Court Opinion

ID: 4337353
Source: CourtListenerOpinion
Date Created: 2018-11-14 03:19:00.018064+00
Date Added: 2024-06-11T14:48:11.944257
License: Public Domain

131 T.C. No. 15

                UNITED STATES TAX COURT

LARRY G. AND MARIA A. WALTON MITCHELL, Petitioners v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 2518-04.                Filed December 15, 2008.

     P-W received distributions during 2001 made pursuant to
a QDRO after her ex-husband retired from the U.S. Air Force.
Ps did not include the 2001 distribution in income when they
filed their joint 2001 Federal tax return. R issued a
notice of deficiency in which he determined that Ps were
liable for income tax on the distribution.

     Held: Distributions received by P-W are income to P-W
and are includable in petitioners’ taxable income.

Larry G. and Maria A. Walton Mitchell, pro se.

Michael R. Skutley, for respondent.
                                 - 2 -

                              OPINION

     GOEKE, Judge:1   Respondent determined a deficiency of $1,471

in petitioners’ Federal tax for 2001.    The issue for decision is

whether $5,126 received by petitioner Maria A. Walton Mitchell

(petitioner) for her interest in her former husband’s military

retired pay is includable in her    gross income.   For the reasons

stated herein, we hold that it is.

                            Background

     The following facts are stipulated or are not disputed by

the parties.   The parties’ stipulation of facts and the

accompanying exhibits are incorporated herein by this reference.

     Petitioners resided in California at the time that the

petition was filed.

     Before her marriage to Larry G. Mitchell, petitioner was

married to Bobbie Leon Walton.    At the time of their marriage,

Mr. Walton was on active duty in the U.S. Air Force (USAF).    Mr.

Walton and petitioner separated in 1985.    Pursuant to a final

judgment entered by the Superior Court of the State of California

(superior court) their divorce became final on August 29, 1986.

On August 1, 1990, Mr. Walton retired from the USAF after 26

years on active duty and began receiving military retired pay.

Petitioner subsequently petitioned the superior court with

     1
      This case was reassigned to Judge Joseph R. Goeke by order
of the Chief Judge.
                              - 3 -

respect to her interest in Mr. Walton’s military retired pay.    On

January 2, 1991, the superior court entered an order (order)

which stated in pertinent part:

          2. Servicemember [Mr. Walton] retired from the United
     States Air Force on August 1, 1990, with fully vested
     retirement rights and benefits, a portion of which are
     community property of Servicemember and of Servicemember’s
     former spouse,

               *    *    *    *       *   *   *

          4. * * * [Petitioner] is now entitled to an order
     dividing the military retirement to the extent same was
     earned by Servicemember during the marriage to * * * [her].

               *    *    *    *       *   *   *

          8. * * * [Petitioner] shall be awarded as her sole and
     separate property, one-half (1/2) of the community property
     interest in Servicemember’s net disposable military
     retirement pay as set forth in the California case of
     Mansell v. Mansell decided by the U.S. Supreme Court on May
     30, 1989, wherein the net disposable military retirement pay
     is defined as the net after deducting (a) amounts owned
     [sic] by the military member to the United States; (b)
     required by law to be deducted from total pay, including
     employment taxes, and fines and forfeitures ordered by
     courts-martial; (c) properly deducted from Federal, State
     and [sic] income taxes; (d) withheld pursuant to other
     provisions under the Internal Revenue Code; (e) deducted to
     pay government life insurance premiums; and (f) deducted to
     create an annuity for the former spouse (10 U.S.C. #1408
     (a)-(4)-(A)-(F)).

          9. The community property interest in the
     Servicemember’s net disposable retirement pay is determined
     to be 48.7%.

          10. * * * [Petitioner’s] interest in Servicemember’s
     net disposable retirement pay is determined to be 24.35%.
                               - 4 -

     Attached to the order was a factsheet titled “DIRECT

PAYMENTS FROM U.S. AIR FORCE RETIRED PAY PURSUANT TO THE

UNIFORMED SERVICES FORMER SPOUSES’ PROTECTION ACT” (factsheet).

The factsheet stated in pertinent part:

          j. Taxes may be held only from the Air Force retiree’s
     pay. Funds may not be held for taxes from the ex-spouses
     portion. For further information, we refer you to the
     nearest Internal Revenue Service office.

     Sometime in 1991 petitioner began receiving monthly payments

from the Defense Finance and Accounting Service (DFAS) for her

interest in Mr. Walton’s military retired pay pursuant to the

order.   For the taxable year 2001 she received payments from DFAS

in the aggregate amount of $5,126.     DFAS issued to petitioner a

Form 1099-R, Distributions From Pensions, Annuities, Retirement

or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., for the

taxable year 2001 which reported both the gross distribution and

the taxable amount as $5,126 and the amount of Federal income tax

withheld as zero.

     Petitioners timely filed a joint Form 1040, U.S. Individual

Income Tax Return, for 2001 but did not report the $5,126

distribution that petitioner received from DFAS.    On November 10,

2003, respondent issued to petitioners a notice of deficiency for

the taxable year 2001.   In the notice respondent determined that

petitioners failed to report the $5,126 in their gross income.

     On February 9, 2004, petitioners filed an imperfect

petition.   On March 26, 2004, petitioners filed an amended
                                - 5 -

petition alleging that taxes were to be taken into account before

petitioner was issued her share of Mr. Walton’s retirement

benefits and that if petitioner’s share were taxed, it would be

subject to double taxation.

     A trial was held on June 24, 2005, in Los Angeles,

California.

                              Discussion

     Petitioners argue that taxes should have been withheld on

the entire amount of the pension payments disbursed to Mr. Walton

before petitioner was paid her share.      Petitioners maintain   that

if petitioner is required to pay Federal income tax on her share,

then Mr. Walton’s pension is being subject to double taxation,

both on disbursement to Mr. Walton and again when petitioner

receives her share.   Respondent argues that tax was withheld only

on Mr. Walton’s share of the military pay, not on petitioner’s

share.2

     Petitioner’s interest in the military retired pay was

determined according to the laws of the State of California.      In

the State of California, community property principles apply in

     2
      On Nov. 23, 2004, this Court issued an opinion in Mitchell
v. Commissioner, T.C. Summary Opinion 2004-160. That dealt with
a substantially similar issue for petitioners’ 2000 tax year.
Respondent also raised collateral estoppel several weeks before
trial, relying on that case. Because this case was tried and
presents a legal issue on the basis of largely uncontested facts,
we decide the case on the merits and do not reach respondent’s
collateral estoppel argument.
                                - 6 -

divorce proceedings.    Consistent with these principles, each

spouse is considered to have a one-half ownership interest in all

property earned by either spouse during the marriage.    See Cal.

Fam. Code sec. 2550 (West 2004).    In McCarty v. McCarty, 453 U.S.

210 (1981), the Supreme Court held that the Federal statutes then

governing military retirement pay prevented State courts from

treating military retirement pay as community property.    In

response to McCarty, Congress enacted in 1982 the Department of

Defense Authorization Act, 1983, Pub. L. 97-252, sec. 1002, 96

Stat. 730 (1982), which added section 1408 to title 10 of the

United States Code.    Under 10 U.S.C. sec. 1408(c)(1) (2006), a

State court may treat disposable military retired pay in a

divorce proceeding either as property solely of the servicemember

or as property of the military retiree and his or her spouse in

accordance with the law of the jurisdiction of the court.    If a

divorce was effective before February 3, 1991, only the

disposable retired pay, which is the total monthly retired pay to

which a member is entitled less, inter alia, amounts properly

withheld for Federal, State, or local income taxes, may be

treated as the property of the member and his spouse.    10 U.S.C.

sec. 1408(a)(4) (1988); National Defense Authorization Act for

Fiscal Year 1991 (NDAA), Pub. L. 101-510, sec. 555(b)(3), (e)(2),

104 Stat. 1569, 1570 (1990).
                                - 7 -

     Under California law post-McCarty, military retirement

benefits earned during marriage are community property.     Casas v.

Thompson, 720 P.2d 921, 925 (Cal. 1986); see Gillmore v.

Gillmore, 629 P.2d 1, 3 (Cal. 1981).

     While State law determines the nature of a property

interest, Federal law determines the Federal taxation of that

property interest.    United States v. Mitchell, 403 U.S. 190

(1971).    Furthermore, the tax liability for income from property

attaches to the owner of the property.    Eatinger v. Commissioner,

T.C. Memo. 1990-310 (citing Helvering v. Clifford, 309 U.S. 331,

334 (1940), Blair v. Commissioner, 300 U.S. 5, 12 (1937), Poe v.

Seaborn, 282 U.S. 101 (1930), and Lucas v. Earl, 281 U.S. 111

(1930)).

     As a general rule, the Internal Revenue Code imposes a tax

on the taxable income of every individual.   See Sec. 1.    For

purposes of calculating taxable income, section 61(a) defines

gross income as “all income from whatever source derived” unless

otherwise specifically excluded.   Gross income specifically

includes amounts derived from pensions.   Sec. 61(a)(11).

Military retired pay constitutes a pension within the meaning of

that section.   See Eatinger v. Commissioner, supra (“A military

retirement pension, like other pensions, is simply a right to

receive a future income stream from the retiree’s employer.”);

sec. 1.61-2(a)(1), Income Tax Regs.; sec. 1.61-11(a), Income Tax
                               - 8 -

Regs. (“Pensions and retirement allowances paid either by the

Government or by private persons constitute gross income unless

excluded by law.”); see also 10 U.S.C. 1461(a) (2006) (defining

the Department of Defense Military Retirement Fund).

      Under section 402(a) a pension distribution is normally

taxed to the distributee.   Pursuant to section 402(e)(1)(A), the

spouse or former spouse is treated as the distributee with

respect to distributions allocated to that spouse pursuant to a

qualified domestic relations order (QDRO), and such distributions

therefore become taxable income to that spouse.    The spouse

receiving the distribution pursuant to the QDRO is also known as

an “alternate payee”.   Secs. 402(e)(1)(A), 414(p)(8).

      A domestic relations order (DRO) qualifies as a QDRO only if

it:   (1) Creates or recognizes the existence of an alternate

payee’s right to, or assigns to an alternate payee the right to,

receive all or a portion of the benefits payable with respect to

a participant under a plan; (2) clearly specifies facts required

by section 414(p)(2); and (3) does not alter the amount or form

of the plan benefits.   Sec. 414(p)(1)-(3).    In addition, the DRO

must be presented to the plan administrator, who must determine

whether it is a QDRO.   Sec. 414(p)(6).   Finally, under section

402(e)(1)(A) an alternate payee is treated as the distributee of

a distribution from a qualifying plan only if the distribution is

made to the alternate payee under a QDRO.     The parties do not
                               - 9 -

dispute that the order constitutes a QDRO, and we agree that the

order satisfies the requirements of section 414(p).

     Nonetheless, even if the superior court order had not

constituted a QDRO under section 414(p), petitioner’s interest in

the military retired pay would be taxable income to her on the

basis of community property law.    See Powell v. Commissioner, 101

T.C. 489, 498 (1993); Eatinger v. Commissioner, supra.

     Petitioners do not dispute that the superior court awarded

petitioner a community property interest in Mr. Walton’s military

retired pay and that she received $5,126 pursuant to the QDRO.

Instead, petitioners argue that the payments petitioner received

for her interest in Mr. Walton’s military retired pay are not

subject to income tax because the QDRO specified that all taxes

should have been withheld from the military retirement pay before

it was divided and distributed.    Petitioner draws support for

this argument from a paragraph in the factsheet attached to the

QDRO which stated in pertinent part:

          i. The amount payable to a spouse or former spouse
     under this law is limited to 50 percent of the disposable
     retired pay. Please see 10 U.S.C. sec. 1408(a)(2)(C) and
     (e)(1). [Emphasis added.]

The QDRO defined “net disposable military retirement pay” as “the

net after deducting * * * properly deducted Federal, State and

[sic] income taxes”.   This definition is consistent with the

plain language of 10 U.S.C. sec. 1408(a)(4)(C) (1988), as it was
                               - 10 -

in effect when the superior court entered both the final judgment

and the QDRO.

     Congress recognized that subtracting tax withholdings from

the computation of disposable retired pay created unfairness to

the service member’s spouse.   H. Rept. 101-665, at 279-280

(1990).   Accordingly, Congress amended the definition of

“disposable retired pay” such that the disposable retired pay is

not reduced by income taxes withheld.   10 U.S.C. sec. 1408(a)(4)

(Supp. III 1991); NDAA sec. 555(b)(3), (e)(2).    This amendment,

however, is effective only for divorces entered into on or after

February 3, 1991, which is after both petitioner’s final judgment

and the QDRO and is therefore not applicable in the instant case.

See 10 U.S.C. sec. 1408(a)(4) (Supp. III 1991); NDAA sec.

555(b)(3), (e)(2).

      The calculation of disposable retired pay, however, does

not mean that petitioner’s allotment is not taxable, nor does it

mean that petitioner’s allotment is exempt from tax because tax

was already withheld on Mr. Walton’s allotment.    Title 10 U.S.C.

sec. 1408(a)(4) (2006) merely defines petitioner’s property

rights in the military retired pay, not the tax consequences of

her receipt of the benefit.    Because the State of California is a

community property State, petitioner is treated as having earned

the distributions she is currently receiving.    Accordingly,
                                - 11 -

petitioner is liable for tax on those distributions, regardless

of the terms of the QDRO.

     Petitioner essentially argues that her disbursement is being

subjected to double taxation.    Petitioner, however, did not

produce any evidence, and the record is void of any evidence,

that double taxation occurred.    Petitioner did not provide any

evidence about the amount of the pension which was included in

Mr. Walton’s taxable income.    Moreover, there is nothing in the

QDRO stating that petitioner’s interest in Mr. Walton’s military

retired pay is not taxable or has already been subject to tax.

As indicated above, the factsheet provides in pertinent part that

“Taxes may be held only from the Air Force retiree’s pay.     Funds

may not be held for taxes from the ex-spouses [sic] portion.”

This supports respondent’s argument that taxes were not withheld

on petitioner’s portion of the military retired pay.

     On the basis of the law as it was in effect on the date of

petitioner’s final judgment and the date of the QDRO,

petitioner’s interest is calculated on Mr. Walton’s military

retired pay less income tax withheld.    Petitioner provided no

evidence that income taxes were withheld from her portion of the

military retired pay.    As explained earlier, petitioner’s

interest is taxable.    Accordingly, we conclude that the $5,126

petitioner received in 2001 for her interest in Mr. Walton’s

military retired pay is includable in petitioners’ gross income.
                              - 12 -

     To reflect the foregoing,

                                        Decision will be entered

                                   for respondent.

     Reviewed by the Court.

     COLVIN, COHEN, WELLS, FOLEY, VASQUEZ, GALE, THORNTON,
MARVEL, HAINES, WHERRY, KROUPA, GUSTAFSON, and PARIS, JJ., agree
with this majority opinion.

     MORRISON, J., did not participate in the consideration of
this opinion.
                                -13-

     HOLMES, J., concurring:    Dear Reader--if you have made it

this far, you may reasonably ask “Where’s the beef?”      Why did the

Tax Court assemble in conference to decide unanimously that

payments under a divorce agreement were taxable income to Maria

Mitchell--a question already resolved on a nearly identical

record for the immediately preceding tax year?

     Tucked away in footnote 2 is the answer:    A solid majority

of the Court does not wish to address the question of whether our

decision in a small tax case collaterally estops future

litigation of the same issue between the same parties in a later-

filed regular tax case.    Our opinion today technically avoids the

issue, but in doing so throws into question at least three

summary opinions,1 two of our Rules,2 and one memorandum opinion3

where we have given or said we would give S-case decisions

collateral-estoppel effect.    It should, I think, be construed by

those who read and rely on our opinions as standing for the

proposition that half our Court’s caseload--cases leading to

     1
       See Voss v. Commissioner, T.C. Summ. Op. 1978-288 at 6
(collateral estoppel “in no way conflicts with the ‘no precedent’
provisions of section 7463(b)”); Wilkerson v. Commissioner, T.C.
Summ. Op. 2004-99 at 6 n.7 (section 7463(b) doesn’t “necessarily
preclude application of the doctrines of res judicata and
collateral estoppel”); Gilmore v. Commissioner, T.C. Summ. Op.
2005-38 at 1 n.1 (applying collateral estoppel despite section
7463(b)).
     2
         Rules 50(g),152(c).
     3
         Ginalski v. Commissioner, T.C. Memo. 2004-104.
                              -14-

decisions in S cases--are like a “restricted railroad ticket,

good for this day and train only.”4    All agree that the Code

makes S-case decisions nonprecedential, but today’s opinion may

suggest more radically that they are without effect on future

litigation at all.

     I write separately to explain the issue that we are avoiding

today, and how I think it should have been resolved.5

                               I.

     The facts in this case were largely undisputed and, as the

trial judge who heard the case, I do not disagree with the

majority’s recitation of them here.    But the case doesn’t really

begin with Mitchell’s 2001 taxes.     Mitchell began receiving the

pension payments due under the QDRO in 1991.    She consistently

reported none of them on her tax returns until 2002, when the IRS

sent her a notice of deficiency challenging her failure to report

the payments on her 2000 tax return.

    Mitchell began a case in our Court, and chose for it to be a

small tax case (S case) under section 7463.    One of our Court’s

special trial judges heard Mitchell’s S case and, as the

majority’s footnote 2 mentions, we issued the opinion as Mitchell

     4
       Smith v. Allwright, 321 U.S. 649, 669 (1944) (Roberts, J.
dissenting).
     5
       See Ballard v. Commissioner, 544 U.S. 40, 63 (2005) (“To
the extent that the individual judge disagrees with his
colleagues, he is free to file a dissenting opinion repeating or
borrowing from his initial decision.”).
                               -15-

v. Commissioner, T.C. Summ. Op. 2004-160 (Mitchell I).    In

language strikingly similar to that used by the majority today,

we held that the QDRO didn’t actually say that Mitchell’s portion

of Walton’s retirement pay was nontaxable, only that her share of

it was to be computed after Walton’s own taxes on the full amount

were withheld.   Finding nothing in the Code that would have

excluded the payments from Mitchell’s gross income, we concluded

then as now that Mitchell had to pay tax on them.

     When Mitchell filed her 2001 joint income tax return with

her second husband (which, I want to note, she filed well before

we issued Mitchell I), she again did not include the pension

payments that she had received under the QDRO.   After receiving

another notice of deficiency, she again filed a petition with

this Court.   This time, she specifically designated her case a

“regular” one under section 7453, subject to the full set of

rules, procedures, and appeal rights as all other regular cases.

     Once the decision in Mitchell I became final, the

Commissioner amended his answer in this case and asserted

collateral estoppel as an affirmative defense.   This squarely

placed at issue a question left open more than a quarter century

ago by Sherwood v. Commissioner, T.C. Memo. 1979-149:    Does our

Court’s decision in an S case collaterally estop the losing party

in later litigation?    A bit of research showed that we had

addressed the issue before in summary opinions, and at least
                                  -16-

obliquely in one memorandum opinion.         And we seemed to have

answered the question by rule when it came to S cases decided by

bench opinions or dispositive orders.         It seemed reasonable to

view this second Mitchell case as a good opportunity to provide

citable precedent on the collateral-estoppel effect of S cases

decided by summary opinion.   We asked both parties to brief the

issue, and gave the Commissioner’s counsel enough time to seek

review from the IRS National Office to make certain that the

views he presented reflected the IRS’s considered opinion.

     The transcript of the trial consists of 30 pages, only 11 of

which show testimony or the receipt of evidence.        The only really

important question was the first one:

     The Court: Now, are there any differences between this
     tax year, which is for 2001, and the tax year that [the
     special trial judge] wrote about?

                    *   *     *    *     *     *   *

     Mr. Mitchell: The only thing I think that may have changed
     is there may be a little slight difference in the amount
     that she received. But I don’t think so.

                                  II.

                                   A.

     I begin by outlining the key characteristics of S cases.

One of the most important is that S status is voluntary.        When

Mitchell filed her first petition in our Court, she used a form

we had specifically designed for small cases, but with a box that
                                    -17-

she had only to check to choose regular-case status.6        Either

party may also ask that we remove this designation any time

before trial.       Rule 171(c).7   But if the case remains an S case

all the way to a final decision, neither party is allowed to

appeal it to a United States Court of Appeals as he could if it

were a decision in a regular case.         Sec. 7481(b).

     Congress considered this point carefully before giving

taxpayers the option of choosing S-status for their cases.        The

S designation has benefits for taxpayers who choose it--they get

relaxed rules of evidence and procedure, a longer list of cities

from which to choose a place of trial, and usually a speedier

decision.       See S. Rept. 91-552, at 302-304 (1969), 1969-3 C.B.

423, 614-15.       And each of these features makes access to the

court system easier and less costly for taxpayers with small

claims, a category into which most Tax Court cases currently

fall.       But increasing access to Tax Court for these taxpayers

increases the likelihood that sometimes unforeseen but

        6
       We recently adopted a new form that requires a taxpayer to
choose between small-case and regular-case procedures. If he
doesn’t, the default rule is to designate his case a regular one.
Tax Court Form 2 (March 2008).
        7
       We also must remove the S designation after trial begins
but before the decision becomes final if the case no longer meets
the jurisdictional requirements. Sec. 7463(d). And Rule 173(b)
now requires the Commissioner to file an answer in S cases, which
also increases the probability that we will notice small cases
raising novel legal issues and move them to a regular-case track
under section 7463(d).
                                   -18-

complicated questions of tax law might be decided incorrectly,

especially when the volume of cases increases and they are not

often tried on both sides by professionals.      By enacting section

7463, Congress chose to balance these competing effects on

accuracy and cost by allowing easier access for taxpayers and

eliminating the right of appeal--making the stakes lower for the

IRS by eliminating any precedential effect an S case might

otherwise have.    See id. at 303, 1969-3 C.B. at 615.

     But any increase in the probability of error is reduced by

our Rules.    Apart from the elimination of the right of appeal and

precedential effect, we decide S cases very much like regular

cases.    In an S case, just as in a regular case, the judge has to

prepare an oral or written “summary of the facts and reasons for

the proposed disposition of the case.”       Rules 182(a), 152.   A

summary opinion like the one in Mitchell I is submitted to the

chief judge (or his designee) for review before decision is

entered.    Rule 182 (a).     This review gives time for the chief

judge to direct that “such report shall be reviewed by the Tax

Court.”    Section 7460(b).    If so, the opinion would be considered

and voted on by all the Court’s presidentially appointed judges

in active service.    And whether the opinion in an S case is

written or oral, the decision in the case becomes final 90 days

after it is entered.    Section 7481(b).    During this time, either
                                 -19-

party may file a motion to vacate or a motion to revise the

decision.   Rule 162.

                                  B.

     Issue preclusion or collateral estoppel is a doctrine with

deep roots in our legal system.    The doctrine is easy to state:

“when an issue of fact or law is actually litigated and

determined by a valid and final judgment, and the determination

is essential to the judgment, the determination is conclusive in

a subsequent action between the parties, whether on the same or

different claim.”   1 Restatement, Judgments 2d, sec. 27 (1982).

It stems from the understandable policy that a dispute once

resolved should stay resolved.    It promotes judicial economy and,

if justice consists in part of reaching the same result in

similar cases, it is also an instrument of justice.   In Peck v.

Commissioner, 90 T.C. 162, 166-67 (1988), affd. 904 F.2d 525 (9th

Cir. 1990), we listed the requirements for applying collateral

estoppel:

          (1) The issue in the second suit must be
     identical in all respects with the one
     decided in the first suit.

          (2) There must be a final judgment
     rendered by a court of competent jurisdiction.

          (3) Collateral estoppel may be invoked
     against parties and their privies to the
     prior judgment.

          (4) The parties must actually have litigated
     the issues and the resolution of these issues must
     have been essential to the prior decision.
                               -20-

          (5) The controlling facts and applicable
     legal rules must remain unchanged from those in the
     prior litigation.

See Montana v. United States, 440 U.S. 147, 155 (1979) (listing

similar elements).

     Mitchell I seems to have them all:

          • The issue is the same;

          • the decision in Mitchell I is final;

          • the parties are identical;

          • the issue was actually litigated and was
            essential to the outcome; and

          • neither the terms of the QDRO nor the
            relevant law changed from one year to
            the next.

     The Supreme Court told us just earlier this year that “[t]he

preclusive effect of a federal-court judgment is determined by

federal common law.”   Taylor v. Sturgell 128 S. Ct. 2161, 2171-

72, n.6 (2008).   We look to caselaw, the Restatement, and

treatises for sources of that law.    And, as with most common-law

doctrines, there are exceptions to the general rule against

relitigation of a decided issue.   One that is relevant here

denies estoppel when “[t]he party against whom preclusion is

sought could not, as a matter of law, have obtained review of the

judgment in the initial action.”   1 Restatement, Judgments 2d,

sec. 28(1) (1982).   The Ninth Circuit--the circuit to which this

case is appealable--has construed the availability of review

specifically to mean “the possibility of a chain of appellate
                               -21-

review.”   Wehrli v. County of Orange, 175 F.3d 692, 695 (9th Cir.

1999) (citation omitted).   If collateral estoppel applied in

cases with no possibility of appellate review, the court

reasoned, it would be too easy for a party to become bound by an

arbitrary or incorrect decision not just in that specific case,

but in any future litigation as well.   Id.   And a leading

treatise on the subject flatly states that “inability to obtain

appellate review * * * does prevent preclusion.”   18 Moore,

Moore’s Federal Practice, par. 132.03[4][k][i], at 132-122

(3d ed. 1997).

     This means that the Commissioner has a problem--Congress, by

enacting section 7463(b), has shattered whatever chain of

appellate review might otherwise have been available to the

Mitchells after our Court decided Mitchell I.    And it might

conceivably be argued that section 7463's prohibition on treating

decisions in S cases “as a precedent” itself somehow bars using

those decisions as the basis for defenses of collateral estoppel

or res judicata or law of the case.
                                 -22-

     I will therefore sort the possible objections8 to giving

collateral-estoppel effect to our decisions in S cases into three

parts:

          • Section 7463;

          • the absence of appealability; and

          • the peculiar problem of applying collateral
            estoppel in a case appealable to the Ninth
            Circuit because of Wehrli.

                                 III.

                                  A.

     Section 7463(b) states that a “decision entered in any case

in which the proceedings are conducted under this section shall

not be reviewed in any other court, and shall not be treated as a

precedent for any other case.”    This language is prominently

     8
       The majority’s stated explanation is that it won’t address
the Commissioner’s collateral-estoppel defense “because this case
was tried and presents a legal issue.” Majority op. note 2.
Neither of these is very persuasive. Collateral estoppel is an
affirmative defense, not a defect in pleading of the sort that’s
waived if not raised before trial. Cf. Fed. R. Civ. P. 12(h).
It’s also a defense that can be raised for the first time on
appeal, during oral argument, even in a supplemental appellate
brief--so “long as it is raised at the first reasonable
opportunity after the rendering of the decision having the
preclusive effect.” Aetna Cas. & Sur. Co. v. Gen. Dynamics
Corp., 968 F.2d 707, 711 (8th Cir. 1992). Nor should the fact
that the key issue is a question of law, rather than a question
of fact, make any difference. Collateral estoppel applies “when
an issue of fact or law is actually litigated and determined by a
valid and final judgment...” 1 Restatement, Judgments 2d, sec. 27
(1982) (emphasis added). And we have said the same thing
ourselves. Bertoli v. Commissioner, 103 T.C. 501, 508 (1994);
Meier v. Commissioner, 91 T.C. 273, 283 (1988).
                                 -23-

quoted in every summary opinion we issue, putting both parties on

notice that they can’t appeal.

     But what exactly does the phrase “shall not be treated as a

precedent for any other case” mean?     One possible reading is to

look at section 7436(c), which provides that our decisions in S

cases at the end of proceedings to determine employment status

“shall not be treated as precedent for any other case not

involving the same petitioner and the same determinations.”    And

then one might consider the language of local rules in many

circuit courts that prohibit citation of unpublished or

nonprecedential opinions (at least for cases decided before

2007).9   The Ninth Circuit’s Rule 36-3(c) is typical:10

           Unpublished dispositions and orders of this
           Court issued before January 1, 2007 may not
           be cited to the courts of this circuit,
           except in the following circumstances.

           (i) They may be cited to this Court or to or
           by any other court in this circuit when
           relevant under the doctrine of law of the
           case or rules of claim preclusion or issue
           preclusion.

     9
       Federal Rule of Appellate Procedure 32.1 restricts courts
from forbidding the citation of unpublished or nonprecedential
opinions. However, the advisory committee noted that this rule
does not say anything about the precedential weight of such
opinions.
     10
       See Cooper, “Citability and the Nature of Precedent in
the Courts of Appeals: A Response to Dean Robel”, 35 Ind. L. Rev.
423, 432-33 (2002).
                                 -24-

     One might argue, on the principle of inclusio unius est

exclusio alterius, or the duty to refrain from reading into the

statute a phrase that Congress has left out,11 that this makes

the best reading of section 7463(b) one that would make our

summary opinions uncitable even for purposes of res judicata,

collateral estoppel, law of the case, or the other purposes

listed by the Ninth Circuit.

     I think such a reading is wrong.    First, barring something

unusual in the context or the structure of the Code, legal terms

like “precedent”--even when used in the Internal Revenue Code--

should be read as having their ordinary meaning to lawyers.

Kornman & Associates, Inc. v. United States, 527 F.3d 443, 451

(5th Cir. 2008).     And “treating a case as precedent” means, to a

lawyer, not a prohibition on citing it altogether, but on citing

it as stating “a point or principle of law * * * decided or

settled by the ruling of a competent court in a case in which it

is directly and necessarily involved,” Black’s Law Dictionary

1443 (8th ed. 2004), or considering the case “as furnishing a

rule or authority for the determination of an identical or

similar case afterwards arising, or of a similar question of

law.”     Id. at 1214.

     11
       See Russello v. United States, 464 U.S. 16, 23 (1983),
(also saying that where Congress has included a phrase in one
section of a statute that it omitted in another we should presume
that it acted intentionally in the disparate inclusion or
exclusion).
                               -25-

     A good illustration of this is our opinion in Ginalski v.

Commissioner, T.C. Memo. 2004-104.12   In that case, the taxpayer

filed an S case to contest the Commissioner’s determination of a

deficiency in her 1993 and 1994 taxes.    She lost, for reasons

explained in a summary opinion.   The Commissioner came to

collect, and she demanded a collection due process hearing.    The

Commissioner argued that she was barred from again challenging

her underlying liability at the hearing, but she thought she

could trump him by citing section 7463.    We disagreed:

          Summary Opinions of this Court contain the
          caveat: “[The] case was heard pursuant to
          the provisions of section 7463 of the
          Internal Revenue Code in effect at the time
          that the petition was filed. The decision to
          be entered is not reviewable by any other
          court, and this opinion should not be cited
          as authority.” Petitioner has mistakenly
          interpreted that caveat to mean that the
          outcome of her Tax Court proceeding involving
          the same taxable years (1993 and 1994) is not
          binding with respect to her proceeding under
          sections 6320 and 6330. Although this
          Court’s decision for petitioner’s 1993 and
          1994 tax years is not precedential for any
          other case, it is final and determinative as
          it relates to petitioner’s liability for
          those years. It appears that petitioner
          believes that the limitation on citing
          Summary Opinions as precedent deprives them
          of the effect of res judicata. * * * [Id.]

     Consider as well the Third Circuit’s rule on citing

nonprecedential opinions, which seems to be unique among the

     12
       See also Gilliam v. U.S., 216 Ct. Cl. 464, 578 F.2d 1389
(1978) (an unpublished decision noting that res judicata bars
relitigation of a claim decided in an S case in our Court).
                                 -26-

circuit courts13 in stating only that “[t]he Court by tradition

does not cite to its not precedential opinions as authority.

Such opinions are not regarded as precedents that bind the

Court.”    3d Cir. Int. Op. Proc. 5.7.     That court, too, gave

little time to an argument that a refusal to treat an unpublished

opinion as precedent meant that it couldn’t be relied on in later

litigation between the same parties:

            We recognize that an unpublished opinion has
            no precedential value and should not be cited
            as authority in a subsequent case. * * *
            The reference made here is necessary,
            however, to record the law of this case.

Edge v. Schweiker, 814 F.2d 125, 127 n.1 (3d Cir. 1987); see also

Green v. Commissioner, 201 F.3d 447 (10th Cir. 1999)(noting in

dicta that “ §7463(b) does not alter traditional principles of

collateral estoppel”), affg. without published opinion T.C. Memo.

1998-274.

     There would also be some perverse consequences of construing

the phrase “not be treated as a precedent” in section 7463(b) as

a bar on subsequent citation for purposes of res judicata,

collateral estoppel, and law of the case.       Section 6512 generally

deprives other federal courts of jurisdiction over refund cases

for tax years that have been the subject of deficiency cases in

our Court.    But there are exceptions:     Section 6512(a)(2), for

     13
          Cooper, supra note 10, at 431.
                                  -27-

example, allows a refund claim for the same year “as to any

amount collected in excess of an amount computed in accordance

with the decision of the Tax Court which has become final.”       Are

courts to read section 7463(b) as prohibiting the use of our

decisions in S cases to establish this jurisdictional

prerequisite when those decisions are explained by summary

opinions?   The answer is “no.”    Section 7463(b) has no effect on

rules of collateral estoppel and res judicata, because they are

rules about the finality of judgments, not rules on the weight or

binding authority of precedent.

     And this leads to a point making the majority’s reluctance

to decide the issue even odder:     Two of our own rules parallel

pretty closely the noncitation rules of the circuit courts--with

no exclusion for S cases.   Rule 50(g) prohibits treating

dispositive unpublished orders as precedents, and Rule 152(c)

does the same for unpublished oral opinions, except “for purposes

of the application of the doctrine of res judicata, collateral

estoppel, or law of the case.”14    (The quotation is from Rule

152(c); Rule 50(g) puts the list in a different order and throws

     14
       Rule 152 expressly governs cases where a special trial
judge is “authorized to make the decision of the Court pursuant
to Code section * * * 7443A(b)(2).” And section 7443A(b)(2)
refers to any proceeding under section 7463--precisely the
section that describes our S cases. Rule 152(c) also doesn’t
distinguish between oral opinions in regular and S cases--it
encompasses both with the phrase “Opinions stated orally in
accordance with paragraph (a) of this Rule.”
                              -28-

in “or other similar doctrine.”)    Even if we silently rue the

adoption of those rules, they remain in effect--leaving today’s

opinion to throw into question only the use of our written-and-

released-on-the-internet summary opinions--presumably the most

thoughtfully constructed S-case decisions--as a basis for

collateral estoppel.15

     But even if section 7463(b) is no bar to applying collateral

estoppel to decisions in S cases explained by summary opinions,

would “the principles of federal common law” balk at using

Mitchell I to collaterally estop Mitchell when she had no right

to appeal our decision?

                               B.

     15
       Consider how the result today might affect a case like
Ginalski. The Commissioner in that case had to show that
Ginalski had had a prior opportunity to contest her deficiency.
One way would be to show a certified mailing list of notices of
deficiency with her name on it; another would be to put on a
credible eyewitness to testify that Ginalski had actually
received the notice. But a perfectly reasonable (and much more
efficient) way ought to be by showing via citing a Summary
Opinion that Ginalski had actually litigated a deficiency case
for the tax year in question--there being no way to start a
deficiency case without actually receiving a notice of
deficiency. And that seems to have been what the Commissioner
was doing: Thus our reference to Ginalski’s having received a
deficiency notice, filed a petition, and had a final decision
entered against her. Ginalski, T.C. Memo 2004-104. In Ginalski,
where the taxpayer was contesting the same liability for the same
tax year, the legal pigeonhole was res judicata; I can’t see any
reason we should treat collateral estoppel differently.
                               -29-

     As I’ve already noted, one of the exceptions to the general

rule giving earlier judgments collateral-estoppel effect in later

litigation is if “[t]he party against whom preclusion is sought

could not, as a matter of law, have obtained review of the

judgment in the initial action.”   1 Restatement, Judgments 2d,

sec. 28(1).   That leads to three related questions:

          •     When those authorities ask whether a
                party could not “as a matter of law”
                obtain review, do they mean that a party
                choosing a procedure without a right of
                appeal cannot be collaterally estopped?

          •     Are there exceptions to the Restatement’s
                requirement of reviewability that are
                analogous to our S cases?

          •     Does “reviewability” mean the same as
                “appealability”?

     Because our Court hasn’t answered these questions before, we

should be looking to analogous procedures in other areas of law

where simplified litigation often comes attached to limited

rights of appeal.   Most of these spring from arbitration and

administrative law.

     Begin with arbitration.   Cases discussing the collateral-

estoppel effect of arbitration awards are especially interesting

because arbitration awards, like our decisions in S cases, are

typically not appealable.   Learning whether they give rise to

collateral estoppel may well answer the first question that we

posed:   Can a party choosing a procedure without a right of
                               -30-

appeal be collaterally estopped?   In answering this question,

courts generally look at what the parties intended.   This is no

surprise since most arbitration agreements are “creature[s] of

contract,” and participants in them voluntarily accept limited

judicial review over the issues they agree will be arbitrated.

Convalescent Ctr., Inc. v. Dept. of Income Maint., 544 A.2d 604,

609-10 (Conn. 1988).   Courts reason that when the parties

themselves agree that a decision will be final, the decision

should be given the same weight as a court-rendered judgment.16

Corey v. Avco-Lycoming Div., 307 A.2d 155, 160-61 (Conn. 1972);

see also Benjamin v. Traffic Executive Association E. R.R., 869

F.2d 107, 113 (2d Cir. 1989) (collateral estoppel of arbitration

decision allowed in part because parties agreed to the

procedures).

     There is an important exception to this default rule:   The

courts have sometimes denied collateral estoppel when a party

tries to use an unappealed arbitration award to preclude a

federal statutory civil-rights claim.   See, e.g., Alexander v.

Gardner-Denver Co., 415 U.S. 36 (1974); McDonald v. City of West

Branch, 466 U.S. 284 (1984) (no collateral estoppel over claim

     16
       This is only true, however, in future litigation between
the same parties. Because of the informal nature of arbitration,
nonmutual collateral estoppel--where a nonparty uses the prior
decision against one of the parties to that decision--is
generally not available for arbitration decisions. E.g.,
Vandenberg v. Superior Court, 982 P.2d 229, 239-40 (Cal. 1999).
                                -31-

brought under 42 U.S.C. section 1983.      But see Mitsubishi Motors

Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985)

(arbitration presumptively competent to resolve certain other

statutory claims).    Such cases remind us that rules about

preclusion are usually judge-made default rules--rules that can

be upended when “Congress itself has evinced an intention to

preclude a waiver of judicial remedies for the statutory rights

at issue.”     Id. at 628.

     Courts follow a similar approach in cases analyzing the

collateral-estoppel effect of administrative-agency decisions.

There the same principle applies:      Collateral estoppel of a

decision with limited or nonexistent judicial review should be

allowed only when the parties voluntarily decide to submit their

dispute to the agency for decision.      See Convalescent Center, 544

A.2d at 611.

     These cases strongly suggest that petitioners who choose

S-case status should be treated the same as parties who opt to

arbitrate disputes or take them to an administrative agency--it

is their choice that deprives them of the right to seek appellate

review, not (to use the Restatement’s careful formulation) “a

matter of law.”    Seen with this parallel in mind, S-case

petitioners like Mitchell should not be able to defeat the

affirmative defense of collateral estoppel because they

themselves chose to give up their right of appeal.
                                -32-

     What makes this analogy less than perfect is that the choice

of S-case status is left up to the petitioner, and not the mutual

agreement of the petitioner and the Commissioner.   Our rules do

give the Commissioner the right to move for an order deleting the

S-case designation, Rule 171(c), and of course in this case it is

the petitioner against whom the doctrine of collateral estoppel

is being urged.   But in Wehrli, the election of an administrative

hearing was likewise the free choice of the party against whom

collateral estoppel was later invoked.    Wehrli, 175 F.3d at 693.

     So, while I think we should view the voluntary choice of S-

case status as a strong argument in favor of allowing decisions

in S cases to collaterally estop later litigation, it’s not

necessarily a clinching one.    I’d therefore move on to the second

question:   Are there exceptions to the Restatement’s requirement

of reviewability for situations analogous to our S cases?

     The comments to the Restatement make the scope of this

requirement seem quite broad:

          “There is a need for an * * * exception to the rule of
     preclusion when the determination of an issue is plainly
     essential to the judgment but the party who lost on that
     issue is, for some other reason, disabled as a matter of law
     from obtaining review by appeal or, where appeal does not
     lie, by injunction, extraordinary writ, or statutory review
     procedure.”

1 Restatement, Judgments 2d, sec. 28(1), cmt. a (1982).17

     17
       See Peterson v. Cal. Dept. of Corr. & Rehab., 451 F.
Supp. 2d 1092, 1104 (E.D. Cal. 2006) (writ of mandamus is
                                                   (continued...)
                                 -33-

In a gentle criticism of this comment, however, a leading

treatise distinguished between decisions of a sort that

ordinarily cannot be appealed and decisions that are ineligible

for appeal only because of some special circumstance (e.g. a

particular case’s becoming moot while on appeal):

               Quite different calculations attend the
          question whether issue preclusion can rest on
          a judgment that falls into a category that
          cannot generally be appealed. Although it is
          tempting to suggest a broad general principle
          that preclusion is never appropriate, [and
          here the treatise cites to the Restatement]
          the matter is not so simple. At most, the
          unavailability of appeal may count as an
          important factor in contemplating preclusion,
          and even that view must be approached with
          caution * * *.

18A Wright & Miller, Federal Practice and Procedure, Jurisdiction

2d sec. 4433, at 108-09 (2002) (fn. refs. omitted).

     The treatise gives two counterexamples to the “broad general

principle” of the Restatement.    The first is peculiar to a very

small set of cases--those within the original jurisdiction of the

Supreme Court.   Though collateral estoppel might not be exactly

the right pigeonhole in which to put that Court’s deference to

its own previous findings of fact, a recognition of the benefits

of rules of finality means that “[t]his Court does not reopen an

     17
      (...continued)
satisfactory method of review); M.J. Woods, Inc. v. Conopco Inc.,
271 F. Supp. 2d 576, 582 (S.D.N.Y. 2003) (judicial review of
arbitration award for legality and general fairness is adequate).
                                -34-

adjudication in an original action to reconsider whether initial

factual determinations were correctly made.”      Arizona v.

California, 460 U.S. 605, 623-24 (1983).

     The second counterexample--though flowing from the same

spring of judicial desire for finality and consistency--is closer

to what we have here.   In the old case of Johnson Co. v. Wharton,

Jr., & Co., 152 U.S. 252 (1894), the Supreme Court faced a

question exceptionally similar to ours:      Wharton had won a

judgment against the Johnson Company for infringing its patent,

but the Johnson Company had no right to appeal because the amount

involved was under a jurisdictional limit.      When Wharton sued

again--this time for a larger amount--and tried to use the first

judgment to collaterally estop the Johnson Company from

challenging the fact of infringement, the Johnson Company

squawked that the absence of even the possibility of appellate

review in the first case made estoppel improper.

     The Supreme Court disagreed.      The doctrine of collateral

estoppel,

            so essential to an orderly and effective
            administration of justice, would lose much of
            its value if it were held to be inapplicable
            to those judgments in the Circuit Courts of
            the United States which, by reason of the
            limited amount involved, could not be
            reviewed by this court.
                                -35-

          * * * Nor can the possibility that a party
          may legitimately or properly divide his
          causes of action, so as to have the matter in
          dispute between him and his adversary
          adjudged in a suit that cannot, after
          judgment, and by reason of the limited amount
          involved, be carried to a higher court,
          affect the application of the general rule
          * * *.

Id. at 261; see Winters v. Lavine, 574 F.2d 46, 62 (2d Cir. 1978)

(Johnson Co. still good law).

     We thus answer the second question that we posed by

concluding that there are indeed situations where the “full chain

of appellate review” is not necessary to give an earlier decision

collateral-estoppel effect.

     But we don’t rest entirely on this old, and not-very-often-

cited precedent,18 nor on Mitchell’s voluntary choice of S-case

status for Mitchell I.   We rely as well on the peculiar nature of

our Court’s internal system for reviewing the work of individual

judges.

     S cases--even though not appealable--are reviewable.

Section 7443A(c) authorizes special trial judges to issue

decisions, subject to “such conditions and review as the court

may provide.”   Long ago, Chief Judge Drennen issued General Order

No. 2, 54 T.C. VI (1970), exercising his authority under section

     18
        One must recognize that, despite its antiquity, Johnson
Co. is a Supreme Court precedent that is on point. I’d therefore
follow it even if the Restatement disagreed--in matters of
federal common law, higher-court caselaw is the law we have to
follow.
                               -36-

7444(c) to create a Small Tax Case Division to have “supervision

of commissioners of the Court.”   The order went on to delegate

“to the judge in charge of the Small Tax Case Division the

authority to review and, in his discretion, approve the proposed

findings of fact and opinion in any small tax case in which the

trial is conducted by a commissioner of the court, and to sign in

his name the decision to be entered therein.”

     Over the years, of course, commissioners became special

trial judges and our chief judges received, and promptly

exercised the power to delegate to them the authority to enter

decisions in S cases.   See Delegation Order No. 11, 86 T.C. VII

(1986).   But the parallel treatment of summary opinions and

reports from the regular divisions continued.   Delegation Order

No. 11 directed (except in cases decided by bench opinion) that

decisions be made only “after the Special Trial Judge prepares a

summary of the facts and reasons for the proposed disposition of

the case and submits said summary to the Chief Judge, or to

another Judge designated by the Chief Judge.”   Our current Rule

182 directs the summary to be submitted in exactly the same way.

All this seems to be very similar to the procedure in regular

cases, or S cases tried by regular judges, cf. section 7459, in

that the report is submitted before the decision is entered.

Given General Order No. 2's creation of a Small Tax Division

under section 7444(c), the most straightforward reading of the
                               -37-

relevant provisions is that a report in the form of a summary

opinion, like a report in the form of a memorandum opinion or

proposed division opinion in a regular case, can be referred to

the Court for review.

     In any event, the purpose of reviewing summary opinions,

whether drafted by special or regular or senior judges, surely is

the same as the purpose of reviewing regular Tax Court opinions

--more eyes to check for typos or infelicities of expression or

bits of illogic of the “oh-of-course-how-could-I-have-overlooked-

it” variety.   And, very occasionally, for suggestions of legal

questions to refer to the full Court to increase the uniform and

accurate application of tax law in the country.19

     We thus answer the third question that we posed by

concluding that appealability is not synonymous with

reviewability.

     Mitchell I was not appealable.   That’s true.   But its

nonappealability, as in the arbitration cases, was a choice made

     19
       Some S cases have even produced T.C. opinions. See,
e.g., Kallich v. Commissioner, 89 T.C. 676 (1987) (decision on
motion to reinstate S designation); Carstenson v. Commissioner,
57 T.C. 542 (1972) (relation back of amended petition to original
filing date); Dressler v. Commissioner, 56 T.C. 210 (1971)
(denying Commissioner’s request to have S designation removed);.
These opinions are certainly not appealable given section
7463(b)’s proscription on review by any other court. Their
rarity suggests that our system for filtering out of the S-case
channel any cases with keen precedential significance, set up
decades ago by our ancestors in office, has actually worked
pretty well.
                                -38-

by a party and not imposed by law.      Mitchell I was also not

reviewable by a higher court, said by the Restatement to be a

requirement for collateral estoppel.     But if reviewability by a

higher court is a requirement, it’s a requirement with some

exceptions, one of which--supported by some seemingly good

precedent--is the absence of appealability because of

jurisdictional limits imposed by statute on the appellate courts.

And Mitchell I (or any of our S cases) was, even if not

appealable, still reviewable.   See secs. 7443A(c), 7460(b).

     Unlike much of tax law, with its detailed if tangled skein

of statute, regulation, and administrative procedure, the rules

of collateral estoppel in federal courts are generally fashioned

by judges guided by reasonableness and precedent.     Though the

majority opinion ensures there will continue to be no precedent

quite on point, I don’t think that the absence of appealability

by itself should prevent the decision in an S case from

collaterally estopping relitigation of the same issue.

                                 C.

     Even if the majority had gone along with me this far, there

still would have been one last obstacle:      Wehrli’s plain

statement that preclusion requires the availability of appellate

review.   Wehrli, 175 F.3d at 695.     The case before us is

appealable to the Ninth Circuit, and under Golsen v.

Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir.
                                 -39-

1971), we do not enter decisions that will surely be reversed.

Lardas v. Commissioner, 99 T.C. 490, 495 (1992).

     But I am confident that Wehrli would have been

distinguishable.   The Ninth Circuit was particularly concerned

about the possible arbitrariness of an unreviewable

administrative decisionmaker:    “individual hearing officers are

capable of occasional arbitrary action even if they are judges.”

Wehrli, 175 F.3d at 695.   But there was nothing in the

administrative process that Wehrli chose that is remotely similar

to the review of reports in our Court, already described at

length in the previous section, that is an effective check on

arbitrariness.

     And, as the Ninth Circuit also emphasized, the decision in

Wehrli was the decision of an administrative agency.      Id.   The

rules of preclusion are somewhat different for decisions of

administrative agencies, and one significant way they are

different is the importance of judicial review as a check on

agency arbitrariness.   See United States v. Utah Constr. & Mining

Co., 384 U.S. 394, 422 (1966).    Mitchell I was, in contrast,

itself a decision of a court exercising judicial, not “executive,

legislative, or administrative, power.”    Freytag v. Commissioner,

501 U.S. 868, 890-91 (1991).

     Another difference is that the decision discussed in Wehrli

was the result of a very informal process--the hearing involved
                                -40-

was not even recorded.    Courts have often held that there must be

a record, whether of administrative or judicial decisionmaking,

for there to be preclusion in later litigation.    This requirement

developed out of the Supreme Court caselaw setting the minimum

requirements for an administrative decision to have collateral-

estoppel effect:    The agency must have acted in a judicial

capacity, the issues decided must have been properly before the

agency, and the parties must have had an adequate opportunity to

litigate those matters.    Utah Constr. & Mining Co., 384 U.S. at

422.    Part of the adequate-opportunity-to-litigate requirement is

that there be some sort of review of the decision, which in turn

requires a record of the proceedings.    Wehrli, 175 F.3d at 695.

The record need not be written--a tape recording is enough,

Peterson v. Cal. Dept. of Corr. & Rehab., 451 F. Supp. 2d 1092,

1105-07 (E.D. Cal. 2006)--but it does need to exist so that there

is some way for a reviewer to review, and of course for a court

in a later case to figure out exactly what issues were decided

and how.

       Our S cases come with a complete record of the proceedings.

Every S case starts with a petition listing the issues in

dispute.    If an S case goes to trial, there is a transcript.

Rule 150(a).    The parties might even submit briefs.   Rule 151(a).

And no matter how small, every decision in an S case is explained

by a judge who must prepare a summary of his reasoning.    Section
                                 -41-

7463(a).     This means that every S case has a record enabling the

judge in a later case to easily see what issues were actually

litigated and how they were decided.

     I would conclude from this that Wehrli is distinguishable

and would use this case to hold that decisions in S cases

collaterally estop relitigation.    Holding to the contrary only

encourages duplication of effort.       And although there may be some

case some day that would warrant an exception to the usual rule

against that vice, giving preclusive effect to our decisions in S

cases would be more consistent with precedents in other areas,

and similarly conserve--if only at the margin--judicial

resources.

                                  IV.

     Our tax system requires an annual reporting of income and

deductions and, for most people, this requires annual reporting

for each calendar year separately.      But there are many questions

that, answered for one year, might affect many later years--are

payments from an ex-spouse made under a divorce decree deductible

alimony or a nondeductible property settlement?      Is the interest

on a bond issued by a public authority tax exempt or taxable?

What is the depreciable cost of a particular capital asset?

     This gives rise to cases like Jacobs v. Commissioner, T.C.

Summ. Op. 1971-22 (resolving issue for 1966, 1967, and 1968 tax

years), followed by Jacobs v. Commissioner, T.C. Memo. 1977-1
                              -42-

(deciding the same issue the same way again for the 1972 and 1973

tax years, plus deciding a new issue), followed by Jacobs v.

Commissioner, T.C. Memo. 1980-308 (deciding that no-longer-so-new

issue from the second case the same way it had already been

decided for the 1974, 1975, and 1976 tax years), followed by

Jacobs v. Commissioner, T.C. Memo. 1982-198 (shutting another

revisitation of the same issues from the prior cases for the

1977, 1978, and 1979 tax years by using collateral estoppel--and,

by that point, section 6673), followed by Jacobs v. Commissioner,

T.C. Memo. 1983-490 (applying collateral estoppel yet again on

the same issues decided in the preceding cases for 1980, and

again imposing damages under section 6673 for abuse of judicial

resources.)

     There’s no reason to encourage this sort of thing.   As the

Supreme Court has repeatedly noted:   “A fundamental precept of

common-law adjudication, embodied in the related doctrines of

collateral estoppel and res judicata, is that a ‘right, question

or fact distinctly put in issue and directly determined by a

court of competent jurisdiction . . . cannot be disputed in a

subsequent suit between the same parties or their privies.’”

Montana, 440 U.S. at 153 (quoting Southern Pac. R. R. v. United

States, 168 U.S. 1, 48-49 (1897)).    These doctrines come with

general rules limited by exceptions, but the presumption in our
                                 -43-

system is that a party can’t keep trying the same issue over and

over again.

     This case gave us a chance to fit the estoppel effect of our

summary opinions into the already quite extensive caselaw on the

effect of judgments generally.    We should have taken it.

     HALPERN, J., agrees with this concurring opinion.