Court Opinion

ID: 4333782
Source: CourtListenerOpinion
Date Created: 2018-11-14 01:21:36.241902+00
Date Added: 2024-06-11T14:47:35.219866
License: Public Domain

118 T.C. No. 18

                UNITED STATES TAX COURT

 RICHARD T. WAGNER AND MARGIE WAGNER, Petitioners
  v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 7186-00L.              Filed April 15, 2002.

     Ps petitioned the Court under sec. 6320(c),
I.R.C., to review a notice of a Federal tax lien placed
upon their property for 1991 and 1996 Federal income
taxes. Ps contend that they are entitled to carry back
to 1991 a net operating loss that they incurred in
1994. Ps now move the Court to dismiss this case.
Held: We shall grant Ps’ motion. Estate of Ming v.
Commissioner, 62 T.C. 519 (1974), distinguished.

Keith H. Johnson, for petitioners.

William R. McCants, for respondent.
                                 -2-

                               OPINION

     LARO, Judge:    Petitioners petitioned the Court under section

6320(c) to review a notice of a Federal tax lien placed upon

their property.    The lien arose from an assessment of Federal

income taxes of $412,787.15 and $844.16 for 1991 and 1996,

respectively.    Petitioners now, after being served with

respondent’s answer and respondent’s motion for summary judgment,

move the Court to dismiss this case without prejudice to their

right to seek in Federal District Court a determination that they

incurred a net operating loss (NOL) in 1994 that may be carried

back to 1991.1    We shall grant petitioners’ motion.2   Unless

otherwise noted, section references are to the Internal Revenue

Code in effect for the relevant years, Rule references are to the

Tax Court Rules of Practice and Procedure, and rule references

are to the Federal Rules of Civil Procedure.    Petitioners resided

in Maitland, Florida, when their petition was filed.

     1
       Respondent argued in his motion for summary judgment that
res judicata barred petitioners from establishing an NOL in 1994
that could be carried back to 1991. The Court determined
petitioners’ income tax liability for 1991 in Estate of Wagner v.
Commissioner, T.C. Memo. 1998-338.
     2
       In so doing, we, of course, leave to the District Court to
determine whether petitioners are entitled to any relief there,
and, if so, what type of relief.
                                  -3-

     The parties agree that the Court may dismiss this case

pursuant to petitioners’ request.3      We distinguish this dismissal

from our jurisprudence that holds that taxpayers may not withdraw

a petition under section 6213 to redetermine a deficiency.      That

jurisprudence stems from the seminal case of Estate of Ming v.

Commissioner, 62 T.C. 519 (1974).

     In Estate of Ming, the taxpayers moved the Court to allow

them to withdraw their petition for a redetermination of their

1964, 1965, and 1966 Federal income taxes.      Presumably, they made

their motion so that they could refile their lawsuit in District

Court.    We denied the motion.   We noted that, whenever this Court

dismisses a case on a ground other than lack of jurisdiction, we

are generally required by section 7459(d)4 to enter a decision

finding that the deficiency in tax is the amount determined in

the notice of deficiency.    Id. at 522.    We observed that entering

such a decision would serve to preclude the taxpayers from

litigating the case on its merits in District Court.      Id. at

     3
       Respondent does not object to dismissal without prejudice
to petitioners’ filing a refund suit in District Court but takes
the position that the dismissal should be with prejudice to their
refiling a petition under sec. 6320(c) in our own Court based on
the same claim as their existing petition.
     4
         Sec. 7459(d) provides in relevant part:

          SEC. 7459(d). Effect of Decision Dismissing
     Petition.--If a petition for a redetermination of a
     deficiency has been filed by the taxpayer, a decision
     of the Tax Court dismissing the proceeding shall be
     considered as its decision that the deficiency is the
     amount determined by the Secretary. * * *
                                -4-

522-523.   We noted that the Commissioner had been prejudiced by

the taxpayers’ filing of the petition by virtue of the fact that

he was precluded from assessing and collecting the taxes which he

had determined the taxpayers owed.    Id. at 524.

     In Estate of Ming v. Commissioner, supra at 521-522, we also

relied on our opinion in Dorl v. Commissioner, 57 T.C. 720

(1972), affd. 507 F.2d 406 (2d Cir. 1974), which held that a

taxpayer may not remove a case from this Court in order to refile

it in District Court.   We observed in Dorl that the filing of a

petition in this Court gives us exclusive jurisdiction under

section 6512(a), which acts to bar a refund suit in the District

Court for the same tax and the same year.   We noted that this

observation was supported by the legislative history accompanying

the enactment of the predecessors of sections 6512(a) and

7459(d).   That history states that, when a taxpayer petitions the

Board of Tax Appeals, the Board’s decision, once final, settles

the taxpayer’s tax liability for the year in question even if the

decision resulted from a dismissal requested by the taxpayer.

Estate of Ming v. Commissioner, supra at 522.

     We believe that our holding in Estate of Ming is

inapplicable to the setting at hand where petitioners have

petitioned this Court under section 6320(c).    Section 7459(d)

applies specifically to a petition that is filed for a

redetermination of a deficiency and makes no mention of a

petition that is filed under section 6320(c) to review a
                                    -5-

collection action.       Section 6320 was added to the Code as part of

the Internal Revenue Service Restructuring and Reform Act of

1998, Pub. L. 105-206, sec. 3401, 112 Stat. 685, 746, and that

act made no amendment to section 7459(d), which finds its roots

in section 906(c) of the Revenue Act of 1926, ch. 27, 44 Stat.

107.       Nor do we know of any provision in the Code that would

require us, upon a dismissal of a collection action filed under

section 6320(c), to enter a decision for the Commissioner

consistent with the underlying notice of determination.       Whereas

the relevant legislative history supported our holding in Dorl v.

Commissioner, supra, we are unaware of any legislative history

that would support a holding contrary to that which we reach

herein.

       Our granting of petitioners’ motion is supported by rule

41(a)(2),5 which we consult given the absence in our Rules of a

       5
           In relevant part, rule 41 provides:

       Rule 41.     Dismissal of Actions

               (a) Voluntary Dismissal: Effect Thereof.

                    (1) By Plaintiff; by Stipulation. * * *
               an action may be dismissed by the plaintiff
               without order of court (i) by filing a notice
               of dismissal at any time before service by
               the adverse party of an answer or of a motion
               for summary judgment, whichever first occurs,
               or (ii) by filing a stipulation of dismissal
               signed by all parties who have appeared in
               the action. Unless otherwise stated in the
               notice of dismissal or stipulation, the
               dismissal is without prejudice, except that a
                                                        (continued...)
                                -6-

specific provision as to this matter.6    See Rule 1.   Under rule

41(a)(2), a plaintiff is not entitled as a matter of right to a

dismissal after the defendant has served a motion for summary

judgment but is allowed such a dismissal in the sound discretion

of the court.   Pontenberg v. Boston Scientific Corp., 252 F.3d

1253, 1255-1256 (11th Cir. 2001); LeCompte v. Mr. Chip, Inc.,

     5
      (...continued)
          notice of dismissal operates as an
          adjudication upon the merits when filed by a
          plaintiff who has once dismissed in any court
          of the United States or of any state an
          action based on or including the same claim.

               (2) By Order of Court. Except as
          provided in paragraph (1) of this subdivision
          of this rule, an action shall not be
          dismissed at the plaintiff’s instance save
          upon order of the court and upon such terms
          and conditions as the court deems proper.
          * * * Unless otherwise specified in the
          order, a dismissal under this paragraph is
          without prejudice.

                *    *    *    *      *   *    *

          (d) Costs of Previously-Dismissed Action. If a
     plaintiff who has once dismissed an action in any court
     commences an action based upon or including the same
     claim against the same defendant, the court may make
     such order for the payment of costs of the action
     previously dismissed as it may deem proper * * *.
     6
       Our Rule on dismissals, Rule 123(b), relates to dismissals
“For failure of a petitioner properly to prosecute or to comply
with these Rules or any order of the Court or for other cause
which the Court deems sufficient”. Pursuant to that Rule, “the
Court may dismiss a case at any time and enter a decision against
the petitioner.” Id. Rule 123(b) does not apply to the setting
at hand where petitioners voluntarily move the Court to dismiss
their petition filed under sec. 6320(c) to review a notice of
Federal tax lien.
                                 -7-

528 F.2d 601 (5th Cir. 1976).   In general, a court “should” grant

a dismissal under rule 41(a)(2) “unless the defendant will suffer

clear legal prejudice, other than the mere prospect of a

subsequent lawsuit, as a result.”      McCants v. Ford Motor Co.,

Inc., 781 F.2d 855, 856-857 (11th Cir. 1986).     “The crucial

question to be determined is, Would the defendant lose any

substantial right by the dismissal.”      Durham v. Fla. E. Coast Ry.

Co., 385 F.2d 366, 368 (5th Cir. 1967).     In making this

determination, a court must “weigh the relevant equities and do

justice between the parties in each case, imposing such costs and

attaching such conditions to the dismissal as are deemed

appropriate.”   McCants v. Ford Motor Co., Inc., supra at 857.

     The statutory period in which petitioners could refile their

lawsuit in this Court appears to have expired.     Section

6330(d)(1) requires that a petition to this Court be filed within

30 days of the determination that is the subject of section 6320.

See also sec. 6320(c).   The rule is deeply embedded in the

jurisprudence of Federal law that the granting of a motion to

dismiss without prejudice is treated as if the underlying lawsuit

had never been filed.    Monterey Dev. Corp. v. Lawyer's Title Ins.

Corp., 4 F.3d 605, 608 (8th Cir. 1993); Brown v. Hartshorne Pub.

Sch. Dist., 926 F.2d 959, 961 (10th Cir. 1991); Robinson v.

Willow Glen Acad., 895 F.2d 1168, 1169 (7th Cir. 1990); Long v.

Board of Pardons and Paroles, 725 F.2d 306 (5th Cir. 1984);

Cabrera v. Municipality of Bayamon, 622 F.2d 4, 6 (1st Cir.
                                -8-

1980); Humphreys v. United States, 272 F.2d 411, 412 (9th Cir.

1959); A.B. Dick Co. v. Marr, 197 F.2d 498, 502 (2d Cir. 1952);

Md. Cas. Co. v. Latham, 41 F.2d 312, 313 (5th Cir. 1930).       We

conclude that respondent is not prejudiced in maintaining the

subject collection action against petitioners as if the instant

proceeding had never been commenced.

     Accordingly, in the exercise of the Court’s discretion, and

after weighing the relevant equities including the lack of a

clear legal prejudice to respondent, we shall grant petitioners’

motion.   In accordance with the foregoing,

                                      An appropriate order of

                               dismissal will be entered granting

                               petitioners’ motion to dismiss.