

Espinoza v. Commissioner, 78 T.C. 412, 416 (1982). The Court

will view factual material and inferences drawn therefrom in the

light most favorable to the party opposing the motion for summary

judgment. Jacklin v. Commissioner, 79 T.C. 340, 344 (1982);

Espinoza v. Commissioner, supra.

Since petitioner has failed to respond to respondent's

request for admissions, the following statements set forth in the

request for admissions are deemed admitted:
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(1) During the taxable year 1982, petitioners were partners

in one or more cattle partnerships formed by Walter J. Hoyt, III

(namely, Florin Farms #6);

(2) Petitioner accepted and executed a Sacramento,

California, Appeals Office settlement offer which reads as

follows:

I would like to settle my case on the basis of the
offer first extended by the IRS on January 3, 1992 --
cash out of pocket.

This will be a binding settlement only if you sign a
closing agreement, Form 906, and we countersign it on
behalf of the Commissioner of Internal Revenue. When
we sign the agreement form, the one-year assessment
period of limitations on assessments described at
I.R.C. section 6229(f) will begin.

If you elect to accept the IRS out-of-pocket
settlement offer, please provide the following
information, and return it to us NO LATER THAN JULY 23,
1993.

copies of all cancelled checks written to the Hoyt
organization, or to others acting as agents of the Hoyt
organization (if any);

copies of all annual statements provided to you by the
Hoyt organization;

a schedule which shows a break-down of how the payments
to the Hoyt organization were applied; for example,

-- annual contribution to partnership capital

-- IRA contribution

-- tax preparation fee; and

-- any other amounts you can specifically
identify.
 - 10 -

(3) Pursuant to the out-of-pocket settlement agreement

referred to in paragraph 2,

a. petitioner is not entitled to any loss deductions

from any cattle partnership for the taxable year 1982;

b. petitioner is not entitled to any investment tax

credit for the taxable year 1982;

c. petitioner is not entitled to any deduction for

cash out of pocket in absence of an executed closing

agreement.

(4) Petitioner refused or neglected to execute a closing

agreement necessary to finalize the out of pocket settlement

offer.

(5) There is a deficiency in income tax due from petitioner

for the taxable year 1982 in the amount of $8,288.

Respondent's motion is supported by the deemed admissions.

Matters deemed admitted pursuant to Rule 90 are conclusively

established and are sufficient to support the granting of a

motion for summary judgment. Morrison v. Commissioner, supra at

651. Petitioner did not appear at the hearing on respondent's

motion, despite notice from this Court, and the deemed admissions

clearly establish that no genuine issue of material fact exists

as to the deficiency determination. Marshall v. Commissioner, 85

T.C. 267, 271-272 (1985). Accordingly, respondent is entitled

summary judgment with respect to such determination as a matter

of law.
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To reflect the foregoing,

An appropriate order and decision

will be entered for respondent.