T.C. Memo. 2005-170
UNITED STATES TAX COURT
ROBERT H. GOLDEN AND JUDITH A. GOLDEN, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16694-04L. Filed July 11, 2005.
Robert H. Golden and Judith A. Golden, pro sese.
A. Gary Begun, for respondent.
MEMORANDUM OPINION
DEAN, Special Trial Judge: This case is before the Court on
respondent’s motion for partial summary judgment filed pursuant
to Rule 121. All Rule references are to the Tax Court Rules of
Practice and Procedure. All section references are to the
Internal Revenue Code of 1986, as amended.
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The motion arises in the context of a petition filed in
response to a notice of determination concerning collection
action under section 6330 sent to petitioners and a notice of
determination concerning relief from joint liability under
section 6015 sent to Ms. Golden. Respondent moves for partial
summary judgment with respect to collection issues other than Ms.
Golden’s request for spousal relief. The section 6015 claim will
be dealt with separately at a later date.
Background
Origin of the Tax Liabilities
As alleged in the petition in this case, in 1976 and 1977,
Robert H. Golden (petitioner) invested $29,000 in a partnership
in which he had no management duties and with which he had
minimal contact. Petitioners claimed tax losses on their joint
Federal income tax returns for the years 1974 through 1981 using
information sent to them in yearly Schedules K-1, Partner’s Share
of Income Deductions, Credits, etc.
Further, according to the petition, during 1981 petitioners
were advised by the Internal Revenue Service (IRS) that the
partnership was under investigation and that losses generated by
the partnership might be disallowed. The petition alleges that
for several years petitioners agreed to extend the period of
limitations while IRS investigated the partnership.
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Attached to respondent’s motion for partial summary judgment
is a partial copy of a statutory notice of deficiency dated June
1, 1990, issued to petitioners for the following years and
amounts:
Year Deficiency
1974 $1,551.00
1977 16,718.00
1978 5,567.00
1979 6,706.30
1980 4,166.00
1981 3,994.00
Also attached to respondent’s motion is a copy of a
stipulated decision of this Court, entered February 7, 1994, in
the case of Robert H. Golden and Judith A. Golden, docket No.
18777-90, ordering and deciding that there are deficiencies in
income taxes due from petitioners as follows:
Year Deficiency
1974 $1,551.00
1977 2,218.00
1978 5,567.00
1979 6,706.30
1980 4,166.00
1981 3,994.00
Evidence of the Assessments
Certified copies of Forms 4340, Certificate of Assessments,
Payments, and Other Specified Matters, attached as exhibits to
respondent’s motion, show that the above-stipulated deficiencies
were assessed by the IRS on May 10, 1994. Petitioners were
subsequently notified of their outstanding tax liabilities by
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letter, and on August 20, 2003, were issued a notice of intent to
levy and advised of their right to a hearing. On September 16,
2003, respondent received a Form 12153, Request For A Collection
Due Process Hearing, dated by petitioners as September 15, 2003.
Petitioners’ Allegations of Error
In their petition, petitioners allege a number of “Counts”,
which in essence raise three issues: (1) That the expiration of
the period of limitations on assessment, and the expiration of
the period of limitations for collections each bar respondent
from collecting liabilities for the years at issue; (2) that the
partnership investments that generated the liabilities were not
tax-motivated transactions warranting increased interest, and (3)
that Judith A. Golden is entitled to section 6015 relief.
Respondent’s motion is directed only to the first two issues.
Discussion
Respondent requests in the motion that the Court determine,
as a matter of law, that petitioners cannot contest the
expiration of the period of limitations on assessment, and that
as a matter of law, the period of limitations on collection of
the tax liabilities at issue here has not expired.
Standard for Granting Summary Judgment
The standard for granting a motion for summary judgment
under Rule 121 is stated in the rule itself.
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A decision shall * * * be rendered if the pleadings,
answers to interrogatories, depositions, admissions,
and any other acceptable materials, together with the
affidavits, if any, show that there is no genuine issue
as to any material fact and that a decision may be
rendered as a matter of law. * * * [Rule 121(b).]
Rule 121(d) provides that, when a properly supported motion
for summary judgment is made, the adverse party “must set forth
specific facts showing that there is a genuine issue for trial.”
Respondent poses two legal bases upon which to rest a
favorable ruling on his motion for partial summary judgment.
Respondent argues that as a matter of law, petitioners’ argument
concerning the period of limitations on assessment and the nature
of their partnership investments, potential issues in the prior
Tax Court litigation, are precluded from litigation in this case
due to statutory and caselaw principles. Respondent also argues
that he has shown that there remains no material issue of fact
with respect to whether the period of limitations on collection
has expired. The Court agrees with respondent on both issues.
Timely Notice of Deficiency
Section 6330 Review
Taxpayers may present at a section 6330 hearing challenges
to the existence or amount of the underlying tax liability “if
the person did not receive any statutory notice of deficiency for
such liability”. Sec. 6330(c)(2)(B).
Petitioners’ claims as to whether the statutory notice of
deficiency was issued within the period of limitations constitute
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challenges to the underlying tax liabilities. Hoffman v.
Commissioner, 119 T.C. 140, 145 (2002); Rodriguez v.
Commissioner, T.C. Memo. 2003-153; MacElvain v. Commissioner,
T.C. Memo. 2000-320.
That petitioners received and contested a notice of
deficiency for 1974, 1977, 1978, 1979, 1980, and 1981, resulting
in the entry of a stipulated decision that there are deficiencies
in their income taxes for those years, is not in dispute.
Petitioners are therefore precluded by section 6330(d)(2)(B) from
challenging the amounts of the deficiencies or the timeliness of
the statutory notice as a matter of law.
Res Judicata
Petitioners are precluded not only by operation of section
6330(c)(2)(B) from raising the issue of the period of limitations
on assessment; they are so precluded by the doctrine of res
judicata. At the hearing on respondent’s motion, the Court
questioned petitioner, a practicing attorney, as to the
application of the doctrine of res judicata to this case. In
petitioners’ brief in opposition to respondent’s motion,
petitioners assert that the questioning by the Court was a
surprise because “Res Judicata was not mentioned in the written
motion by the Respondent”. The Court calls petitioners’
attention to pages 16 through 20 of respondent’s motion. There,
respondent argues that due to the application of the doctrine of
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res judicata petitioners are precluded from questioning here the
validity of the notice of deficiency that were the subject of the
prior litigation.
The Supreme Court in Commissioner v. Sunnen, 333 U.S. 591,
597 (1948), summarized the judicial doctrine of res judicata,
also known as claim preclusion, as follows:
The rule provides that when a court of competent
jurisdiction has entered a final judgment on the merits
of a cause of action, the parties to the suit and their
privies are thereafter bound ‘not only as to every
matter which was offered and received to sustain or
defeat the claim or demand, but as to any other
admissible matter which might have been offered for
that purpose.’ Cromwell v. County of Sac, 94 U.S. 351,
352, 24 L.Ed. 195. The judgment puts an end to the
cause of action, which cannot again be brought into
litigation between the parties upon any ground
whatever, absent fraud or some other factor
invalidating the judgment. * * *
As to the application of the doctrine in the context of tax
litigation the Court stated:
Income taxes are levied on an annual basis. Each year
is the origin of a new liability and of a separate
cause of action. Thus if a claim of liability or non-
liability relating to a particular tax year is
litigated, a judgment on the merits is res judicata as
to any subsequent proceeding involving the same claim
and the same tax year. * * * [Id. at 598.]
As a general rule, where the Tax Court has entered a
decision for a taxable year, both the taxpayer and the
Commissioner (with certain exceptions) are barred from reopening
that year. Hemmings v. Commissioner, 104 T.C. 221, 233 (1995).
It has also been held that “the Tax Court’s jurisdiction, once it
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attaches, extends to the entire subject of the correct tax for
the particular year.” Erickson v. United States, 159 Ct. Cl.
202, 309 F.2d 760, 767 (1962).
An agreed or stipulated judgment is a judgment on the merits
for purposes of res judicata. In re Baker, 74 F.3d 906, 910 (9th
Cir. 1996); see also United States v. Intl. Bldg. Co., 345 U.S.
502, 503-506 (1953) (recognizing res judicata effect of
stipulated Tax Court decisions); accord Erickson v. United
States, supra at 768; Krueger v. Commissioner, 48 T.C. 824, 828-
829 (1967).
Respondent issued to petitioners a notice of deficiency with
respect to the subject taxable years, petitioners petitioned for
redetermination, and the case was concluded without trial by
entry of a stipulated decision on February 7, 1994. Here,
petitioners would like to argue that the statutory notice of
deficiency was issued outside the period of limitations for the
years involved. Petitioners could have made this challenge in
their pleadings in the earlier Tax Court proceeding as an
affirmative defense under Rule 39, Pleading Special Matters.
The validity of the notice of deficiency is a matter that
could have been raised and litigated in connection with the
deficiency proceeding, involving these same petitioners, and the
same tax years. Because the decision in that case was not
appealed and has since become final, res judicata precludes
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petitioners from now disputing the amounts of the deficiencies or
the timeliness of the statutory notice in this collection action.
See Newstat v. Commissioner, T.C. Memo. 2004-208.
Period of Limitations on Collection
Petitioners argue that even if the period of limitations on
assessment had not expired when the notice was issued, or the
issue is precluded from dispute here, respondent’s proposed
collection action is outside the period of limitations on
collection.
Section 6502, Collection After Assessment, provides that
where an assessment has been timely made, the tax may be
collected by levy or proceeding that is begun “within 10 years
after the assessment of the tax”. The Forms 4340 show that the
stipulated deficiencies entered by the Court’s decision of
February 7, 1994, were assessed by the IRS 92 days later, on May
10, 1994. After a notice of deficiency is mailed, the running of
the period of limitations on assessment is suspended until the
decision of the Tax Court becomes final, after 90 days without an
appeal, and for 60 days thereafter. Sec. 6503; see also secs.
7481, 7483.1
1
Although not specifically framed by petitioners, their
general argument that “the statute of limitations on assessment
had run” could subsume the argument that the assessments after
entry of decision were untimely. As can be seen from the
pertinent dates, the assessments were in fact timely made.
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On August 20, 2003, respondent issued a notice of intent to
levy and right to a hearing for the tax years at issue. On
September 16, 2003, respondent received petitioners’ request for
a hearing under section 6330. The date petitioners mailed their
request for a hearing under section 6330 was less than 10 years
from the date of the assessments. Once the request for hearing
was made, the running of the period of limitations on collection
was suspended and remains suspended until the 90th day after the
day on which there is a final determination in this case. Sec.
6330(e)(1); Boyd v. Commissioner, 117 T.C. 127, 130-131 (2001);
sec. 301.6330-1(g), Proced. & Admin. Regs.
Petitioners argue that there “must have been” earlier
assessments for the years at issue. There “must have been”
earlier assessments because there was an assessment in 1987 for a
year not at issue, 1976,2 that was “from the same source”, the
partnership, according to petitioners. Indeed, petitioners
sought formal discovery from respondent of any documents that
would show assessments for the years at issue other than those
made after the Court’s entry of decision. Respondent denied the
existence of any such assessments, offering Forms 4340 as proof.
2
In petitioners’ brief in opposition to respondent’s motion
and at oral argument on the motion, petitioners identify the year
as 1977 but a Copy of Form 668, Certificate of Release of Federal
Tax Lien, attached to petitioners’ brief, refers to “Tax Period
Ending” Dec. 31, 1976.
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Petitioners have provided no evidence that any assessments of tax
for the years at issue ever took place prior to May 10, 1994.
Respondent, after adequate time for discovery, has made a
showing from the record of a complete failure of proof concerning
an essential element of petitioners’ claim, and on which
petitioners would bear the burden of proof at trial. Rule
142(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-323
(1986). There can be no genuine issue as to any material fact
with respect to petitioners’ claim that the period of limitations
for collection has expired. Because petitioners have failed to
set forth specific facts showing that there is a genuine issue
for trial as to the expiration of the period of limitations on
collection, respondent is entitled to a summary disposition in
his favor. Rule 121(d).
Conclusion
The Court finds as a matter of law that petitioners are
barred from contesting the existence, amounts, and timeliness of
the underlying assessments in this case, and that the period of
limitations on collection of the assessments here has not
expired.
An appropriate order will
be issued granting respondent’s
motion for partial summary
judgment.