TAX COURT OPINION

Case: Arthur W. Wadsworth & Jeanne R. McCulloch
Docket Number: 20038-14
Judge: Gustafson
Opinion Type: bench
Filed: 10/15/2015
Pages: 6

RS UNITED STATES TAX COURT WASHINGTON, DC 20217 ARTHUR W. WADSWORTH & JEANNE R. MCCULLOCH, Petitioners, v. ) ) ) ) ) Docket No. 20038-14. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ORDER Pursuant to the opinion of the Court as set forth in the transcript of the proceedings at New York City, on September 29, 2015, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Gustafson at New York City, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, an order will be issued, continuing the case so it can be scheduled for trial at a future session of the Court. Dated: Washington, D.C. October 15, 2015 (Signed) David Gustafson Judge SERVED Oct 16 2015 Capital Reporting Company 3 1 2 Bench Opinion by Judge David Gustafson September 29, 2015 3 Arthur W. Wadsworth and Jeanne R. McCulloch v. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Commissioner Docket No. 20038-14 The Court has decided to render the following as its oral Findings of Fact and Opinion in this case. This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code, and Tax Court Rule 152; and it shall not be relied on as precedent in any other case. By a notice of deficiency dated June 9, 2014 (Stip.16), the Internal Revenue Service (IRS) determined deficiencies in the Federal income tax of petitioners Arthur W. Wadsworth and Jeanne R. McCulloch for the years 2007-2010, plus penalties. The principal issue in dispute is petitioners' entitlement to a deduction for the charitable contribution of an easement. However, petitioners allege that in the month before trial, the parties settled the case. Respondent denies that they settled. We ordered a hearing on the issue of the presence or absence of a settlement. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 The hearing took place in New York City on September 28, 2015. Petitioners were represented by Steven P. 3 Caley, Robert Crotty, and Christina M. Mason; and 4 respondent was represented by Gennady Zilberman and 5 Marissa Savit. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 FINDINGS OF FACT At the time they filed their petition, petitioners resided in New York. (Stip. 1.) on April 28, 2015, the Court served notice on the parties that this case would be tried at the Court's session in New York City beginning September 28, 2015. Under Rule 143(g)(2), expert witness reports in this case were therefore due to be submitted to the Court and served to opposing parties on August 28, 2015. On August 17, 2015, Ms. Savit sent petitioners' counsel an email that made a settlement offer and ended: ". . . should I receive my expert' s appraisal before we reach a settlement, then any settlement 20 will be based on our before value. Please let me know 21 22 23 24 25 if my offer is acceptable." (Stip. 38-39; Ex. 10-J) . Ms. Savit received the expert's report on August 27, 2015. By that time, petitioners had not accepted the August 17 settlement offer. On August 28, 2015, Ms. Savit mailed her expert's report to petitioners' 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 counsel and the Court. Petitioners' counsel's firm received the report August 31, 2015. (Stip. 46.) On September 2, 2015, petitioners' counsel telephoned Ms. Savit and stated that petitioners accepted the IRS's August 17 offer. (Stip. 48.) Ms. Savit replied that the offer had already expired (Stip. 49), prompting the current dispute. On September 14, 2015, after a telephone conference with the parties, the Court ordered that a hearing would be held as to the existence of a settlement. On September 25, 2015, the parties filed a stipulation of facts, and the hearing.took place as scheduled. OPINION "A settlement is a contract, and, consequently, general principles of contract law determine whether a settlement has been reached." Dorchester Indus., Inc. v. Commissioner, 108 T.C. 320, 330 (1997). It is hornbook law that, in order for a contract to exist, there must be offer and acceptance. Here, there was an offer, but it included a term that the offer must be accepted before a certain time (i.e., before respondent's counsel received her expert's report). Petitioners have stipulated that they did not accept the offer until after respondent's counsel 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 had received the report (i.e., 5 days after). Thus, respondent is correct that its August 17 offer had expired on August 27 before petitioners' counsel purported to accept it on September 2. This issue might be harder to resolve if the time limitation had been arbitrary (but it was not), or if petitioners' counsel had tried to accept the offer before they knew that the report had been received (but they did know), or if the time allowed for consideration had been impossibly brief (but it turned out to be 11 days). But likely even those considerations would make no difference in the contract law analysis. And in any event, the time limitation was comprehensible (even if not immediately knowable) and was tied to a milestone in the case that could well affect the strength of a party's case (and its interest in settling). The offer expired before it was acepted, and there is therefore no settlement. To reflect the foregoing, an appropriate order 21 will be entered, continuing the case so it can be 22 23 scheduled for trial at a future session of the Court. This concludes the Court's oral Findings of Fact and 24 Opinion in this case. 25 (Whereupon, at 9:06 a.m., the above- 866.488.DEPO www.CapitalReportingCompany.com 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Capital Reporting Company entitled matter was concluded.) 7 866.488.DEPO www.CapitalReportingCompany.com