TAX COURT OPINION

Case: Mark Y. Liu & Ginger Y. Bian
Docket Number: 16841-14
Judge: Carluzzo
Opinion Type: bench
Filed: 06/02/2016
Pages: 7

CMS UNITED STATES TAX COURT WASHINGTON, DC 20217 MARK Y. LIU & GINGER Y. BIAN, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) Docket No. 16841-14 ) ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioners and to respondent a copy of the pages of the transcript of the trial in the above case before Special Trial Judge Lewis R. Carluzzo at Houston, Texas, 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 appropriate Order denying petitioners' motion will be issued. (Signed) Lewis R. Carluzzo Special Trial Judge Dated: Washington, D.C. June 2, 2016 SERVED Jun 02 2016 Capital Reporting Company 3 1 2 Bench Opinion by S.T. Judge Lewis R. Carluzzo May 20, 2016 3 Mark Y. Liu & Ginger Y. Bian v. Commissioner 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Docket No. 16841-14 The Court has decided to render oral findings of fact and opinion in this case, and the following represents the Court's oral findings of fact and opinion (bench opinion). Unless otherwise noted, section references made in this bench opinion are to the Internal Revenue Code of 1986, as amended, in effect for the relevant period, and Rule references are to the Tax Court Rules of Practice and Procedure. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. Except as provided in Rule 152(c), this bench opinion shall not be cited as authority. By agreement between the parties, the decision in this case for the redetermination of a deficiency was entered on October 2, 2014. Neither party appealed the decision, and it became final in due course 90 days later. See secs. 7481(a)(1) and 7483. Petitioners now seek to vacate that decision in their motion for leave, filed April 13, 2016 (motion). Respondent's objection to petitioners' 25 motion was filed April 26, 2016. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 By Order dated April 29, 2016, and pursuant to section 7443A(b)(3) and Rule 182, petitioners' 3 motion was assigned to me for disposition. By Order 4 5 dated May 2, 2016, I set petitioners' motion for hearing on May 20, 2016, in Houston, Texas. The 6 motion was heard as scheduled. Mark Y. Liu appeared 7 on his own behalf and argued in support of the 8 motion. Ginger Y. Bian passed away after the 9 decision in this case was entered. Ashley Vaughan 10 11 12 13 14 15 16 17 18 19 Targac and Paul Feinberg appeared on behalf of respondent and opposed it. Derek Matta appeared on his own behalf at the invitation of the Court and made a presentation. On May 17, 2016, just days before the scheduled date for the hearing, the Court received and filed petitioners' motion to postpone the hearing; the appearance of Mark Y. Liu renders that motion moot. In general, the finality of a decision entered by this Court is absolute, and the Tax 20 Court's authority to vacate a final decision is 21 22 23 24 25 limited. See Cinema '84 v. Commissioner, 122 T.C. 264, 270 (2004), aff'd 412 F.3d 366 (2d Cir. 2005). One exception to this general rule involves a decision procured by fraud on the Court; we have jurisdiction to set aside an otherwise final decision for that 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 reason. Id.: see Davenport Recycling Assoc. v. Commissioner, 200 F.3d 1255, 1259 (11th Cir. 2000), 3 aff'g T.C. memo, 1998-347; Taub v. Commissioner, 64 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 T.C. 741, 751 (1975), aff'd without published opinion, 538 F.2d 314 (2d Cir. 1976). According to petitioners, the decision they now seek to vacate was procured by fraud on the Court. In the context of a motion to vacate a final Tax Court decision, fraud on the court is narrowly construed to require "'an unconscionable plan or scheme which is designed to improperly influence the Court in its decision,' preventing the opposing party 'from fully and fairly presenting his case.'" Davenport Recycling Assoc. v. Commissioner, 220 F.3d at 1262 (quoting Abatti v. Commissioner, 859 F.2d 115, 118 (9th Cir. 1971), aff'g 86 T.C. 1319 (1969); cf. Toscano v. Commissioner, 441 F.2d 930, 936-937 (9th Cir. 1971), vacating 52 T.C. 295 (1969). To prove fraud on a court, a party bears the heavy burden of presenting specific facts 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. at 1319, 1325; see Drobney v. Commissioner, 113 F.3d 670, 677-678 (7th Cir. 1997), 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 aff'g T.C. Memo 1995-209; Kenner v. Commissioner, 387 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 F.2d 689, 691 (7th Cir. 1968). According to petitioners, the relationship between Derek Matta, an attorney admitted to practice before the Court who was previously employed as an attorney with the Office of Chief Counsel, and Ashley Targac, who represented respondent in this case, forms the basis for petitioners' claim. Mr. Matta's appearance on petitioners' behalf is not noted in this case, but he was involved, at least early on, due to the unusual manner in which this case was commenced. Petitioners suggest that Mr. Matta somehow or another colluded with Ms. Targac, and the two settled the case, "without petitioners' knowledge or consent." Mr. Matta and Ms. Targac apparently discussed settlement of the case, and Mr. Matta apparently transmitted the results of these discussions to petitioners with recommendations on how to proceed, but Mr. Matta was not involved in the formal settlement of the case. The stipulated 21 Decision that petitioners now seek to vacate, 22 23 24 25 however, is not signed by Mr. Matta on petitioners' behalf, but by petitioners themselves. Petitioner's own statements included in the record show that the settlement that they now 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 complain about was negotiated between them and respondent's counsel. In a document styled "Ratification of Petition," dated September 10, 2014, received from petitioners on September 15, 2014, and filed by the Court on that date as petitioners' 6 motion for entry of decision, petitioners represent: 7 8 9 10 11 "We will not contest the Notice of Deficiency in principle for the taxable year 2011. In our phone conversations on September 9, 2014, respondent's counsel Ashley Targac and we reached a settlement of 50% of the penalties." The decision entered on 12 October 2, 2014, precisely reflects this 13 14 15 "settlement." Furthermore, according to a representation in petitioners' August 30, 2014 letter to the Court, received by the Court and filed as 16 petitioners' second amended petition on September 8, 17 2014, the $24,714 deficiency has been paid. 18 Respondent's counsel confirmed at the hearing that 19 20 21 the deficiency has not been twice assessed and only half of the penalty has been assessed. It now appears that petitioners are unhappy 22 with the terms of the settlement, and they blame Mr. 23 Matta for any recommendations he might have made to 24 25 them regarding its merits. But we fail to see how petitioners can complain about the portion of the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 decision showing their liability for the section 6662(a) penalty in an amount they expressly stated to have agreed to with respondent's counsel, and their dissatisfaction with the settlement is hardly grounds to reopen a closed case. From what has been presented, it cannot be said that the stipulated decision in this case was procured by fraud on the 8 Court. It follows that the Court has no authority to 9 disturb its finality. To reflect the foregoing, an appropriate order denying petitioner's motion will be issued. As a result, all other pending motions not addressed in this bench opinion are moot. This concludes the Court's bench opinion in this matter. (Whereupon, at 11:46 a.m., the above- entitled matter was concluded.) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com