T.C. Memo. 1998-266
UNITED STATES TAX COURT
TOM AND BRENDA KELLY, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 21641-96. Filed July 21, 1998.
Tom Kelly, pro se.
Thomas C. Pliske, for respondent.
MEMORANDUM OPINION
DINAN, Special Trial Judge: This case was heard pursuant
to the provisions of section 7443A(b)(3) and Rules 180, 181, and
182.1
1
Unless otherwise indicated, all section references are
to the Internal Revenue Code in effect for the taxable year in
issue. All Rule references are to the Tax Court Rules of
Practice and Procedure.
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Respondent determined a deficiency in petitioners' Federal
income tax for 1993 in the amount of $2,954 and an accuracy-
related penalty pursuant to section 6662(a) in the amount of
$591.
After concessions by the parties,2 the issue remaining for
decision is whether respondent's acceptance and cashing of
petitioners' check constitutes an accord and satisfaction of
their Federal income tax liability for 1993.
Some of the facts have been stipulated and are so found.
The stipulations of fact and attached exhibits are incorporated
herein by this reference. Petitioners resided in Catawissa,
Missouri, on the date the petition was filed in this case. All
references to petitioner in the singular are to Tom Kelly.
On March 29, 1996, petitioners received a letter from
respondent's Appeals Office which stated that the total amount
due for their 1993 taxable year was $2,907.05. This amount
included tax in the amount of $2,044, a penalty in the amount of
$395, and interest through April 15, 1996, in the amount of
$468.05.
On June 10, 1996, petitioners mailed a check in the amount
of $2,513 to the Internal Revenue Service. Petitioner, who
formerly worked as an attorney, wrote "93 Full payment of tax
2
The parties agreed at trial that the amount of the
deficiency in petitioners' Federal income tax for 1993 is $2,044
and the amount of the sec. 6662(a) accuracy-related penalty is
$395.
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liability" in the notation area of the check. On the back of the
check in the endorsement area, petitioner wrote "Full payment of
1993 Fed Tax, penalties & interest for Tom & Brenda Kelly".
Along with the check, petitioner sent a letter dated June 10,
1996, which stated:
IRS
Find enclosed check for $2513 for full payment on
tax, penalty & interest for 1993 for Tom & Brenda
Kelly.
Thanks, please spend the money wisely.
Petitioner also sent with the check and the letter a Form
1040-V (Payment Voucher) which he had found in the instructions
for his 1995 tax return. He wrote on the voucher a note similar
to the above-quoted statement. Respondent's service center in
St. Louis, Missouri, received the check and cashed it on or about
June 15, 1996.
On July 5, 1996, respondent issued the statutory notice of
deficiency in this case.
Petitioner argues that the respondent's act of cashing the
check with a restrictive endorsement constituted an accord and
satisfaction of petitioners' Federal income tax liability for
their 1993 taxable year. We disagree.
It is well established that as a general rule the
Commissioner is finally and conclusively bound by an agreement
with a taxpayer only if the parties enter into a closing
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agreement under the provisions of section 7121.3 Holland v.
Commissioner, 70 T.C. 1046, 1048-1049 (1978), affd. 622 F.2d 95
(4th Cir. 1980); Hudock v. Commissioner, 65 T.C. 351, 362 (1975).
The statutory procedure is ordinarily the exclusive method by
which the Commissioner may be finally and conclusively bound.
Botany Worsted Mills v. United States, 278 U.S. 282, 288 (1929);
Estate of Meyer v. Commissioner, 58 T.C. 69, 70-71 (1972). "The
very fact that Congress has provided a way in which the Internal
Revenue Department may bind itself, precludes the possibility of
its being bound by some other procedure." Knapp-Monarch Co. v.
Commissioner, 139 F.2d 863, 864 (8th Cir. 1944), affg. 1 T.C. 59
(1942).
In the instant case, petitioners did not enter into any
agreement with respondent with respect to their 1993 taxable
year, let alone a closing agreement pursuant to the provisions of
section 7121 and the regulations thereunder. Further,
respondent's acceptance and cashing of the check tendered by
petitioner did not constitute an accord and satisfaction of
petitioners' tax liability for 1993. Johnston v. Commissioner,
19 B.T.A. 630 (1930); Whitaker v. Commissioner, T.C. Memo. 1994-
109; Kehew v. Commissioner, T.C. Memo. 1983-354.
3
Sec. 7121(b) provides an exception to this rule upon a
showing of fraud, or malfeasance or misrepresentation of a
material fact.
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Accordingly, we hold that the amounts of petitioners'
deficiency in Federal income tax for 1993 and liability for the
section 6662(a) accuracy-penalty are equal to the amounts agreed
to by the parties. See supra note 2.
To reflect the foregoing,
Decision will be entered
under Rule 155.