T.C. Memo. 2004-86

UNITED STATES TAX COURT

THOMAS J. AND BONNIE F. RATKE, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 9641-01L. Filed March 25, 2004.

Jack B. Schiffman, for petitioners.

Anne W. Durning, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

FOLEY, Judge: The issue for decision is whether respondent

abused his discretion in determining to proceed with collection.

FINDINGS OF FACT

On April 15, 1994, petitioners timely filed their 1993

Federal income tax return. On June 7, 1994, petitioners filed an

amended return relating to that year. On January 9, 1996,
- 2 -

1 Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the year in issue. 

Dollar amounts are generally rounded to the nearest dollar.

2 The petition refers to an “amended 1993 individual income

tax return”. At the time they mailed the petition, petitioners

had submitted two amended returns to the Internal Revenue

Service. Thus, it is not clear whether petitioners are referring

to the first or the second amended return.

respondent sent petitioners a notice of deficiency, determining a

$20,710 deficiency and a $4,142 section 6662(a)1 penalty. In

response, on March 29, 1996, petitioners sent their petition to

the Court and a second amended return relating to 1993 to the

Internal Revenue Service. On April 2 and 3, 1996, respectively,

the petition and the second amended return were filed.

Petitioners, in the petition, disputed the entire amount of

the deficiency and penalty as follows:

The Commissioner has asserted deficiencies in income

taxes and additions to taxes for the Petitioners

taxable year 1993, all of which are in dispute, as

follows:

Deficiency: Increase in Tax $20,710

Penalties: Section 6662(a) $ 4,142

The petition also stated that “The Petitioners have correctly

reported the sale of the business property on their amended 1993

individual income tax return, form 1040X”.2

On May 27, 1996, respondent made a $12,655 assessment for

the amount shown as tax on petitioners’ second amended return and

sent petitioners a notice and demand for payment. Respondent

also sent petitioners an audit statement, determining a $2,931
- 3 -

net deficiency after taking into account the May 27, 1996,

assessment. The parties subsequently agreed to the $2,931

deficiency, and, on March 13, 1997, the Court entered a decision

pursuant to the parties’ stipulated agreement as follows:

ORDERED AND DECIDED: That there is a deficiency

in income tax due from the petitioners for the taxable

year 1993 in the amount of $2,931.00; and 

That there is no addition to tax due from the

petitioners for the taxable year 1993, under the

provisions of I.R.C. § 6662(a).

On May 19, 1997, respondent assessed the $2,931 deficiency

and sent petitioners a notice and demand for $21,164. On June

25, 1999, petitioners filed a third amended return relating to

1993. 

On September 20, 2000, respondent sent petitioners a Final

Notice - Notice of Intent to Levy and Notice of Your Right to a

Hearing relating to 1993. On October 17, 2000, petitioners filed

Form 12153, Request for Collection Due Process Hearing (hearing

request). Section 6330 hearings were held on March 13 and May 1,

2001. On May 15, 2001, petitioners amended their original

hearing request.

On June 28, 2001, respondent sent petitioners a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330. On July 31, 2001, petitioners, while residing in

Glendale, Arizona, filed their petition with the Court. On

August 7, 2001, petitioners filed an amended petition. 
- 4 -

OPINION

Respondent contends that the May 27, 1996, assessment was

taken into account in determining the deficiency stipulated by

the parties. Petitioners, however, contend that the assessment

is invalid, pursuant to section 6213(a), and that their liability

is limited to the $2,931 set forth in the Court’s March 13, 1997,

decision.

The petition clearly reflects petitioners’ decision to

contest the entire deficiency determined by respondent. Thus,

the Court had jurisdiction to determine petitioners’ correct tax

liability relating to 1993. See Naftel v. Commissioner, 85 T.C.

527, 533 (1985). On March 13, 1997, the parties signed a

settlement agreement, pursuant to which a decision was entered by

the Court. This decision is final and binding on the parties

pursuant to the terms of their stipulation. Accordingly,

respondent may collect only $2,931, the amount set forth in the

Court’s March 13, 1997, decision. 

Contentions we have not addressed are irrelevant, moot, or

meritless.

Decision will be entered

for petitioners.