Fisher v. Commissioner , 80 T.C.M. 338 ( 2000 )

T.C. Memo. 2000-284
UNITED STATES TAX COURT
THOMAS J. FISHER AND ANN M. FISHER, ET AL.,1 Petitioners
v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 27394-86, 5879-89, Filed September 5, 2000.
25436-90, 1321-92.
A. John P. Mancini, for petitioners.
Thomas L. Fenner and Marion S. Friedman, for respondent.
1
This case has been consolidated by order with those of White
Rim Oil & Gas Associates, 1980, Raymond Phillips, Tax Matters
Partner, docket Nos. 5879-89, 25436-90, and 1321-92, each of
which is a TEFRA proceeding involving the same partnership.
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MEMORANDUM OPINION
SWIFT, Judge: These consolidated cases are before us on
motions for entry of decisions.2 An evidentiary hearing was held
on December 9, 1999, with regard to these motions.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
The underlying tax liabilities involved in the instant
motions for entry of decisions of Thomas J. and Ann M. Fisher
(who are petitioners in docket No. 27394-86 and who are
hereinafter referred to as petitioners) relate to two tax shelter
limited partnerships (the White Rim partnerships and the Syn-Fuel
partnerships) in which petitioners in the early 1980's invested.
Both of these tax shelters and the claimed tax benefits
associated therewith have been the subject of test case opinions
adverse to the investors. See Peat Oil & Gas Associates v.
Commissioner, 100 T.C. 271 (1993) (relating to the Syn-Fuel
2
In docket No. 27394-86, petitioners Thomas J. and Ann M.
Fisher move for entry of decision. In docket Nos. 5879-89,
25436-90, and 1321-92, respondent moves for entry of decisions
under Rule 248, to which motions the Fishers, as participating
partners, object. Also, in the latter three dockets, the
Fishers, as participating partners, cross move, as to themselves
only (not as to other partners) for entry of decisions, for
abatement of interest, for innocent spouse relief, and for
attorney’s fees. In those three dockets, the tax matters partner
filed no response to the pending motions.
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partnerships), affd. sub nom. Ferguson v. Commissioner, 29 F.3d
98 (2d Cir. 1994); Krause v. Commissioner, 99 T.C. 132 (1992),
(relating to the White Rim partnerships), affd. sub nom.
Hildebrand v. Commissioner, 28 F.3d 1024 (10th Cir. 1994).3
The instant motions focus primarily on whether petitioners
should be treated as having entered into binding settlement
agreements of the taxes and penalties pertaining to their
investments in the White Rim and Syn-Fuel partnerships on a basis
more favorable than that available to other partners in the same
partnerships. Petitioners’ counsel complains vigorously of
respondent’s general handling of the above tax shelters and of
respondent’s particular treatment of petitioners. Whatever may
be the explanation for petitioners’ financial and other problems
relating to their investments in the above partnerships, the
evidence herein does not establish that petitioners entered into
binding settlement agreements with respondent of their tax
liabilities, additions to tax, and increased interest in a manner
inconsistent with respondent’s proposed decisions. For the
reasons set forth below, in docket No. 27394-86, we shall deny
3
For other opinions relating to the White Rim partnerships,
see Hill v. Commissioner, 204 F.3d 1214 (9th Cir. 2000); Copeland
v. Commissioner, T.C. Memo. 2000-181; Marinovich v. Commissioner,
T.C. Memo. 1999-179; Acierno v. Commissioner, T.C. Memo. 1997-
441, affd. without published opinion 185 F.3d 861 (3d Cir. 1999);
Karlsson v. Commissioner, T.C. Memo. 1997-432; Vanderschraaf v.
Commissioner, T.C. Memo. 1997-306, affd. without published
opinion 211 F.3d 1276 (9th Cir. 2000).
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petitioners’ motion for entry of decision. In docket Nos. 5879-
89, 25436-90, and 1321-92, we shall grant respondent’s motions
for entry of decisions, and we shall deny the motions for entry
of decisions filed by petitioners as participating partners.
Background
At the time the petitions were filed, petitioners resided in
and the relevant partnerships maintained their offices in New
York State.
On their Federal income tax returns for the years 1980
through 1985, petitioners claimed loss deductions relating to
their limited partnership investments in White Rim and Syn-Fuel
as follows:
Claimed Loss Deductions
Partnership 1980 1981 1982 1983 1984 1985
White Rim $39,925 $45,479 $50,880 $13,665 --- ---
Syn-Fuel --- 40,392 38,319 40,890 $33,414 $6,927
Respondent disallowed the above-claimed loss deductions
relating to petitioners’ investments in the White Rim and Syn-
Fuel partnerships for the tax years 1980 through 1982 and the
partnerships’ loss deductions for 1983 through 1985.
At a Court hearing on April 22, 1986, respondent’s counsel
announced that respondent would accept settlement offers from
investors in the White Rim and related limited partnerships on
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terms that would allow the investors an ordinary loss deduction
for the amount of cash invested in the partnerships. For
partnerships formed in 1979 and 1980, respondent’s offer of
settlement expired on September 5, 1986. By that date,
petitioners did not respond to respondent’s offer of settlement.
On December 27, 1988, petitioners mailed to respondent 10
checks totaling $130,836. On each check, petitioners indicated
whether the amount of each check should be applied to taxes or to
interest owed for each year. No indication appeared on the
checks as to whether the payments were being made in settlement
of all or any portion of the tax liabilities determined by
respondent against petitioners, nor did any indication appear on
the checks as to whether the payments were being made for any tax
liabilities relating to White Rim or to Syn-Fuel, or both.
Over the course of 1989 through 1997, petitioners and their
counsel and respondent exchanged various correspondence and other
documents discussing petitioners’ tax liabilities and that
petitioners on December 27, 1988, had partially paid. The
correspondence makes clear that, except as noted below, no
settlement was entered into by petitioners and respondent for any
of the tax years in dispute herein.
For example, included in the documents petitioners submitted
to respondent are claims for refund that petitioners filed in
1990 and in 1994 seeking refunds from respondent of amounts
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petitioners had paid for the years 1981 through 1985 -- including
the $130,836 that petitioners had paid on December 27, 1988.
On May 2, 1995, petitioners and respondent submitted to the
Court an agreed and signed decision document in docket No.
11904-88, involving petitioners’ Federal income tax liability for
1982, in which petitioners agreed to a tax deficiency for that
year of $44,693.
On April 26, 1995, one of respondent’s Appeals officers
wrote a letter to petitioners to explain the allocation by
respondent of the total $130,836 in payments that had been
received from petitioners on December 27, 1988. In that letter,
a misleading statement was made by respondent’s Appeals officer
relating to petitioners’ Federal income tax liabilities that
There remains no balance on the 1984 account, but each
of the other years show a balance in your favor which
will be refunded when this matter is closed.
At a Court hearing in petitioners’ case at docket No. 27394-
86 in New York City on December 9, 1997, the parties orally
settled issues relating to petitioners’ investment in White Rim
for 1980 and 1981, and the parties filed their stipulation of
settled issues therein on December 9, 1999.
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Discussion
The evidence in these cases is clear that (except for the
May 2, 1995, and the December 9, 1999, settlements relating to
petitioners’ 1980, 1981, and 1982 tax liabilities that are
mentioned above) no settlements were entered into between
petitioners and respondent with regard to petitioners’ Federal
income tax liabilities for the years 1980 through 1985.
Petitioners’ attempt to have the $130,836 in payments that they
made on December 27, 1988, treated as a binding and final
settlement of all of petitioners’ Federal income tax liabilities
relating to the White Rim and Syn-Fuel partnerships for the years
1980 through 1985, or for any portion thereof, is rejected.
Binding settlement agreements may be entered into between
taxpayers and respondent. To constitute, however, a binding
settlement agreement of a Federal tax controversy, the taxpayers
and respondent’s representatives, among other things, must comply
generally with contract principles such as offer and acceptance
and must objectively manifest mutual assent to the essential
terms of the purported settlement agreement. See Dorchester
Indus. v. Commissioner, 108 T.C. 320, 329-330 (1997), affd. 208
F.3d 205 (3d Cir. 2000).
As we have found, with regard to the amounts in controversy,
petitioners never accepted the terms of any pending settlement
from respondent. To the contrary, after making the payments
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totaling $130,836 in December of 1988, petitioners filed two sets
of claims for refund therefor -- the first in 1990 and the second
in 1994. The filing by petitioners of the claims for refund in
1990 and 1994 is inconsistent with and disproves petitioners’
contention that they had settled the related tax liabilities in
December of 1988.
The total amount of petitioners’ December 27, 1988, payments
(and the amount of the various separate checks designated for
taxes and interest), with one exception for 1 year, do not match
the calculations of what would have been due under any of
respondent’s settlement offers. Further, in context, the
April 26, 1995, letter from respondent’s Appeals officer clearly
did not constitute an offer or acceptance of any settlement
agreement.
Petitioners’ various alternative arguments (e.g., that
petitioners’ December 27, 1988, payments and respondent’s receipt
thereof should be treated as an accord and satisfaction of the
tax liabilities then asserted against petitioners relating to
White Rim and/or to Syn-Fuel, or that petitioners’ investments in
Syn-Fuel should be treated as giving rise to loss deductions for
fraud) are rejected. No credible evidence supports petitioners’
alternative arguments. Other arguments made by petitioners that
are not specifically addressed herein have been considered and
are rejected.
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Petitioner Mrs. Fisher’s claims for innocent spouse relief
for 1983 and later years and petitioners’ claims for abatement of
interest and for attorney’s fees are all premature and therefore
will be denied. Any innocent spouse relief available to
Mrs. Fisher relating to partnership items under the Tax Equity
and Fiscal Responsibility Act of 1982, Pub. L. 97-248, 96 Stat.
324 (such as the White Rim and Syn-Fuel investments for 1983,
1984, and 1985), would be governed by the separate and
independent proceedings described in section 6230(a)(3).
Any abatement of interest that might be available to
petitioners would be governed by the separate proceedings
described in section 6404(e). See Bourekis v. Commissioner,
110 T.C. 20, 26 (1998).
In light of our denial of petitioners’ motions for entry of
decisions, petitioners do not qualify as prevailing parties, and
we deny petitioners’ motions for attorney’s fees. See sec. 7430.
To reflect the foregoing,
An appropriate order will
be issued in docket No. 27394-86;
and orders and decisions will be
entered in docket Nos. 5879-89,
25436-90, and 1321-92.