Opinion ID: 686831
Heading Depth: 2
Heading Rank: 1

Heading: Tax Court's Equitable Power

Text: 7 This appeal largely stands or falls on the answer to the question of whether or not the Tax Court can equitably reform a consent-to-extend agreement to toll the running of the statutory limitations period. For the reasons which follow, we answer this question in the affirmative. 8 It is undisputed that, as an Article I court designed to handle cases of a specialized nature, The Tax Court is a court of limited jurisdiction and lacks general equitable powers. C.I.R. v. McCoy, 484 U.S. 3, 7, 108 S.Ct. 217, 219, 98 L.Ed.2d 2 (1987) (per curiam); accord C.I.R. v. Gooch Milling & Elevator Co., 320 U.S. 418, 421, 64 S.Ct. 184, 186, 88 L.Ed. 139 (1943). However, the Tax Court has always understood this proposition to mean that, while it cannot act, equitably or otherwise, in a case over which it lacks or has lost jurisdiction, see Woods v. C.I.R., 92 T.C. 776, 785-87, 1989 WL 32907 (1989), the Tax Court can act equitably in a case in which it has jurisdiction. See id. at 784 and cases collected at nn. 3-9. 9 Numerous decisions from this Circuit have touched on the issue of the Tax Court's equitable power and/or jurisdiction. See e.g. Billingsley v. C.I.R., 868 F.2d 1081, 1084 (9th Cir.1989); Abatti v. C.I.R., 859 F.2d 115, 117, 118 (9th Cir.1988); Russell v. C.I.R., 678 F.2d 782, 784 (9th Cir.1982); First Sec. Bank of Idaho, N.A. v. C.I.R., 592 F.2d 1046, 1048 (9th Cir.1979); Feistman v. C.I.R., 587 F.2d 941, 943 (9th Cir.1978); Morse v. United States, 494 F.2d 876, 879 (9th Cir.1974); Flood v. C.I.R., 468 F.2d 904, 904-905 (9th Cir.1972), cert. denied, 411 U.S. 906, 93 S.Ct. 1529, 36 L.Ed.2d 195 (1973); Toscano v. C.I.R., 441 F.2d 930, 933 (9th Cir.1971); Lasky v. C.I.R., 235 F.2d 97, 100 (9th Cir.1956), aff'd by mem., 352 U.S. 1027, 77 S.Ct. 594, 1 L.Ed.2d 598 (1957). The gist of these decisions may be summarized as holding, in part at least, that the Tax Court is a court of strictly limited jurisdiction and cannot assert equitable powers in any way that could be construed as extending its jurisdiction. 5 10 While none of the above cases dealt with the precise question raised by the instant appeals, viz., whether and to what extent the Tax Court may act equitably in a matter over which it has jurisdiction, decisions from other Circuits provide helpful guidance. Indeed, the clear weight of authority from other jurisdictions holds that, except in the rare instance when a decision of the Tax Court was obtained either by way of a fraud on the court or through mutual mistake of the parties, the Tax Court has no equitable jurisdiction to act on a matter that is not the subject of a case properly before it (e.g., as the result of an untimely filing of a petition for redetermination of tax assessment, or when the time for filing a notice of appeal has passed after final judgment has been rendered, etc.), but it does have a limited equitable power to act in a case that is properly before it. 11 A good example of this distinction between equitable jurisdiction and equitable power appears in the recent decision of Buchine v. C.I.R., 20 F.3d 173 (5th Cir.1994). In that case the Court of Appeals for the Fifth Circuit confronted a case involving a factual situation nearly on all fours with the instant appeal. Citing the Supreme Court's decisions in McCoy and Gooch Milling, supra, as well as the Tax Court's holding in Woods, supra, the Fifth Circuit upheld the Tax Court's equitable reformation of the parties' IRS Form 872-A to reflect a date different from that argued by the taxpayers. 12 This court has acknowledged the distinction, espoused by the Tax Court, between exercising general equitable powers to take jurisdiction over a matter not provided for by statute and applying equitable principles. In Continental Equities, Inc. v. C.I.R., 551 F.2d 74 (5th Cir.1977), the question presented was whether the Tax Court could exercise general equitable powers to assume jurisdiction to review the Commissioner's denial of a refund claim, and order that a refund be given. This court held that the Tax Court, being a court of limited jurisdiction, did not have equitable power to expand its jurisdiction to adjudicate a tax refund claim. Id. at 79. However, in Mayfair Minerals, Inc. v. C.I.R., 456 F.2d 622 (5th Cir.1972), this court held that the Tax Court properly concluded that when the Commissioner allowed the statute of limitations to run on adjustments of income because of the taxpayer's misleading returns, the equitable principle of estoppel prohibited the taxpayer from denying that the deductions were properly taken. Id. at 623. 13 At the core of the Buchines' case, as in Woods, is the Tax Court's determination of whether a tax deficiency exists. This determination falls clearly within the ambit of the Tax Court's jurisdiction. The Tax Court in this case simply applied the equitable principle of reformation to a case over which it had jurisdiction. 14 Therefore, we find that the Tax Court appropriately reformed the consent form and that it did not improperly expand its limited jurisdiction by doing so. 15 20 F.3d at 177-78 (emphasis added). Accord Bokum v. C.I.R., 992 F.2d 1136, 1140 (11th Cir.1993) (citing decisions from the Second, Fifth, Sixth, Eighth, Ninth, 6 and Eleventh Circuits); see also C.I.R. v. Penn Athletic Club Bldg., 176 F.2d 939, 943-44 (3d Cir.1949) (so long as a particular case is properly before it, the Tax Court may exercise its equitable power to look beyond the form of a given transaction to its economic substance). 16 In light of the above, we uphold the Tax Court's conclusion that it had the equitable power to reform the two IRS Forms 872-A that were the subject of the deficiency determination before it, because that determination did not have the effect of unlawfully expanding the Tax Court's strictly limited and statutorily defined subject matter jurisdiction.