Court Opinion

ID: 4331613
Source: CourtListenerOpinion
Date Created: 2018-11-14 00:15:33.430172+00
Date Added: 2024-06-11T14:47:34.221089
License: Public Domain

110 T.C. No. 5

                UNITED STATES TAX COURT

THOMAS L. FREYTAG AND SHARON N. FREYTAG, Petitioners v.
      COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 13538-86.                    Filed February 5, 1998.

     R issued a notice of deficiency to Ps for the taxable
years 1978, 1981, and 1982. Ps filed a petition with this
Court and subsequently filed a petition in bankruptcy with
the bankruptcy court. R filed proofs of claim for the
taxable years 1978, 1981, and 1982 pursuant to 11 U.S.C.
sec. 505(a)(1) (1994) (Bankruptcy Code). P Sharon filed an
objection to R's proofs of claim on the grounds that she is
an innocent spouse pursuant to sec. 6013(e), I.R.C., and
sec. 6004 of the Technical and Miscellaneous Revenue Act of
1988, Pub. L. 100-647, 102 Stat. 3342, 3685. The bankruptcy
court determined, inter alia, that P Sharon was not a so-
called innocent spouse and was liable for the taxes for 1981
and 1982. P Sharon moves to dismiss this case for "lack of
jurisdiction". Held: This Court has jurisdiction. Comas,
Inc. v. Commissioner, 23 T.C. 8 (1954), and Valley Die Cast
Corp. v. Commissioner, T.C. Memo. 1983-103, distinguished.
Held, further, the period of limitations for making an
assessment has not expired. Held, further, under the
principles of res judicata a decision will be entered
consistent with the determinations of the bankruptcy court.
                                    - 2 -

       William D. Elliott, for petitioner Sharon N. Freytag.

       James R. Turton, for respondent.
                               OPINION

       DAWSON, Judge:    This case was assigned to Special Trial

Judge Carleton D. Powell pursuant to the provisions of section

7443A(b)(4) and Rules 180, 181, and 183.1     The Court agrees with

and adopts the opinion of the Special Trial Judge that is set

forth below.

                 OPINION OF THE SPECIAL TRIAL JUDGE

       POWELL, Special Trial Judge:    This matter is before the

Court on the motion for summary judgment of petitioner Sharon N.

Freytag (Mrs. Freytag or petitioner), filed August 20, 1996.           The

facts may be summarized as follows.

       By notice of deficiency issued February 10, 1986, respondent

determined deficiencies in petitioners' Federal income taxes and

additions to tax as follows:

                                    Additions to Tax
Year        Deficiency      Sec. 6653(a)(1)   Sec. 6653(a)(2)

1978        $5,000                 $250                   -0-
1981        53,598                2,680      50%   of   the interest
                                             due   on   $53,598
1982        36,901                1,845      50%   of   the interest
                                             due   on   $36,901

       On May 12, 1986, petitioners filed a petition for

redetermination of the deficiencies and additions to tax.         At

       1
           Unless otherwise indicated, section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
                               - 3 -

that time, petitioners were husband and wife and resided in

Dallas, Texas.   Respondent filed an answer to the petition on

June 26, 1986.

     The primary issue involved deductions claimed for losses on

transactions between petitioner Thomas L. Freytag (Mr. Freytag)

and First Western Government Securities, Inc. (First Western).

At that time there were more than 3,000 cases involving the same

issues.   Test cases had been selected, and this case was held in

abeyance.   The First Western issues were resolved in Freytag v.

Commissioner, 89 T.C. 849 (1987), affd. 904 F.2d 1011 (5th Cir.

1990), affd. on other grounds 501 U.S. 868 (1991).

     On January 5, 1990, petitioners filed a petition in the U.S.

Bankruptcy Court for the Northern District of Texas, Dallas

Division.   Respondent filed a proof of claim that was amended

several times to include, inter alia, the income taxes and

additions to tax for the years at issue in this case.    Respondent

notified the Court of the bankruptcy proceedings, and pursuant to

11 U.S.C. sec. 362(a)(8) (1994) (Bankruptcy Code), this Court, on

May 2, 1991, stayed all proceedings in this case.

     In the bankruptcy court, Mrs. Freytag objected to

respondent's amended proofs of claim.   She did not contest the

underlying deficiencies for 1981 and 1982, and the parties

stipulated that the challenged deductions for 1981 and 1982 were

in fact grossly erroneous and had no basis in fact or law.    See

Freytag v. Commissioner, supra.   Rather, she sought a
                               - 4 -

determination from that court that she was not liable for the

taxes and addition to taxes at issue solely because she was an

"innocent spouse" under section 6013(e) and section 6004 of the

Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647,

102 Stat. 3342, 3685.

     On August 12, 1993, the bankruptcy court issued a

"Memorandum Opinion Regarding Sharon N. Freytag's Objection to

IRS Claim".   The court stated that it could "find no reason why

it would be inequitable to hold Sharon liable for the

consequences of the understatements."   It accordingly decided

that Mrs. Freytag was liable for the taxes for 1981 and 1982 and

could not rely successfully upon the "innocent spouse" defense.

On May 31, 1994, the bankruptcy court entered an "Agreed Order

Pertaining to Dischargeability" in which it discharged:   (1)

Penalties and interest on penalties claimed by the IRS for the

Freytags' taxable years 1978-1982; (2) penalty interest imposed

by section 6621(c) to the extent it exceeded the normal rate of

interest; and (3) $5,000 in tax and $10,941.89 in interest for

the year 1978.   With regard to the amounts not discharged, the

parties seem to agree that while no dollar amount was stated in

the order, the amount of the tax debts for 1981 and 1982 could be

determined by reference to that order and the proof of claim, as

amended, for the years at issue in this case.

     In view of the bankruptcy court's order of discharge, this

Court lifted the stay of proceedings.   On August 20, 1996,
                                - 5 -

petitioner filed a motion for summary judgment asking that this

case "be dismissed for lack of subject matter jurisdiction".

Consistent with the order of the bankruptcy court, Mr. Freytag

and respondent filed a stipulation of settled issues in which it

is agreed that there is no deficiency for 1978; there are no

additions to tax for the years 1978, 1981, and 1982; and there

are deficiencies in the amounts of $53,598 and $36,901 for the

years 1981 and 1982, respectively.

Summary Judgment

     Rule 121 provides that either party may move for summary

judgment on all or any part of the legal issues in controversy

where there is no genuine issue as to any material fact and a

decision may be entered as a matter of law.   As we understand

Mrs. Freytag's position, she does not seek an entry of a

decision, but rather a dismissal of the case for lack of

jurisdiction with respect to her.    Summary judgment, therefore,

would not be an appropriate vehicle to obtain the relief that she

seeks.   Nonetheless, as we shall see, there is an aspect of

petitioner's argument that is appropriate for summary judgment

resolution.   In these circumstances, initially for discussion

purposes, we treat petitioner's motion as a motion to dismiss for

lack of jurisdiction, which we deny, and then proceed with an

analysis for the proper disposition of this case.

Jurisdiction of the Tax Court
                               - 6 -

     As a general proposition, this Court has jurisdiction to

redetermine a taxpayer's Federal tax liabilities as long as

respondent has sent the taxpayer a valid notice of deficiency and

the taxpayer has filed a timely petition in this Court to review

the deficiencies asserted in the notice.   Secs. 6212 and 6213;

Gustafson v. Commissioner, 97 T.C. 85, 89 (1991).   Section

6213(a) further provides that in general the filing of such a

petition prevents the assessment or collection of the taxes at

issue.   While the normal period of limitations within which an

assessment may be made expires 3 years after the return was filed

(sec. 6501(a)), section 6503(a)(1) provides that the period of

limitations is "suspended" for the period that there is a

proceeding in the Tax Court and for 60 days after the decision of

the Tax Court becomes final.

     A proceeding before the Tax Court is an in personam action.

Morris Plan Industrial Bank of N.Y. v. Commissioner, 151 F.2d 976

(2d Cir. 1945), affg. a Memorandum Opinion of this Court dated

Oct. 5, 1944; Hemmings v. Commissioner, 104 T.C. 221, 230 (1995).

Furthermore, once this Court acquires jurisdiction over the

dispute between a taxpayer and respondent, that jurisdiction

remains unimpaired until the controversy is decided.   Dorl v.

Commissioner, 57 T.C. 720, 722 (1972), affd. 507 F.2d 406 (2d

Cir. 1974); see also sec. 7459(d) (if a case is dismissed the

decision will be entered in the amount determined by the

Secretary).
                              - 7 -

     If, after this Court acquires jurisdiction over a

controversy, the petitioner files a petition in the bankruptcy

court, 11 U.S.C. sec. 362(a)(8) (1994) (Bankruptcy Code) provides

that "a petition filed * * * operates as a stay, applicable to

all entities" including "the commencement or continuation of a

proceeding before the United States Tax Court".   At the request

of a party in interest the bankruptcy court may lift the stay.

See 11 U.S.C. sec. 362(d), (e), and (f).   And, unless previously

lifted, such a stay terminates at the earliest of the closing or

dismissal of the bankruptcy case or at the time a discharge is

granted or denied to an individual.   11 U.S.C. sec. 362(c); Smith

v. Commissioner, 96 T.C. 10 (1991).   Once a stay has been lifted

or terminated this Court will proceed to resolve the dispute,

unless a stay is affirmatively reimposed by the bankruptcy court.

Kieu v. Commissioner, 105 T.C. 387, 394-395 (1995).   However, 11

U.S.C. sec. 505(a)(1) (1994), provides:

          Except as provided in * * * [11 U.S.C. sec.
     505(a)(2)], the [bankruptcy] court may determine the
     amount or legality of any tax, any fine or penalty
     relating to a tax, or any addition to tax, whether or
     not previously assessed, whether or not paid, and
     whether or not contested before and adjudicated by a
     judicial or administrative tribunal of competent
     jurisdiction.[2]

     2
          11 U.S.C. sec. 505(a)(2) (1994) restricts the
bankruptcy court's authorization to determine tax liability to
cases which were not adjudicated by a judicial or administrative
tribunal before the commencement of the bankruptcy case.
                              - 8 -

     The enactment of 11 U.S.C. secs. 362 and 505 was part of the

major reform of the bankruptcy laws accomplished by the

Bankruptcy Reform Act of 1978, Pub. L. 95-598, 92 Stat. 2549.

The legislative history clearly shows that Congress understood

that the bankruptcy courts and this Court would have concurrent

jurisdiction in cases regarding common issues of Federal tax

liability of bankrupts who are properly before both courts.3

United States v. Wilson, 974 F.2d 514, 517 (4th Cir. 1992).     If

the bankruptcy court first decides the common tax issue, its

decision is to be binding under principles of res judicata upon

this Court:

     the bankruptcy judge will have authority to determine
     which court will determine the merits of the tax claim
     both as to claims against the estate and claims against
     the debtor concerning his personal liability for
     nondischargeable taxes. Thus, * * * the bankruptcy
     judge can either rule on the merits of the claim and
     continue the stay on any pending Tax Court proceeding
     or lift the stay * * *. If he rules on the merits of
     the complaint before the decision of the Tax Court is

     3
          Prior to the enactment of the Bankruptcy Reform Act of
1978, Pub. L. 95-598, 92 Stat. 2549, the House and the Senate
formulated different proposals as to how the bankruptcy laws
should be revised, and a compromise bill was eventually entered
into law. See 3 Collier, Collier on Bankruptcy, pars. 505.02 and
505.03 (15th ed. 1996). No formal conference was held to
formulate the compromise bill, but the sponsors of the bill
issued extensive comments which served in the place of a
conference committee report. 124 Cong. Rec. 32391-32420 (1978)
(Representative Edwards); 124 Cong. Rec. 33992-34019 (1978)
(Senator DeConcini); see, generally, Kennedy, Foreword: "A Brief
History of The Bankruptcy Reform Act", 58 N.C.L. Rev. 667, 676-77
(1980). Those comments provide persuasive evidence of Congress'
intent when it enacted 11 U.S.C. secs. 362 and 505. See Begier
v. I.R.S., 496 U.S. 53, 64-65 n.5 (1990); United States v.
Wilson, 974 F.2d 514, 518 (4th Cir. 1992).
                               - 9 -

     reached, the bankruptcy court's decision would bind the
     debtor as to nondischargeable taxes and the Tax Court
     would be governed by that decision under principles of
     res judicata. [124 Cong. Rec. 32414 (1978)
     (Representative Edwards); 124 Cong. Rec. 34014 (1978)
     (Senator DeConcini); emphasis added.]

     There is nothing in the Internal Revenue Code, the

Bankruptcy Code, or their legislative histories that remotely

suggests that by ruling on the merits of a tax dispute the

bankruptcy court ousts the Tax Court of jurisdiction over a case

that is pending before it.   Cf. United States v. Wilson, supra.

Rather, it is clear that the principles of issue preclusion or

res judicata would apply to avoid duplicative litigation.

Irrespective of other arguments that may be made, this Court

still retains in personam jurisdiction over petitioner and

subject matter jurisdiction over her dispute with respondent.4

Period of Limitations and Jurisdiction

     As we understand, petitioner's reasoning seems to be based

upon an assumption that the judgment of the bankruptcy court

constitutes a bar to the making of an assessment of the taxes at

issue.   At the February 26, 1997, hearing on this motion

petitioner's counsel explained:   "Section 505(c) of the

Bankruptcy Code is specific and clear:   following determination

     4
          Compare sec. 7422(e) which provides that, if "prior to
the hearing" of a refund suit, the Secretary issues a notice of
deficiency for the same year and the taxpayer files a petition
with the Tax Court, the court before which the suit was pending
"shall lose jurisdiction * * * to whatever extent jurisdiction is
acquired by the Tax Court".
                               - 10 -

by * * * [the bankruptcy] court, the IRS should have assessed.

They [sic] didn't.    They [sic] are now out of time."

     The running of the period of limitations is a defense to a

claim, and it is not a jurisdictional matter.    See, e.g.,

Robinson v. Commissioner, 12 T.C. 246, 248 (1949), affd. 181 F.2d
17 (5th Cir. 1950).    It, however, may be argued that, if indeed

the period of limitations had run, this Court should enter a

decision that there are no deficiencies due from petitioner.

Section 7459(e) provides that "If the assessment or collection of

any tax is barred by any statute of limitations, the decision of

the Tax Court to that effect shall be considered as its decision

that there is no deficiency in respect to such tax."

     The genesis of petitioner's argument lies in section 6871(b)

and 11 U.S.C. sec. 505(c).5   Section 6871(b) provides--

     Any deficiency (together with all interest, additional
     amounts, and additions to the tax provided by law)
     determined by the Secretary in respect of a tax imposed
     by Subtitle A or B * * * on--

     5
          11 U.S.C. sec. 505(c) (1994) provides:

     Notwithstanding section 362 of this title, after
     determination by the [bankruptcy] court of a tax under
     this section, the governmental unit charged with
     responsibility for collection of such tax may assess
     such tax against the estate, the debtor, or a successor
     to the debtor, as the case may be, subject to any
     otherwise applicable law.

Congress subsequently applied the principles of 11 U.S.C. sec.
505(c) more specifically to Federal tax proceedings when it
enacted sec. 6871(b).
                               - 11 -

                 (1) the debtor's estate in a case under title
            11 of the United States Code, or

                 (2) the debtor, but only if liability for
            such tax has become res judicata pursuant to a
            determination in a case under title 11 of the
            United States Code,

     may, despite the restrictions imposed by section
     6213(a) on assessments, be immediately assessed if such
     deficiency has not theretofore been assessed in
     accordance with law.

     Section 6871(b) was enacted as part of the Bankruptcy Tax

Act of 1980, Pub. L. 96-589, 94 Stat. 3389.   Its enactment

reflects Congress' belief that "the provisions of the Internal

Revenue Code relating to assessment and collection procedures

should be coordinated with rules enacted in the new bankruptcy

statute (Pub. L. 95-598) for determination of tax liabilities in

bankruptcy cases."   S. Rept. 96-1035, at 48 (1980), 1980-2 C.B.

620, 644.   Section 6871(b) is derived from current 11 U.S.C. sec.

505(c).

     The use of the word "may" in both statutes is generally

interpreted to be permissive and not mandatory.    See United

States v. Rodgers, 461 U.S. 677, 706-710 (1983).    Read in this

light, section 6871(b) establishes when an assessment of tax

liabilities may be made with respect to a taxpayer who has sought

relief both here and in the bankruptcy court.   In all events,

section 6871(b) does not purport to establish when respondent

must assess the taxes.   That limitation is set forth in section
                              - 12 -

6503(a).   Specifically, section 6503(a) provides that the

limitations period

     shall * * * be suspended for the period during which
     the Secretary is prohibited from making the assessment
     or from collecting by levy or a proceeding in court
     (and in any event, if a proceeding in respect of the
     deficiency is placed on the docket of the Tax Court,
     until the decision of the Tax Court becomes final), and
     for 60 days thereafter. [Emphasis added.]

     The result of the statutory design is that, even when the

bankruptcy court has determined liabilities that are also at

issue in a case before this Court, while an assessment may be

made earlier, the time within which respondent must assess those

liabilities is suspended until the decision of this Court

"becomes final".6

     Petitioner relies on Valley Die Cast Corp. v. Commissioner,

T.C. Memo. 1983-103.   In that case, decided under the old

Bankruptcy Act and before the Bankruptcy Code was enacted

     6
          The Internal Revenue Code describes the finality of our
decisions in considerable detail. Sec. 7481(a) provides that a
decision of the Tax Court shall become final "Upon the expiration
of the time allowed for filing a notice of appeal, if no such
notice has been duly filed within such time". Sec. 7483 provides
that "Review of a decision of the Tax Court shall be obtained by
filing a notice of appeal with the clerk of the Tax Court within
90 days after the decision of the Tax Court is entered." Putting
secs. 7481(a) and 7483 together, a decision of the Tax Court (if
unappealed) becomes "final" for purposes of sec. 7481, and hence
"final" within the meaning of sec. 6503(a), 90 days after the
decision is entered. Additionally, our Rules provide that a
decision may be based upon a dismissal. Rule 123(d) provides
that "A decision rendered upon a default or in consequence of a
dismissal, other than a dismissal for lack of jurisdiction, shall
operate as an adjudication on the merits."
                              - 13 -

(Bankruptcy Reform Act of 1978, Pub. L. 95-598, 92 Stat. 2549),

we held that where a bankruptcy court had decided all the issues

that were before the Tax Court and the taxes had been assessed,

the case should be dismissed for lack of "jurisdiction".    In

reaching this result we relied upon Comas, Inc. v. Commissioner,

23 T.C. 8 (1954).   To understand the holdings in these cases, it

is necessary to also understand the statutory context in which

they arise.   Prior to the Bankruptcy Tax Act of 1980, Pub. L. 96-

589, 94 Stat. 3389, section 6871 (26 U.S.C. sec. 6871 (1976)),

provided, inter alia,

          (a) Immediate Assessment.--Upon the adjudication of
     bankruptcy of any taxpayer in any liquidating proceeding * *
     * any deficiency * * * shall, despite the restrictions
     imposed by section 6213(a) upon assessments, be immediately
     assessed * * * in accordance with law.

          (b) Claim Filed Despite Pendency of Tax Court
     Proceeding.--In the case of a tax * * * claims for the
     deficiency * * * may be presented, for adjudication * * * to
     the court before which the bankruptcy * * * proceeding is
     pending, despite the pendency of proceedings for the
     redetermination of the deficiency in pursuance of a petition
     to the Tax Court * * *. [Emphasis added.]

     The result in both Valley Die Cast Corp. and Comas, Inc. was

based on the peculiarities of the old Bankruptcy Act and the pre-

1980 version of section 6871 that are summarized in 1A Collier,

Collier on Bankruptcy, par. 8.02, at 8-5 (15th ed. 1996):

          Once a bankruptcy case was filed, there was no
     automatic stay, and the IRS had the power to assess income
     tax liabilities against the bankrupt. This concept of
     immediate assessment was detrimental to the bankrupt
     taxpayer because it took away the power of the Tax Court to
     pass on tax issues. After immediate assessment the Tax
     Court had no jurisdiction over the bankrupt's tax
                              - 14 -

     liabilities. The bankrupt's right to invoke the
     jurisdiction of the bankruptcy court was available after
     immediate assessment of tax by the IRS, but the ruling of
     the bankruptcy court had a limited effect on the IRS. The
     IRS could proceed after the immediate assessment of the tax
     to collect the tax by levy and distraint on the bankrupt's
     property and could seize and sell assets in which the
     bankrupt had an interest.

     As the court in Abel v. Campbell, 334 F.2d 339, 341 (5th

Cir. 1964), explained, the pre-1980 section 6871 was meant to

take jurisdiction of a pending case from the Tax Court.

     once a tax claim has been asserted and allowed in a
     bankruptcy proceeding * * * neither the language of the
     Code nor the sense of the situation suggests that any
     of the procedure of section 6213 again becomes
     prerequisite to the establishment and collection of
     that particular tax liability. [Id. at 342, quoting
     Cohen v. Gross, 316 F.2d 521, 523 (3d Cir. 1963)].

     This results, however, from the pre-1980 version of section

6871 and the intricacies of the Bankruptcy Act.   On the other

hand, the present Bankruptcy Code merely stays Tax Court

proceedings while the case is processed by the bankruptcy court.

See 11 U.S.C. sec. 362(a)(8), (c)(2)(C).   Thereafter, the rules

of res judicata are applicable as discussed infra.

     Furthermore, even if this Court lacked subject matter

jurisdiction, that fact would not affect the suspension of the

period of limitations for assessment.   There was still a petition

before this Court with respect to the deficiencies for 1978,

1981, and 1982.   Consequently, the period of limitations under

section 6503(a) was still tolled.   Green Spring Dairy v.

Commissioner, 208 F.2d 471 (4th Cir. 1953), affg. 18 T.C. 217
                                  - 15 -

(1952); American Equitable Assur. Co. of New York v. Helvering,

68 F.2d 46 (2d Cir. 1933), affg. 27 B.T.A. 247 (1932); Eversole

v. Commissioner, 46 T.C. 56 (1966).

       In sum, this Court still has jurisdiction over this case,

and the period of limitations on making an assessment has not

run.       We turn next to the proper disposition of the case.

Res judicata

       For purposes of our discussion here, the term "res judicata"

encompasses total res judicata or claim preclusion and partial

res judicata or issue preclusion.       See Hemmings v. Commissioner,

104 T.C. 221, 231 (1995), and cases cited therein.       "[C]laim

preclusion prevents a party from asserting a claim that has been,

or should have been, the subject of prior litigation."       Id. at

231.       Issue preclusion is "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 * * *."          Id.

at 235 (quoting 1 Restatement, Judgments 2d, sec. 27 (1982)).         We

need not differentiate between the two concepts here since all of

the issues were before the bankruptcy court.7

       7
          The meaning and scope of the doctrine of res judicata
has been described by the Supreme Court as follows:

       The general rule of res judicata applies to repetitious
       suits involving the same cause of action. It rests upon
       considerations of economy of judicial time and public policy
       favoring the establishment of certainty in legal relations.
                                                     (continued...)
                              - 16 -

      In this case, under 11 U.S.C. sec. 505(a), the bankruptcy

court determined the liability of petitioner for the Federal

taxes and additions to tax asserted in respondent's notice of

deficiency and in respondent's amended proofs of claim.

Petitioner did not dispute the underlying deficiencies, and the

court rejected the only opposition raised by petitioner to

respondent's claims when it found that petitioner was not an

"innocent spouse".

      Petitioner's motion is based upon the premise that the

bankruptcy court has resolved every issue in the matter before

us.   From this record, we agree with that premise in general.

But, petitioner then argues that the bankruptcy court's

determination of these matters terminated the jurisdiction of

this Court.

      The doctrine of res judicata "operates not as a

jurisdictional bar but by way of estoppel."   Jefferson v.

Commissioner, 50 T.C. 963, 966 (1968).   "This characteristic of

      7
       (...continued)
      The rule provides that when a court of competent
      jurisdiction has entered a final judgment on the merits of a
      cause of action, the parties to the suit and their privies
      are thereafter bound "not only as to every matter which was
      offered and received to sustain or defeat the claim or
      demand, but as to any other admissible matter which might
      have been offered for that purpose." The judgment puts an
      end to the cause of action, which cannot again be brought
      into litigation between the parties upon any ground
      whatever, absent fraud or some other factor invalidating the
      judgment. [Commissioner v. Sunnen, 333 U.S. 591, 597 (1948);
      citations omitted.]
                              - 17 -

an affirmative defense is antithetical to the principle that

questions concerning the Court's jurisdiction can be raised at

any time, even after the case is tried and briefed, and even by

the Court sua sponte."   Gustafson v. Commissioner, 97 T.C 85, 90

(1991) (citing Smith v. Commissioner, 96 T.C. 10, 13-14 (1991);

Kahle v. Commissioner, 88 T.C. 1063 n.3 (1987)).

     As our discussion indicates, however, there appears to be

little reason to continue this case.   The bankruptcy court has

decided all issues of fact and law, and we are bound to those

findings by the principle of res judicata.   That court expunged

the liability for 1978 and the additions to tax for 1978, 1981,

and 1982.   It further held that petitioner was liable for the

deficiencies for 1981 and 1982.   Consistent with the order of the

bankruptcy court, Mr. Freytag and respondent have filed a

stipulation of settled issues in which it is agreed that there is

no deficiency for 1978; there are no additions to tax for the

years 1978, 1981, and 1982; and there are deficiencies in the

amounts of $53,598 and $36,901 for the years 1981 and 1982,

respectively.
                        - 18 -

In view of the foregoing,

                            An Order and Decision will be

                    entered denying petitioner's motion

                    for summary judgment, and the

                    decision entered will be consistent

                    with the order of the bankruptcy

                    court.