T.C. Memo. 1997-453
UNITED STATES TAX COURT
LARRY C. GAMSBY, Petitioner v. COMMISSIONER
OF INTERNAL REVENUE, Respondent
Docket No. 26224-95. Filed October 2, 1997.
Larry C. Gamsby, pro se.
Guy A. Bracuti and John C. Galluzzo, Jr., for respondent.
MEMORANDUM OPINION
ARMEN, Special Trial Judge: This matter is before the Court
on petitioner's Motion for Leave to File Motion to Vacate
Decision. As explained in greater detail below, we shall deny
petitioner's motion.
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Background
Larry C. Gamsby (petitioner) failed to file income tax
returns for the taxable years 1991 and 1992. However, respondent
received Forms 1099-NEC from 2 payors indicating that petitioner
received nonemployee compensation in the amount of $24,910 and
$26,673 for the taxable years 1991 and 1992, respectively.
Revenue Agent Joan Rice conducted an examination of
petitioner's tax liability for 1991 and 1992. By letter dated
November 22, 1994, Revenue Agent Rice forwarded a copy of her
revenue agent's report to petitioner and advised petitioner that,
despite the Forms 1099-NEC filed with respondent, the facts
supported petitioner's contention that petitioner should be
classified as an employee for the taxable years in issue.
On September 13, 1995, respondent issued a notice of
deficiency to petitioner. In the notice, respondent determined
that petitioner was liable for deficiencies in and additions to
his Federal income taxes for 1991 and 1992 as follows:
Addition to Tax
Year Deficiency Sec. 6651(a)(1)1
1991 $6,164 $1,541
1992 6,600 1,650
Contrary to the conclusion reached by Revenue Agent Rice in her
report, respondent determined in the notice of deficiency that
1
All section references are to the Internal Revenue Code,
as amended; all Rule references are to the Tax Court Rules of
Practice and Procedure.
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petitioner was liable for self-employment tax in respect of the
nonemployee compensation reported to respondent on the previously
mentioned Forms 1099-NEC.
Petitioner filed an imperfect petition, followed by an
amended petition, in which he contested liability for self-
employment tax, as well as the amount of the compensation
reportedly paid to him for the taxable years 1991 and 1992. At
the time that the petition was filed, petitioner resided in
Thorndike, Massachusetts.
By notice dated June 11, 1996, petitioner's case was set for
trial on September 3, 1996, in Boston, Massachusetts. On August
6, 1996, Appeals Officer Richard Puzzo forwarded to petitioner a
proposed form of decision and an audit report. The form of
decision included a reduction in the amount of the deficiencies
and additions to tax determined in the notice of deficiency, as
follows:
Addition to Tax
Year Deficiency Sec. 6651(a)(1)
1991 $4,413 $1,103
1992 1,748 437
The accompanying audit statement clearly revealed: (1) Respondent
computed the reduced deficiencies based on petitioner's receipt
of nonemployee compensation (albeit in lower amounts relative to
the amounts determined in the notice of deficiency); and (2) such
compensation was subject to self-employment tax.
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Petitioner and respondent executed the proposed form of
decision and submitted the same to the Court. On September 5,
1996, the Court entered its decision utilizing the form of
decision furnished by the parties.
Petitioner did not file a notice of appeal or a timely
motion to vacate or revise the decision. Consequently, the
decision became final on Wednesday, December 4, 1996, 90 days
after it was entered. Sec. 7481(a)(1).
On July 14, 1997, petitioner filed his Motion for Leave to
File a Motion to Vacate Decision. On August 11, 1997, respondent
filed a response in opposition to petitioner's motion.
This matter was called for hearing at the Court's motions
session held in Washington, D.C., on August 20, 1997. Counsel
for respondent appeared at the hearing and presented argument in
opposition to petitioner's motion. Although petitioner did not
appear at the hearing, he did file a written statement with the
Court pursuant to Rule 50(c).
Petitioner's Rule 50(c) statement includes allegations that
the decision entered in this case should be vacated based on
fraud on the Court as evidenced by the following: (1) Petitioner
executed the form of decision with the understanding that he
would be permitted to file an offer in compromise (based on doubt
as to collectibility) in respect of his tax liabilities for 1991
and 1992; and (2) contrary to the form of decision, Revenue Agent
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Rice made a prior determination in her letter dated November 22,
1994, that petitioner should be classified as an employee, rather
than an independent contractor, for the taxable years 1991 and
1992.
Discussion
Section 7481(a)(1) provides the general rule that a decision
of the Tax Court becomes final on expiration of the time to file
a notice of appeal. Section 7483 provides that a notice of
appeal generally must be filed within 90 days after a decision is
entered. However, the 90-day appeal period may be extended if
the taxpayer files a timely motion to vacate or revise the
decision. Fed. R. App. P. 13(a). Pursuant to Rule 162, a motion
to vacate or revise a decision must be filed within 30 days after
the decision is entered, unless the Court allows otherwise.
As indicated, petitioner did not file a notice of appeal or
a timely motion to vacate or revise the decision. Accordingly,
the decision became final on December 4, 1996. See secs.
7459(c), 7481(a)(1).
The Tax Court generally lacks jurisdiction to vacate a final
decision. Abatti v. Commissioner, 859 F.2d 115, 117 (9th Cir.
1988), affg. 86 T.C. 1319 (1986); Lasky v. Commissioner, 235 F.2d
97, 100 (9th Cir. 1956), affd. per curiam 352 U.S. 1027 (1957).
The Court may vacate a final decision only in certain narrowly
circumscribed situations. For instance, some courts have ruled
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that this Court may vacate a final decision if the decision is
shown to be void, or a legal nullity, for lack of jurisdiction
over either the subject matter or the party, see Billingsley v.
Commissioner, 868 F.2d 1081, 1084-1085 (9th Cir. 1989); Abeles v.
Commissioner, 90 T.C. 103, 105-106 (1988); Brannon's of Shawnee,
Inc. v. Commissioner, 69 T.C. 999, 1002 (1978), or if the
decision was obtained through fraud on the Court. See Abatti v.
Commissioner, supra; Senate Realty Corp. v. Commissioner, 511
F.2d 929, 931 n.1 (2d Cir. 1975); Stickler v. Commissioner, 464
F.2d 368, 370 (3d Cir. 1972); Casey v. Commissioner, T.C. Memo.
1992-672. In addition, the Court of Appeals for the Fifth
Circuit has indicated that the Tax Court has the power in its
discretion, in extraordinary circumstances, to vacate and correct
a final decision where it is based on a mutual mistake of fact.
See La Floridienne J. Buttgenbach & Co. v. Commissioner, 63 F.2d
630 (5th Cir. 1933. But cf. Harbold v. Commissioner, 51 F.3d
618, 621-622 (6th Cir. 1995).
Petitioner contends that the decision in this case should be
vacated due to fraud on the Court. In Abatti v. Commissioner,
supra at 118-119, the Court of Appeals for the Ninth Circuit
defined the phrase "fraud on the court" as "an unconscionable
plan or scheme which is designed to improperly influence the
court in its decision" or a fraudulent act that "prevents the
opposing party from fully and fairly presenting his case". See
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Toscano v. Commissioner, 441 F.2d 930, 933 (9th Cir. 1971);
Kenner v. Commissioner, 387 F.2d 689, 691 (7th Cir. 1968). A
party moving to vacate a final decision of the Tax Court bears a
heavy burden of particularized pleading and proof. Abatti v.
Commissioner, supra at 118; Drobny v. Commissioner, 113 F.3d 670
(7th Cir. 1997), affg. T.C. Memo. 1995-209, and cases cited
therein.
Petitioner alleges that the decision in this case reflects
fraud on the Court on the grounds that he was promised an
opportunity to file an offer in compromise (based on doubt as to
collectibility) for the taxable years 1991 and 1992 and that his
status as an employee was determined by Revenue Agent Rice during
the audit stage of the case. Regarding the submission of an
offer in compromise, petitioner complains that he did not receive
the necessary forms until January 1997 and that Internal Revenue
Service personnel in Springfield, Massachusetts, refused to
assist him in submitting the offer in compromise without some
form of picture identification.
Considering all of the facts and circumstances, we hold that
petitioner has failed to demonstrate that the decision entered in
this case is the result of fraud on the Court.2 Although
2
The fact that respondent may have credited an
overpayment of tax for another taxable year against petitioner's
tax liabilities for the taxable years in issue does not
constitute fraud on the Court. Sec. 6402(a).
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petitioner may have executed the form of decision with the
understanding that he would be permitted to file an offer in
compromise, such an agreement is not reflected in the record
presented. Moreover, even assuming that the parties agreed to
such a procedure, the filing of an offer in compromise based on
doubt as to collectibility, subsequent to entry of decision by
the Court, does not provide a basis for setting aside what is
otherwise a final decision.3
Petitioner's contention that Revenue Agent Rice determined
petitioner's status as an employee during the audit stage of the
case is likewise misplaced. The revenue agent's report that
petitioner relies on is not a determination that is binding on
either respondent or the Court. See Casey v. Commissioner, 38
T.C. 357, 381 (1962); Wilson v. Commissioner, 16 B.T.A. 1280,
1285 (1929); Gilmartin v. Commissioner, T.C. Memo. 1973-247. To
the contrary, respondent's final determination regarding
petitioner's tax liability for 1991 and 1992 is set forth in the
notice of deficiency dated September 13, 1995. That notice
clearly indicates that respondent determined that petitioner is
liable for self-employment tax.
In sum, the decision entered in this case is now final, and
petitioner has failed to persuade us that such decision
3
At the hearing on petitioner's motion, counsel for
respondent stated that petitioner was still free to file an offer
in compromise based on doubt as to collectibility.
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constitutes a fraud on the Court. Therefore, it follows that we
lack jurisdiction to vacate the decision in this case.
To reflect the foregoing,
An order will be issued
denying petitioner's Motion for
Leave to File Motion to Vacate
Decision.