Court Opinion

ID: 4333207
Source: CourtListenerOpinion
Date Created: 2018-11-14 01:05:34.473923+00
Date Added: 2024-06-11T14:19:40.670830
License: Public Domain

CHIH H. AND CHU F. CHU, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, RespondentCHIH H. v. COMMISSIONERNo. 24861-97United States Tax CourtT.C. Memo 2001-84; 2001 Tax Ct. Memo LEXIS 109; 81 T.C.M. 1492; April 9, 2001, Filed 2001 Tax Ct. Memo LEXIS 109">*109  An order will be issued denying petitioners' motion for leave to file motion to vacate decision.  Chih H. and Chu F. Chu, pro sese.David R. Jojola, for respondent.  Chiechi, Carolyn P.CHIECHIMEMORANDUM OPINIONCHIECHI, 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 petitioners' motion.BACKGROUNDOn 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):    2001 Tax Ct. Memo LEXIS 109">*110                   Fraud Penalty  Year       Deficiency       Under Sec. 6663(a)  ____       __________       __________________  1991       $ 18,508          $ 13,881  1992        40,931           30,698  1993        70,662           52,997On 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 stipulated decision document2001 Tax Ct. Memo LEXIS 109">*111  (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 document 2 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 accuracy-related penalties under section 6662(a) on, petitioners' tax, as follows:             Fraud Penalty    Accuracy-Related PenaltyYear   Deficiency    Under Sec. 6663(a)    Under Sec. 6662(a)____   __________ 2001 Tax Ct. Memo LEXIS 109">*112     _________________   ________________________1991    $ 2,973        None          $ 5951992     6,008        None          1,2021993    20,379        None          4,076DISCUSSIONThe 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).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">859 F.2d 115, 859 F.2d 115">118 (9th Cir. 1988), affg.  86 T.C. 1319">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 or2001 Tax Ct. Memo LEXIS 109">*113  the party, see Billingsley v. Commissioner, 868 F.2d 1081">868 F.2d 1081, 868 F.2d 1081">1084-1085 (9th Cir. 1989); Abeles v. Commissioner, 90 T.C. 103">90 T.C. 103, 90 T.C. 103">105-106 (1988). 3The Court of Appeals for the Ninth Circuit has defined the phrase "fraud2001 Tax Ct. Memo LEXIS 109">*114  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">441 F.2d 930, 441 F.2d 930">934 (9th Cir. 1971)(quoting England v. Doyle, 281 F.2d 304">281 F.2d 304, 281 F.2d 304">309 (9th Cir. 1960)), vacating 52 T.C. 295">52 T.C. 295 (1969); see 859 F.2d 115">Abatti v. Commissioner, 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">86 T.C. 1319, 86 T.C. 1319">1325 (1986), affd.  859 F.2d 115">859 F.2d 115 (9th Cir. 1988); see Drobny v. Commissioner, 113 F.3d 670">113 F.3d 670, 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 the2001 Tax Ct. Memo LEXIS 109">*115  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 104   6) The motion to withdraw the counsel of petitioners was ordered    from the court because Robert with CPA background charging    $ 20   7) From the IRS booklets; When all2001 Tax Ct. Memo LEXIS 109">*116  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    no2001 Tax Ct. Memo LEXIS 109">*117  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 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    helped2001 Tax Ct. Memo LEXIS 109">*118  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; A2001 Tax Ct. Memo LEXIS 109">*119      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 transaction statement.    Actually, respondent spent only two hours to put the numbers2001 Tax Ct. Memo LEXIS 109">*120      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    the2001 Tax Ct. Memo LEXIS 109">*121  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 non-professionals by treating the taxpayer    unfairly, differently or not just. As people say that2001 Tax Ct. Memo LEXIS 109">*122  non-    professionals might use tangible weapons to rob the bank to    get money illegally; But, professionals can use intangible    way (their knowledge to 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 lots2001 Tax Ct. Memo LEXIS 109">*123  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) 2001 Tax Ct. Memo LEXIS 109">*124  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 $ 20    (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; Do2001 Tax Ct. Memo LEXIS 109">*125  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,    respondent2001 Tax Ct. Memo LEXIS 109">*126  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 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 shown2001 Tax Ct. Memo LEXIS 109">*127  in the stipulated decision document 4 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 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 under2001 Tax Ct. Memo LEXIS 109">*128  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.  Footnotes1. All 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.↩2. On 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.↩3. The 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">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">859 F.2d 115, 859 F.2d 115">118 (9th Cir. 1988), affg.  86 T.C. 1319">86 T.C. 1319 (1986); Lasky v. Commissioner, 235 F.2d 97">235 F.2d 97, 235 F.2d 97">99-100 (9th Cir. 1956), affd. per curiam 352 U.S. 1027">352 U.S. 1027↩ (1957).4. It is noteworthy that the stipulated decision document reflects a substantial concession by respondent regarding the determinations in the notice.↩5. Contrary 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.↩