T.C. Memo. 2001-84

UNITED STATES TAX COURT

CHIH H. AND CHU F. CHU, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 24861-97. Filed April 9, 2001.

Chih H. and Chu F. Chu, pro sese.

David R. Jojola, for respondent.

MEMORANDUM OPINION

CHIECHI, Judge: This case is before the Court on petitioners’ motion for leave to file motion to vacate decision (petitioners’ motion). Respondent filed an objection to petitioners’

motion and a declaration by David R. Jojola (Mr. Jojola) in

support of that objection. Petitioners filed a reply to respondent’s objection (petitioners’ reply). We shall deny petition-
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1All section references are to the Internal Revenue Code in

effect at relevant times. All Rule references are to the Tax

Court Rules of Practice and Procedure. 

ers’ motion. 

Background

On October 29, 1997, respondent issued a notice of deficiency (notice) to petitioners that determined the following

deficiencies in, and fraud penalties under section 6663(a)1 on,

petitioners’ Federal income tax (tax):

 Fraud Penalty

 Year Deficiency Under Sec. 6663(a)

 1991 $18,508 $13,881

 1992 40,931 30,698

 1993 70,662 52,997

On December 29, 1997, petitioners timely filed pro sese a

petition. This case was calendared for trial at the Court’s

trial session in Los Angeles, California, that commenced on

February 8, 1999. 

On February 2, 1999, Robert H. Appert (Mr. Appert) entered

an appearance on behalf of petitioners. On February 8, 1999, the

parties filed a stipulation of settled issues, a first supplemental stipulation of settled issues, and a second supplemental

stipulation of settled issues (collectively, stipulations of

settled issues). Each of those stipulations was signed on

February 6, 1999, by Mr. Appert on behalf of petitioners as well

as by each petitioner and by Mr. Jojola on behalf of respondent. 

On March 11, 1999, the parties submitted to the Court a stipu-
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2On Mar. 26, 1999, after the decision in this case was

entered, Mr. Appert filed a motion to withdraw as attorney of

record for petitioners in this case. On Apr. 22, 1999, the Court

granted Mr. Appert’s motion. 

lated decision document (stipulated decision document) that was

signed on March 10, 1999, by Mr. Appert on behalf of petitioners

and by a representative of respondent and that reflected the

agreement of the parties as set forth in the stipulations of

settled issues. 

On March 15, 1999, the Court entered a decision in this case

pursuant to the agreement of the parties as reflected in the

stipulated decision document2 that petitioners are not liable for

the fraud penalty under section 6663(a) for any of the years at

issue and that they are liable for deficiencies in, and accuracyrelated penalties under section 6662(a) on, petitioners’ tax, as

follows:

 Fraud Penalty Accuracy-Related Penalty

 Year Deficiency Under Sec. 6663(a) Under Sec. 6662(a) 

 1991 $2,973 None $595

 1992 6,008 None 1,202

 1993 20,379 None 4,076

Discussion

The Court’s decision in this case was entered pursuant to

the agreement of the parties on March 15, 1999. No notice of

appeal or timely motion to vacate or revise the decision was

filed in this case, see sec. 7483 and Rule 162, and the decision

herein became final on June 13, 1999, see sec. 7481(a)(1); Fed.

R. App. P. 13(a). 
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3The Court of Appeals for the Fifth Circuit has indicated

that in extraordinary circumstances this Court has the power in

its discretion to vacate and correct a final decision where it is

based on a mutual mistake of fact. See La Floridienne J.

Buttgenbach & Co. v. Commissioner, 63 F.2d 630 (5th Cir. 1933). 

The Court of Appeals for the Ninth Circuit, to which an appeal in

this case would normally lie, does not recognize this Court’s

power to vacate and correct a final decision where it is based on

a mutual mistake of fact. See Abatti v. Commissioner, 859 F.2d

115, 118 (9th Cir. 1988), affg. 86 T.C. 1319 (1986); Lasky v.

Commissioner, 235 F.2d 97, 99-100 (9th Cir. 1956), affd. per

curiam 352 U.S. 1027 (1957).

Petitioners’ motion was filed on February 12, 2001, almost

two years after the Court entered the decision in this case and

20 months after that decision became final. Once a decision

becomes final, the Court may vacate it only in narrowly circumscribed situations, such as where the decision was obtained

through fraud on the Court, see Abatti v. Commissioner, 859 F.2d

115, 118 (9th Cir. 1988), affg. 86 T.C. 1319 (1986), or where the

decision is void or a legal nullity for lack of this Court’s

jurisdiction over either the subject matter or the party, see

Billingsley v. Commissioner, 868 F.2d 1081, 1084-1085 (9th Cir.

1989); Abeles v. Commissioner, 90 T.C. 103, 105-106 (1988).3

The Court of Appeals for the Ninth Circuit has defined the

phrase “fraud on the court” to be “‘an unconscionable plan or

scheme which is designed to improperly influence the court in its

decision.’” Toscano v. Commissioner, 441 F.2d 930, 934 (9th Cir.

1971)(quoting England v. Doyle, 281 F.2d 304, 309 (9th Cir.

1960)), vacating 52 T.C. 295 (1969); see Abatti v. Commissioner,
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supra. In order to prove fraud on the Court, petitioners have

the burden of establishing that “an intentional plan of deception

designed to improperly influence the Court in its decision has

had such an effect on the Court.” Abatti v. Commissioner, 86

T.C. 1319, 1325 (1986), affd. 859 F.2d 115 (9th Cir. 1988); see

Drobny v. Commissioner, 113 F.3d 670, 677-678 (7th Cir. 1997),

affg. T.C. Memo. 1995-209, and cases cited therein. 

The Court has carefully reviewed petitioners’ motion and

petitioners’ reply. Petitioners’ motion states in pertinent

part: 

1) IRS hold the document (from the Bank Deposits) and

made the copies of receipts back to 1995 of taxable year 1991-1993; But, never exchange to taxpayer or CPA even requested for years to see what

the results from and run out of the appealing

time, jumped to the conclusion which no one would

believe it * * *. 

* * * * * * *

3) It was found IRS made mistakes for taxable year of 

1990 by double taxing on the petitioners because

IRS always using the worksheets to jot down the

numbers which could be partially reported and IRS

examiners never recreated on the official forms to

show or exchange to the taxpayers.

4) IRS eventually released the data in Dec. of 1998

and petitioners hired the attorney Robert H.

Appert to check and recreate the official 1040

forms for taxable year of 1991-1993 as the reference to the Tax Court.

5) The counsel for Petitioners did not attend the

conference meeting on time held by judge Carolyn

Chiechi, nor recreated the 1040/Schedule C official forms as all the receipts, cancelled checks

were available.
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6) The motion to withdraw the counsel of petitioners

was ordered from the court because Robert with CPA

background charging $200/hr and did not prepare

the 1040 forms either as the supporting document

to the court and both parties.

7) From the IRS booklets; When all the data are

available, the professionals require only hours to

fill out 1040 forms; Actually, back to 1995, when

auditor Jennifer was in CPA’s office to examine

the taxable year of 1991; The CPA took only half

hour to accomplish the 1040 forms with schedule C

to auditor for information when all the receipts

and cancelled checks were copied by the auditor.

8) The reason to use official 1040 forms was easy to

communicate with the other party and should any

number in doubt, the taxpayers can have receipts

or cancelled check or bank statement to prove it. 

To prevent IRS examiners to hide or delete items

or made partial report to jump to the conclusion

misleading the judgments; It must have the 1040

forms to be as the reference. It does not matter

which 1040 forms to be used.

9) The petitioner has been in electronics industry

for 16 years and being laid off from July 1991 due

to the Eaton Corp. closed completely in Los Angeles; Since the petitioners have no idea of accounting/book keeping, every year must have the

CPA/tax specialist to prepare the 1040 forms.

10) In 1992, petitioner could not find the right job

after being laid off For almost one year starting

to do import/trade business using the Savings or

IRA funds to purchase the goods. The Cost of

goods in the year 1992 was Around $54,000 plus the

operation expenses of startup this new field of

business. Definitely, the operating expenses

(Schedule C) for this new trade business was far

more than the profits of selling the products. It

does not matter which official forms (1040 EZ or

1040A) to be used; The results of the income loss

(profits) should be the same.

11) It does not matter what method to be used to analysis the new startup business; The bank saving

dropping from 1991 to 1993 indicated the seeds
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money being used up for the import business startup, and in 1992 & 1993, even could not afford to

hire the part time bookkeeper. Mrs. Chu majoring

in Music helped to just put all the receipts aside

without knowing how to organize it. But, everyone

knows without investing or buying the seeds to

fertilize it, the fruits will not be there years

after. In other words, no one would expect the

profits (Fruits) in the first few years of startup

a new business (seeds). [Reproduced literally.] 

Petitioners’ reply states in pertinent part:

12) This Court has jurisdiction to vacate a final

decision if the decision of the Court was obtained

by fraud on the Court. Partially report the COG

is the act of fraud, which would influence the

judgment. Treating petitioners unfairly or differently will be justified by the court as the act

of fraud or one kind of discriminating the petitioners had no tax/accounting background or knowledge.

* * * * * * *

14) The definition of Fraud is an act of deliberate

deception with the design of securing something by

taking unfair advantage of another-New International Dictionary; A deliberate deception for

unfair or unlawful gain-American Heritage Dictionary. Respondent is a tax professional, hold the

documents retrieved from the bank without exchange

to the petitioners for four years (1995-1999) and

jump to the decision without providing the appeal

meeting for petitioners to explain until tax solving date requested by the congressman to release

the files to the petitioners to check.

15) To prove such fraud, petitioners (No Tax background) hired the CPA and attorney to analyze and

prepare the detailed 1040 forms and schedule C for

easy understanding without eliminating or modified

the numbers where the banks statements or receipts/cancelled checks were all available. The

respondent (Professional tax expert) claimed in

his office the preparation of 1040 forms need one

more year and he could not find help to prepare it

based on the receipts/cancelled checks and bank
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transaction statement. Actually, respondent spent

only two hours to put the numbers into the 1040

forms (See Exhibit A), but, hold the progress of

checking the taxable years of 1992 and 1993. 

Because respondent knowing that petitioner lost

the main job in 1992 and started to import the

different small quantities of samples of audio

devices from April of 1992. Respondent deliberately hold the progress of reviewing the expenses

of start-up business, which was about two weeks

from Feb. 8, 1999. (Deadline to turn in the paper

to the court). The petitioners hired the attorney

to continue to review and prepare the 1040 form

and schedule C which estimated only need four

hours required, but, not successful and on Feb.

6th, 1999, petitioners being told that counsel

could do it at the second phase; First phase he

did not care about what respondent did. This was

the main reason the petitioner had the motion to

withdraw the counsel.

* * * * * * *

17) The legal counsel was hired to make the progress

of reviewing the COGs of 1992, 1993 and few expenses items which respondent deliberately hold or

partially report in his stipulation report. During the time of hiring, not only the counsel was

late in the meeting called by the judge, but, he

did not make any progress report to petitioners

until Feb. 6th, 1999 (Two days away from the deadline set by the court); Besides, the petitioner

(spouse) had the operation of the chest and under

daily radiation treatment of cancer disease; Under

such mentally pressure, Robert forced the petitioners to sign the incompletely stipulation report by saying he can fix it at the second phase. 

As the Fraud is an act; only if the professional

made it, later can be caught what did the respondent make. During the stage of professional’s

intention to design the scheme, it was hard to get

the evidence. As Fraud is an act using professional knowledge to take advantage of the nonprofessionals by treating the taxpayer unfairly,

differently or not just. As people say that nonprofessionals might use tangible weapons to rob

the bank to get money illegally; But, professionals can use intangible way (their knowledge to
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write the makeup figures) to take the money from

the taxpayer pockets illegally. As the professional always use the rules in favor of his misconduct as the fraud activity, he would never tell

anyone by holding such case for how many years

would dismiss (drop) the case; Since by holding

the case, IRS put the interest on it, and when IRS

owed petitioner money, also, holding the check for

the taxable year of 1990 without releasing by

making the excuses. As there are two different

issues.

18) Because of the following reasons, the settlement

was never reached. 

A) The deficiency of taxable year 1991, 1992 and

1993 came out without giving the petitioners the

documents describing where the figures from or how

it was calculated. The only paper received was

last week the exhibits of respondent letter, which

had lots of expenses, items being deleted or partially report. In other words, The stipulation

issues were not only vague, incomplete but, very

confusing to the court if the judge knowing in

1992 and 1993 the petitioners had no main job and

using up the savings or even the IRA fund as emergency seed money used to start up the new trade

business; The tax deficiency in 1992 (Petitioner

lost the main job) was calculated twice as higher

as in the 1991 ($2,973.00 + $595) which petitioner

still had the main job. In 1993 (the second year

of the new start-up trade business), the deficiency was calculated eight times ($20,379 +

$4076) higher than the 1991. It would make the

judge very confused by just looking at the above

figures made-up by the respondent deliberately to

deceive the court judgment.

(B) Before the deadline (Feb. 2, 1999); Judge

agreed the withdrawal of petitioners counsel. 

Because no progress report and even negligence of

the meeting called by the judge.

(C) The petitioner (Spouse) was under cancer

treatment and mentally in the bad shape. Petitioners have to totally trust and rely on the

counsel hired with the $200/hr rate.
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(D) Under above stress conditions, the petitioners’ counsel talked into the petitioners to sign

the incomplete stipulation issues made up by the

respondent at the last minute on Feb. 6th, 1999 by

saying he could do the second phase work or he

would not represent the petitioners on the Feb.

8th, 1999 in the court.

(E) In the morning (About 9:00 A.M.) of Feb. 8th,

1999; Petitioner did turn in the above situation

paper and requested the Judge to consider the COGs

of 1992, 1993 and few expenses items which respondent deliberately drop or cut off in respondent

issues two days ago. Showing the stipulations has

the figures made up by the respondent except the

taxable year of 1991. Starting from the end of

January 1999; The respondent just hold the progress of reviewing the taxable year of 1992 and

1993; Do not mention to exchange the documents or

provide the opportunity for petitioners until Feb.

6th, 1999. All the papers were prepared for last

minutes signatures. This was the way the professional designed the trap to take advantage of the

taxpayers unfairly by giving petitioners no opportunity at all saying the court need the signatures

to turn in. The petitioners did not sign the

stipulations of facts at the first place because

the respondent did not provide the complete expenses report when reviewing the taxable year of

1991. I believe the laws give the taxpayers to

know how the deficiency being calculated and based

on. Respondent hold or hide the documentations

and provided no chance for petitioners to explain

or exchange are not only unfair, but, trying to

stop the court to review what figures respondent

made up deliberately to take advantage of the

petitioners is obviously seen. If the respondent

did not make up the figures or untruth report to

the court, respondent should not be afraid of any

questions to be asked by the Judge during the next

investigation. [Reproduced literally.]

We find petitioners’ motion and petitioners’ reply to be

vague and confusing. However, those filings do not appear to

suggest or argue that we had no jurisdiction over the subject
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4It is noteworthy that the stipulated decision document

reflects a substantial concession by respondent regarding the

determinations in the notice. 

5Contrary to the allegations in petitioners’ motion and

petitioners’ reply, petitioners’ counsel, Mr. Appert, did not

file a motion to withdraw as attorney of record for petitioners

in this case until Mar. 26, 1999, after the decision in this case

was entered on Mar. 15, 1999. The Court granted that motion on

Apr. 22, 1999. 

matter or petitioners in this case. Nor do petitioners’ motion

and petitioners’ reply appear to suggest or argue that there was

any corruption of the Court. Assuming arguendo that petitioners

are contending in petitioners’ motion and petitioners’ reply that

some sort of fraud was perpetrated on the Court, on the instant

record, we reject any such contention. That record establishes

that: Petitioners retained legal counsel shortly before the

scheduled trial in this case was to begin; after retaining legal

counsel, the parties reached a basis of settlement and memorialized that settlement in the stipulations of settled issues which

were signed by petitioners’ counsel, Mr. Appert, on behalf of

petitioners as well as by each petitioner and by Mr. Jojola on

behalf of respondent; the Court entered a decision in this case

pursuant to the agreement of the parties as shown in the stipulated decision document4 that was signed by Mr. Appert on behalf

of petitioners and by a representative of respondent and that

reflected the stipulations of settled issues;5 and petitioners

did not appeal the decision in this case or timely move to vacate
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or revise that decision. 

Based on our review of the entire record before us, we find

that petitioners have failed to show that the decision entered in

this case is the result of fraud on the Court or any other

situation that warrants our exercise of our discretion under Rule

162 to grant petitioners’ motion. Based on that record, we find

that petitioners have failed to persuade us that we should grant

them leave to file a motion to vacate the decision. 

To reflect the foregoing, 

An order will be issued denying petitioners’ motion for leave

to file motion to vacate decision.