T.C. Memo. 2006-220

UNITED STATES TAX COURT

NELSON I. AND ESTHER S. GOODMAN, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 21917-04L. Filed October 23, 2006.

Martin D. Tropper, for petitioners.

Alex Shlivko, for respondent.

MEMORANDUM OPINION

DEAN, Special Trial Judge: This case is before the Court

on respondent's motion for summary judgment filed pursuant to

Rule 121. Rule references are to the Tax Court Rules of Practice

and Procedure. Section references are to the Internal Revenue

Code of 1986 as amended. The motion arises in the context of a

petition filed in response to a Notice of Determination
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Concerning Collection Action(s) Under Section 6320 and/or 6330

that respondent sent to petitioners. At the time the petition

was filed, petitioners resided in Lawrence, New York.

Background

Origin of the Tax Liability

Petitioners timely filed their Federal income tax return for

1995 without remittance. The tax shown on the return was

assessed, and notice and demand was issued. The tax was paid on

October 16, 1997. 

The return was subsequently examined, and a deficiency in

income tax was proposed. One of the issues in the examination

was the treatment of certain stock as section 1244 stock. Martin

D. Tropper (Mr. Tropper), pursuant to a power of attorney, was

petitioners’ representative in the administrative proceedings. 

Mr. Tropper was not, at the time, admitted to practice before the

United States Tax Court. 

Petitioners could not reach an agreement with the

Commissioner on the proposed deficiency, and a statutory notice

of deficiency was issued. Petitioners filed pro sese a petition

with the Tax Court at docket No. 1262-01S for redetermination of

the deficiency for 1995. Petitioners signed on February 10,

2002, a stipulated decision document in which they agreed: (1)

To a deficiency of $26,955.75, (2) that they had no liability for

the section 6662 accuracy-related penalty, and (3) that “interest
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1The actual amount to which the parties agreed was

$26,955.75.

will be assessed as provided by law on the deficiency”. The

decision was entered by the Court on February 25, 2002, and the

assessment was made on July 22, 2002. 

Administrative Activity

Notice and demand was issued for the deficiency assessment

followed by several additional notices of tax due. Receiving no

response or payment, respondent sent to petitioners Letter 1058,

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

Hearing. 

Petitioners filed a timely Form 12153, Request for a

Collection Due Process Hearing. Attached to the Form 12153 was a

statement that petitioners had not agreed to pay any interest

because “there was still a question whether the Internal Revenue

Service was entitled to” the deficiency. According to the

statement, petitioners agreed to pay “$26,927.67”,1 in essence,

only because an Internal Revenue Agent told them that they “could

work out an affordable payment schedule.” The statement cites as

petitioners’ objective in the section 6330 hearing the

presentation to Appeals of “documentation with the view to

discharge of the original assessed balance.” 

The Appeals officer who conducted the hearing informed

petitioners that because the underlying tax liability had been
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litigated, it could not be the subject of the hearing. He also

informed them that because a “collection information statement”

and proposal to pay the tax were not presented, there were no

collection alternatives available.

Petition

A letter with an attached document titled “NOTICE OF

PETITION” was received by the Court on November 15, 2004,

regarding the notice of determination received by petitioners. 

The letter was signed by Mr. Tropper, who was still not admitted

to practice before the Tax Court. Petitioners subsequently filed

pro sese an amended petition in which they asserted that the

issue is “whether a proper deduction was taken under section 1244

of the IRS Code for my taxable year 1995.”

Discussion

Respondent reasons that since the only issue that

petitioners raise questions the existence and amount of the

underlying tax liability, he is entitled to a ruling in his favor

as a matter of law. 

All of petitioners’ arguments are addressed to their

deficiency proceeding or to the preceding or succeeding

administrative events.

Standard for Granting Summary Judgment

The standard for granting a motion for summary judgment

under Rule 121 is stated in the Rule as follows: 
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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).]

The moving party has the burden of showing the absence of a

genuine issue as to any material fact. See Espinoza v.

Commissioner, 78 T.C. 412, 416 (1982) (and cases cited therein). 

The evidence of the nonmovant is to be considered in the

light most favorable to him, and all justifiable inferences are

to be drawn in his favor. Adickes v. S.H. Kress & Co., 398 U.S.

144, 158-159 (1970). There is, however, no issue for trial

unless there is sufficient evidence for the finder of fact to

find in favor of the nonmoving party. First Natl. Bank v. Cities

Serv. Co., 391 U.S. 253, 288-289 (1968). The nonmovant’s

evidence must be more than merely colorable. Dombrowski v.

Eastland, 387 U.S. 82, 84 (1967) (per curiam). If the

nonmovant’s evidence is not significantly probative, summary

judgment may be granted. First Natl. Bank v. Cities Serv. Co.,

supra at 290.

Respondent argues that as a matter of law petitioners’

argument concerning whether stock was section 1244 stock was a

potential issue in the prior Tax Court litigation and is

precluded from litigation in this case due to statutory and

caselaw principles. The Court agrees with respondent.
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Res Judicata - Claim Preclusion

Petitioners are precluded by operation of the judicial

doctrine of res judicata from contesting their income tax

deficiency for 1995. The Supreme Court in Commissioner v.

Sunnen, 333 U.S. 591, 597 (1948), summarized 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. 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 in Sunnen: 

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. Baker v. IRS, 74 F.3d 906, 910

(9th Cir. 1996); accord Erickson v. United States, supra at 768;

Krueger v. Commissioner, 48 T.C. 824, 828-829 (1967); see also

United States v. Intl. Bldg. Co., 345 U.S. 502, 503-506 (1953)

(upholding res judicata effect of stipulated Tax Court

decisions).

Respondent issued to petitioners a notice of deficiency for

1995. Petitioners petitioned for redetermination, and the case

was concluded without trial by entry of a stipulated decision on

February 25, 2002. Petitioners, however, argue that res judicata

does not apply because petitioner, Nelson Goodman, “believed that

Petitioner would be entitled to a hearing by the IRS

notwithstanding submissions to the Tax Court”. Petitioners also

allege that they were misled by an agent of respondent into

thinking that the deficiency was open for further consideration;

essentially they are asserting an estoppel against respondent. 

Petitioners have provided no authority for the proposition that

mistake or estoppel is an exception to the application of res

judicata.
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Because the decision in petitioners’ deficiency case was not

appealed and has since become final, res judicata precludes

petitioners from now disputing the validity of the underlying

liability in this collection action.

The Court concludes that the circumstances of this case meet

the prerequisites for application of res judicata and that

petitioners are precluded under the doctrine from challenging

their underlying liability in this proceeding. See Newstat v.

Commissioner, T.C. Memo. 2004-208.

Statutory Preclusion Under Section 6330

Res judicata is not the only rule of law precluding

petitioners from contesting their deficiency here. Section

6330(c)(2)(B) also precludes them from relitigating the

underlying tax liability in this case. A taxpayer 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 tax liability”. Sec.

6330(c)(2)(B).

That petitioners received a notice of deficiency for 1995 is

not in dispute. Because petitioners received the notice and

contested the deficiency before the Court, they cannot challenge

the underlying liability in this section 6330 proceeding and are

therefore, as a matter of law, precluded from raising the issue.
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Respondent’s Direct Communication With Petitioners

Petitioners’ attorney, in petitioners’ objection to

respondent’s motion, complains that respondent’s counsel served

the motion for summary judgment directly on petitioners without

providing him with a copy or notice of the motion. The issue,

along with similar complaints he raised at the hearing, is

irrelevant to a decision on the motion for summary judgment, and

is also inappropriate. Mr. Tropper did not enter his appearance

in this case until December 28, 2005; petitioners were pro sese

until that time. The motion for summary judgment was filed

November 10, 2005. By Court Rule, papers and documents are

generally served on the parties unless there is counsel of

record. Rule 21(a) and (b)(2); see also Rule 24(b).

Conclusion

Petitioners have failed to show that there is a genuine

issue of material fact for trial, and respondent’s motion for

summary judgment will be granted.

An appropriate order and

decision will be entered granting

respondent’s motion for summary

judgment.