T.C. Memo. 1996-220
UNITED STATES TAX COURT
JANET KLINE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15500-92. Filed May 7, 1996.
Peter Driscoll, for petitioner.
Diane D. Helfgott, for respondent.
MEMORANDUM OPINION
PANUTHOS, Chief Special Trial Judge: This case was heard
pursuant to the provisions of section 7443A(b)(3) and Rules 180,
181, and 182.1 Respondent determined additions to petitioner's
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the tax year in issue,
and all Rule references are to the Tax Court Rules of Practice
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1984 income tax, pursuant to section 6653(a)(1) and (2), in the
amounts of $200 and $2,756, respectively. The additions to tax
are attributable to a partnership loss from the American Indian
Venture Capital Partnership (the partnership) that was claimed on
the 1983 joint income tax return and carried forward to the 1984
return. The underlying adjustments relating to the partnership
were resolved in American Indian Venture Capital v. Commissioner,
docket No. 17697-87. A timely petition was filed in response to
the statutory notice issued on April 3, 1992. At the time of
filing the petition herein, petitioner resided in Ellicott City,
Maryland.
Petitioner, through her attorney, Peter Driscoll, filed a
petition for redetermination on July 9, 1992. Petitioner argued
that she is not liable for the additions to tax because she is an
innocent spouse within the meaning of section 6013(e).
Petitioner also argues that the statute of limitations bars
assessment and collection of the tax.
On September 4, 1992, respondent filed an answer to the
petition in which she denied all substantive allegations of fact
and error and affirmatively alleged as a defense that the statute
of limitations does not bar assessment and collection of the
deficiency due for the taxable year 1984. Respondent alleged as
follows:
and Procedure.
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(a) The notice of deficiency at issue herein
asserts additions to tax arising from the loss claimed
by petitioner and Frank Kline as their distributive
share of the partnership loss reported by American
Indian Venture Capital Partnership for the taxable
year 1983.
(b) Petitioner and Frank Kline claimed a loss from
American Indian Venture Capital on their 1983 return
and carried forward a net operating loss based on the
1983 partnership loss to their 1984 return.
(c) The net operating loss claimed by petitioner
and Frank Kline on their 1984 return is an affected
item as defined by 6231(a)(5), arising from the
partnership loss reported by American Indian Venture
Capital Partnership for the taxable year 1983. Maxwell
v. Commissioner, 87 T.C. 783, 790 (1986).
(d) The notice of deficiency at issue herein
asserts additions to the tax for the taxable year 1984
arising from the partnership loss carried forward by
petitioner and Frank Kline from 1983 to 1984.
(e) These additions to tax asserted by respondent
are also affected items as defined in I.R.C. 6231(a)(5)
and Treas. Reg. 301.6231(a)(5) - 1(d) arising from the
partnership loss claimed by American Indian Venture
Capital for the taxable year 1983.
(f) Pursuant to I.R.C. 6501(o)(2) and 6229(g), the
applicable period of limitations for the assessment of
additions to tax arising from partnership items is
provided by I.R.C. 6229.
(g) American Indian Venture Partnership filed its
1983 partnership return of income on April 15, 1984.
(h) A notice of partnership administrative
adjustment setting forth respondent's determination of
the adjustments to partnership items for American
Indian Venture Capital for the taxable year 1983 was
mailed to each partner on March 16, 1987, which date
was prior to the expiration of the three-year period
for assessment and collection under I.R.C. 6229(a).
(i) A timely petition contesting the partnership
adjustments was filed on June 12, 1987.
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(j) A decision was entered on January 17, 1991,
and became final on April 16, 1991.
(k) A notice of deficiency was mailed to
petitioner with respect to the additions to the tax
affected items on April 3, 1992, which date was prior
to the expiration of the one-year period for assessment
and collection under I.R.C. 6229(f).
On September 4, 1992, respondent served a copy of her answer
upon Attorney Driscoll. On November 5, 1992, respondent filed a
motion for entry of an order that the undenied allegations in her
answer be deemed admitted in accordance with Rule 37(c).
Attorney Driscoll was served with a copy of the motion. Also on
November 5, 1992, Attorney Driscoll was served with a notice from
the Clerk of the Court that respondent had filed a motion for
entry of an order. The notice indicated that
If petitioner files a reply as required by Rule
37(a) and (b) of this Court's Rules on or before
November 27, 1992, respondent's motion will be denied.
If petitioner does not file a reply as directed herein,
the Court will grant respondent's motion and deem
admitted for purposes of this case the affirmative
allegations in the answer.
No reply was filed by petitioner, and, accordingly, respondent's
motion was granted on December 7, 1992.
This case was originally set for trial on October 12, 1993.
Respondent filed a motion for continuance which was granted by
the Court on August 19, 1993. The case was then set for trial on
October 11, 1994. Respondent filed a motion for continuance
which was granted by the Court on August 22, 1994. The two
motions to continue referred to related cases under submission
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involving the deductibility of petitioner's claimed partnership
losses.
On June 23, 1995, a notice setting this case for trial on
September 11, 1995, in Baltimore, Maryland, along with a Standing
Pre-Trial Order, were served upon Attorney Driscoll. The notice
clearly indicated that "YOUR FAILURE TO APPEAR MAY RESULT IN
DISMISSAL OF THE CASE AND ENTRY OF DECISION AGAINST YOU". On
August 18, 1995, approximately 3 weeks before the date set for
trial of this matter, respondent filed a motion for an order to
show cause why judgment should not be entered against petitioner
on the basis of Kline v. Commissioner, T.C. Memo. 1994-397. By
order dated August 21, 1995, petitioner was ordered to "show
cause in writing on or before September 6, 1995, why respondent's
* * * motion should not be granted and a decision entered in
accordance therewith." Attorney Driscoll was served with a copy
of this order on August 22, 1995. No response was filed to the
order to show cause.
When the case was called for trial on September 11, 1995,
neither petitioner nor Attorney Driscoll appeared or otherwise
communicated with the Court. Counsel for respondent appeared at
the hearing.
In Kline v. Commissioner, supra, the Court considered
whether petitioner was entitled to relief as an innocent spouse
for the additions to tax determined for the 1982 and 1983 tax
years. The additions to tax were attributable to a partnership
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loss claimed in 1983 and carried back to 1982.2 We held that
petitioner was not entitled to relief as an innocent spouse
because she had failed to prove that she satisfied the lack of
knowledge requirement pursuant to section 6013(e). We did not
address whether petitioner had satisfied the remaining
requirements of section 6013(e).
Discussion
As in the prior case, Kline v. Commissioner, supra, the
additions to tax here are affected items. Saso v. Commissioner,
93 T.C. 730, 734 (1989). It is well established that the
Commissioner's deficiency determination carries with it a
presumption of correctness, and the taxpayer bears the burden of
proving that the determination is erroneous. Rule 142(a); Welch
v. Helvering, 290 U.S. 111 (1933).
Our Rules provide that the failure of a party to appear at
trial may result in entry of decision against that party.
Specifically, Rule 123 provides in pertinent part:
(b) Dismissal: For failure of a petitioner
properly to prosecute or to comply with these Rules or
any order of the Court or for other cause which the
Court deems sufficient, the Court may dismiss a case at
any time and enter a decision against the petitioner.
* * *
2
The partnership, American Indian Venture Capital
Partnership, is the identical partnership involved in this case.
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Dismissal of a case is a sanction resting in the sole
discretion of the trial court. Harper v. Commissioner, 99 T.C.
533, 540 (1992). Furthermore--
Dismissal may properly be granted where the party's
failure to comply with Rules and orders of the Court is
due to "willfulness, bad faith or any fault", as
contrasted with mere inadvertence or inability.
Societe Internationale v. Rogers, 357 U.S. 197, 212
(1958)(Fed. R. Civ. P. 37(b)(2)); Dusha v.
Commissioner, 82 T.C. 592, 599 (1984) (Rule 104(c)). A
case may be dismissed for failure properly to prosecute
when petitioner, or counsel on petitioner's behalf,
fails to appear at trial and does not otherwise
participate in the resolution of petitioner's claim.
Basic Bible Church v. Commissioner, 86 T.C. 110, 114
(1986). [Id.]
We look to the legal standards for dismissal under rule
41(b) of the Federal Rules of Civil Procedure as guidance for
involuntary dismissals in the Tax Court under our Rule 123(b).
Basic Bible Church of America v. Commissioner, 86 T.C. 110, 113
(1986). The Court of Appeals for the Fourth Circuit, to which
dismissal of this case would be appealable, has held that a court
considering whether to dismiss a case under rule 41(b) of the
Federal Rules of Civil Procedure for failing to prosecute must
consider the following factors:
"(1) the degree of personal responsibility of the
plaintiff, (2) the amount of prejudice caused the
defendant, (3) the existence of a 'drawn out history of
deliberately proceeding in a dilatory fashion' and (4)
the existence of sanctions less drastic than
dismissal." [Herbert v. Saffell, 877 F.2d 267, 270 (4th
Cir. 1989) (quoting Chandler Leasing Corp. v. Lopez,
669 F.2d 919, 920 (4th Cir. 1982)).]
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Applying these factors we conclude that dismissal of this
case is proper under Rule 123(b). With respect to the first
factor, petitioner is responsible for Attorney Driscoll's actions
under ordinary principles of agency. Link v. Wabash R.R., 370
U.S. 626, 633-634 (1962); Doyle v. Murray, 938 F.2d 33, 35 (4th
Cir. 1991) ("But this must always be done with an eye to the
realities of a client's practical ability to supervise and
control his attorney's litigation conduct."). As indicated,
petitioner filed her petition with this Court through Attorney
Driscoll. We do not know the circumstances surrounding this
attorney-client relationship; nevertheless, petitioner had an
obligation to inquire about the status of her case. Petitioner
is not unfamiliar with the proceedings of this Court, as
evidenced by the previous case litigated.
The remaining factors also warrant dismissal. Respondent
would be prejudiced if we were to continue this case for trial on
another date, particularly in light of the fact that petitioner
has not requested a continuance. In spite of this Court's
warning in its notice setting this case for trial and its
pretrial order, petitioner failed to appear at the hearing and
trial on September 11, 1995. Petitioner also failed to show
cause why judgment should not be entered in accordance with Kline
v. Commissioner, supra. Finally, we believe that dismissal is
warranted because petitioner has, through her own fault, failed
to properly prosecute her case. Accordingly, we discharge the
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order to show cause, and we dismiss this case pursuant to Rule
123(b), and we sustain respondent's determination respecting the
additions to tax.
To reflect the foregoing,
An order of dismissal and
decision for respondent will be
entered.