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.