Rambacher v. Commissioner

T.C. Memo. 2000-35

UNITED STATES TAX COURT

FRANCES L. AND GARY L. RAMBACHER, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 11444-96. Filed February 4, 2000.

Frances L. and Gary L. Rambacher, pro sese.

Andrew M. Winkler, for respondent.

MEMORANDUM OPINION

GOLDBERG, Special Trial Judge: Respondent determined

additions to petitioners’ Federal income tax for the 1983 taxable

year of $138 pursuant to section 6653(a)(1) and for 50 percent of

the interest on $2,757, the part of the underpayment due to

negligence pursuant to section 6653(a)(2). Unless otherwise

indicated, all section references are to the Internal Revenue
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Code in effect for the year in issue, and all Rule references are

to the Tax Court Rules of Practice and Procedure.

The issue for decision is whether petitioners are liable for

additions to tax for negligence or intentional disregard of rules

or regulations pursuant to section 6653(a)(1) and section

6653(a)(2) for the 1983 taxable year.

This case was submitted fully stipulated pursuant to Rule

122. The stipulation of facts and the attached exhibits are

incorporated herein by this reference. At the time that they

filed their petition, petitioners resided in Ironton, Ohio.

On February 17, 1995, this Court entered a stipulated

decision in the underlying partnership proceeding, Anderson

Equip. Associates v. Commissioner, at docket No. 27745-89.

Pursuant to section 7481, that decision became final on May 18,

1995, and thereafter respondent assessed taxes against

petitioners for the 1981, 1982, 1983, and 1984 taxable years as

computational adjustments. The deficiency in the instant case is

attributable to adjustments in the underlying partnership

proceedings which resulted in automatic adjustments to

petitioners' income pursuant to the provisions of the Tax Equity

& Fiscal Responsibility Act of 1982, Pub. L. 97-248, 96 Stat.

324.

On March 5, 1996, respondent issued a notice of deficiency

to petitioners for the 1981 taxable year. The question of
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petitioners' liability for negligence for 1981 was decided by

this Court in the case of Rambacher v. Commissioner, T.C. Memo.

1998-124, affd. without published opinion 194 F.3d 1313 (6th Cir.

1999)(Rambacher I).1 Petitioners were found liable for the

additions to tax pursuant to sections 6653(a)(1) and (2) for

1981. Pursuant to section 7481(a)(2)(A), the decision in

Rambacher I became final on December 28, 1999, the date on which

the time allowed for filing a petition for a writ of certiorari

with the U.S. Supreme Court expired.2

In the instant case, respondent, in a notice of deficiency

dated March 5, 1996, determined that petitioners were liable for

additions to tax pursuant to section 6653(a)(1) and section

6653(a)(2) for the 1983 tax year.

Section 6653(a)(1) provides for an addition to tax equal to

5 percent of any underpayment if any part of the underpayment is

due to negligence or intentional disregard of rules or

regulations. Section 6653(a)(2) provides for an addition to tax

in the amount of 50 percent of the interest payable on the

portion of any underpayment of tax which is attributable to

negligence or intentional disregard of rules or regulations.

1
The order of the Court of Appeals for the Sixth Circuit
lists petitioner wife as “Francis L. Rambacher” in the case
caption. The unpublished order was entered on Sept. 28, 1999.
2
Rule 13, Rules of the Supreme Court of the United States,
provides that a petition for a writ of certiorari is timely when
filed within 90 days after entry of the judgment.
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In their petition, petitioners contend: (1) Petitioners were

not negligent or did not intentionally disregard rules and

regulations; (2) the Internal Revenue Service (IRS) did not

respond to petitioners' request to inform petitioners as to how

the IRS made its negligence determination; and (3) that the

statute of limitations bars respondent's action in this matter.3

Petitioners concede that the issue in this case is identical

to the issue in Rambacher I and have stipulated that record into

this case. Since the issue decided by Rambacher I is identical

to the issue in this case, we issued an Order to Show Cause

(order) on November 16, 1999, asking petitioners to demonstrate

why this case should not be decided on the same grounds as

Rambacher I. Petitioners’ response to the order was filed with

this Court on December 16, 1999.

The doctrine of collateral estoppel, sometimes called issue

preclusion, generally “applies to tax proceedings involving

similar claims containing the same legal points, or different tax

years, when there has been no change in the controlling facts or

applicable legal principles.” Continental Oil Co. v. Jones, 80

F. Supp. 340, 343 (W.D. Okla. 1948), affd. 176 F.2d 519 (10th

Cir. 1949); see also Commissioner v. Sunnen, 333 U.S. 591, 598-

599 (1948). Collateral estoppel has “the dual purpose of

3
Petitioners now concede that the statute of limitations does
not bar an assessment with respect to the 1983 tax year.
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protecting litigants from the burden of relitigating an identical

issue and of promoting judicial economy by preventing unnecessary

or redundant litigation." Meier v. Commissioner, 91 T.C. 273,

282 (1988).

In Montana v. United States, 440 U.S. 147, 155 (1979), the

Supreme Court established the following three-prong test for

applying collateral estoppel: (1) The issue presented in the

subsequent litigation is in substance the same as the issue

presented in the first case; (2) the controlling facts or legal

principles have not changed significantly since the first

judgment; and (3) special circumstances do not warrant an

exception to the normal rules of preclusion.

Building on the Supreme Court's analysis in Montana, this

Court has identified five criteria that must be satisfied for

collateral estoppel to apply. They are: (1) The issue in the

second suit must be identical in all respects with the one

decided in the first suit; (2) there must be a final judgment

rendered by a court of competent jurisdiction; (3) collateral

estoppel may only be invoked against parties and their privies to

the prior judgment; (4) the parties must have actually litigated

the issue and the resolution of the issue must have been

essential to the prior decision; and (5) the controlling facts

and applicable legal rules must remain unchanged from those in
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the prior litigation. See Peck v. Commissioner, 90 T.C. 162,

166-167 (1988), affd. 904 F.2d 525 (9th Cir. 1990).

On the basis of the record, we find that all five conditions

have been satisfied in the instant case, and, pursuant to the

doctrine of collateral estoppel, find that the holding in

Rambacher I is controlling here. We therefore hold that

petitioners are liable for the additions to tax pursuant to

sections 6653(a)(1) and (2) for the 1983 taxable year.

To reflect the foregoing,

An appropriate order and

decision will be entered.