Court Opinion

ID: 4156567
Source: CourtListenerOpinion
Date Created: 2017-03-29 20:01:01.370501+00
Date Added: 2024-06-11T07:46:40.613465
License: Public Domain

FILED
                             NOT FOR PUBLICATION
                                                                            MAR 29 2017
                      UNITED STATES COURT OF APPEALS                    MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS

                             FOR THE NINTH CIRCUIT

JERRY L. KEENAN; CYNTHIA S. )                 No. 15-70997
KEENAN,                     )
                            )                 Tax Ct. No. 8917-09
    Petitioners-Appellants, )
                            )                 MEMORANDUM*
    v.                      )
                            )
COMMISSIONER OF INTERNAL )
REVENUE,                    )
                            )
    Respondent-Appellee,    )
                            )

                            Appeal from a Decision of the
                              United States Tax Court

                             Submitted March 14, 2017**
                              San Francisco, California

Before: FERNANDEZ, MURGUIA, and WATFORD, Circuit Judges.

      Jerry and Cynthia Keenan (hereafter “Taxpayers”) appeal the decision1 of

the United States Tax Court that determined the deficiency in their income tax for

      *
       This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
      **
      The panel unanimously finds this case suitable for decision without oral
argument. Fed. R. App. P. 34(a)(2).
      1
          Order and Decision dated January 5, 2015.
2003 and the amount of the accuracy-related penalty thereon issued after the Tax

Court had entered an order2 precluding them from filing a motion to be relieved

from the effect of a stipulation. We vacate the decision and remand for further

proceedings.

      As relevant here, Taxpayers entered into a stipulation with the

Commissioner of Internal Revenue (“Commissioner”) that they would be bound by

the ultimate decision in the then pending case of Curcio v. Commissioner, Tax

Court Docket No. 1768-07, regarding the manner of calculation of the adjustment

and redetermination of “the tax consequences of participation in the ‘Benistar 419

Advantage Plan.’” In that stipulation, they also agreed that “the applicability of the

penalty under I.R.C. § 6662(a)” would be determined “in the same manner that

such penalty” was determined in Curcio. After the issues were decided in a

manner adverse to their position,3 Taxpayers sought to be relieved from their

stipulation insofar as it related to the penalty. The parties agree that a taxpayer can

be relieved from the effect of a stipulation when “manifest injustice would result.”

Bail Bonds by Marvin Nelson, Inc. v. Comm’r, 820 F.2d 1543, 1547 (9th Cir.

      2
          Order dated December 3, 2014.
      3
       See Curcio v. Comm’r, 689 F.3d 217, 229 (2d Cir. 2012), cert. denied, __
U.S. __, 133 S. Ct. 2826, 186 L. Ed. 2d 884 (2013).

                                           2
1987); see also Tax Ct. R. 91(e); cf. United States v. Baker, 790 F.2d 1437, 1438

(9th Cir. 1986) (defining manifest injustice in the area of “postsentencing

motions”).

      Here, in its order of December 3, 2014, the Tax Court determined that any

motion by the Taxpayers to set aside the stipulation would be untimely because of

their failure to comply with its order “served January 23, 2014, in which they were

ordered to show cause in writing why decision should not be entered based on the

stipulation to be bound by the Curcio case.” That foreclosed the filing of a motion

to set aside the stipulation. However, the Tax Court overlooked the fact that the

January 23, 2014, order directed that Taxpayers’ response should be filed on a date

after the Commissioner filed “a proposed decision.” The Commissioner did not

file that proposed decision before the December 3, 2014, order was issued. Thus,

the Tax Court’s decision was based upon a clear factual error, and resulted in an

abuse of discretion. See Bail Bonds, 820 F.3d at 1547; see also United States v.

Hinkson, 585 F.3d 1247, 1261–63 (9th Cir. 2009) (en banc). Because the Tax

Court’s order essentially precluded the Taxpayers from presenting their position to

that court in any meaningful way,4 we are unable to hold that they did not suffer

      4
        As the Tax Court noted in its January 5, 2015, order, it based its decision on
the fact that the Taxpayers did not file a motion, detail unusual facts, or file
                                                                          (continued...)

                                           3
prejudice from the court’s error.

      VACATED and REMANDED. Costs are to be taxed against the

Commissioner.

      4
       (...continued)
affidavits. While the Taxpayers did submit some limited argument about the
merits of their proposed position on the stipulation, the Tax Court’s order of
December 3, 2014, left the Tax Court with a record from which it did not and could
not “detail its reasoning” in that regard. See Estate of Trompeter v. Comm’r, 279
F.3d 767, 770 (9th Cir. 2002).

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