Court Opinion

ID: 9442884
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:02:45.991505+00
Date Added: 2024-06-11T17:29:15.015889
License: Public Domain

United States Tax Court

                             161 T.C. No. 1

                     JOSEPH E. ABE, DDS, INC.,
                            Petitioner

                                    v.

            COMMISSIONER OF INTERNAL REVENUE,
                        Respondent

                              —————

Docket No. 20378-22R.                              Filed August 3, 2023.

                              —————

             P established a retirement plan for its employees.
      R selected P’s retirement plan for audit. R issued a
      determination letter revoking the plan’s qualification.
      P petitioned the Court pursuant to I.R.C. § 7476 seeking a
      declaratory judgment. R timely filed an Answer. P moved
      to dismiss the case. R did not object to the Motion to
      Dismiss.

             Held: The Court has discretion to grant motions for
      voluntary dismissal in nondeficiency cases filed pursuant
      to I.R.C. § 7476.

             Held, further, the Court will dismiss the case.

                              —————

Daniel W. Layton, for petitioner.

Edward T. Mitte, for respondent.

                           Served 08/03/23
                                           2

                                      OPINION

       FOLEY, Judge: The sole issue for decision is whether the Court,
on petitioner’s Motion, may dismiss a petition for declaratory judgment
filed pursuant to section 7476. 1

                                    Background

       Petitioner, Joseph E. Abe, DDS, Inc., is a California corporation.
Petitioner created the Joseph E. Abe, DDS, Inc., Retirement Plan (the
plan) which became effective on July 1, 1982. On September 9, 1987, the
Internal Revenue Service sent petitioner a favorable determination
letter that informed petitioner that the plan met the requirements of
section 401(a). On August 7, 2019, petitioner terminated the plan,
effective January 1, 2019.

       In a letter dated November 25, 2020, respondent notified
petitioner that the plan was selected for audit. The audit initially
covered 2018 and 2019 but was later extended to include 2012 through
2017. On October 27, 2021, respondent sent petitioner a Revenue Agent
Report with the results of the audit and revoked the plan’s qualification
relating to 2012 through 2019. In a final revocation letter dated June
21, 2022, respondent informed petitioner that the plan did not meet the
requirements of section 401(a).

      On September 16, 2022, petitioner timely filed a Petition with the
Court seeking a declaratory judgment pursuant to section 7476 that
from 2012 through 2019 the plan was a qualified retirement plan. The
Court, on November 17, 2022, filed respondent’s timely Answer. On
January 14, 2023, petitioner moved to dismiss the Petition. Respondent
did not object to the Motion.

                                     Discussion

       The Tax Court is a court of limited jurisdiction and may exercise
jurisdiction only to the extent authorized by Congress. Naftel v.
Commissioner, 85 T.C. 527, 529 (1985). The Court primarily hears cases
involving petitions to redetermine deficiencies. See § 6213; Mainstay
Bus. Sols. v. Commissioner, 156 T.C. 98, 99 (2021). The Court also hears
certain nondeficiency cases, including collection actions pursuant to

       1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C. (Code), in effect at all relevant times, and Rule references are to
the Tax Court Rules of Practice and Procedure.
                                    3

sections 6320 and 6330, innocent spouse determinations pursuant to
section 6015, whistleblower award determinations pursuant to section
7623(b)(4), and interest abatement actions pursuant to section 6404(h).
Mainstay, 156 T.C. at 99. In addition the Court’s jurisdiction extends to
reviewing the Commissioner’s decisions regarding the initial or
continuing qualification of a retirement plan. § 7476(a).

        When the Court grants a motion to dismiss, unless the dismissal
is for lack of jurisdiction, section 7459 requires the Court to sustain the
Commissioner’s determination set forth in the notice of deficiency.
§ 7459(d). This Court has held that taxpayers may not move to withdraw
a petition in deficiency redetermination cases. See Estate of Ming v.
Commissioner, 62 T.C. 519, 522–23 (1974) (holding section 7459(d)
applies in cases filed pursuant to section 6213 and mandates an entry of
decision in the Commissioner’s favor).

       In nondeficiency cases filed pursuant to Code sections other than
section 6213, this Court has previously granted taxpayers’ motions to
dismiss or withdraw petitions. See generally Stein v. Commissioner, 156
T.C. 167 (2021) (administrative costs pursuant to section 7430(f)(2));
Mainstay, 156 T.C. at 100 (failure to abate interest pursuant to section
6404(h)); Jacobson v. Commissioner, 148 T.C. 68 (2017) (whistleblower
awards pursuant to section 7623(b)(4)); Davidson v. Commissioner, 144
T.C. 273 (2015) (innocent spouse determinations pursuant to section
6015(e)); Wagner v. Commissioner, 118 T.C. 330 (2002) (collection
actions pursuant to sections 6320(c) and 6330(d)). Section 6213 was not
applicable to these nondeficiency cases and therefore section 7459(d) did
not mandate entry of decisions in the Commissioner’s favor upon the
dismissals. See, e.g., Stein, 156 T.C. at 169.

       Because there is no Tax Court Rule on motions for voluntary
dismissal, the Court may look to the Federal Rules of Civil Procedure
(FRCP). See Rule 1(b). FRCP 41 permits plaintiffs to voluntarily dismiss
a civil action without a court order by filing either (1) a notice of
dismissal before the opposing party serves an answer or a motion for
summary judgment or (2) a stipulation of dismissal signed by all parties
who have appeared. FRCP 41(a)(1)(A). In all other circumstances, a
court may dismiss a case “at the plaintiff’s request only by court order,
on terms that the court considers proper.” FRCP 41(a)(2). The granting
of a motion pursuant to FRCP 41(a)(2) is without prejudice, unless the
Court orders otherwise. Davidson, 144 T.C. at 276; Settles v.
Commissioner, 138 T.C. 372, 375 (2012). Accordingly, a voluntary
dismissal is generally treated as if the action had never been filed. See
                                    4

Humphreys v. United States, 272 F.2d 411, 412 (9th Cir. 1959); Wagner,
118 T.C. at 333–34.

       FRCP 41(a)(2) permits voluntary dismissal at a court’s discretion,
and the caselaw interpreting the provision provides that a court should
grant such dismissal “unless the defendant will suffer clear legal
prejudice.” Wagner, 118 T.C. at 333 (quoting McCants v. Ford Motor Co.,
781 F.2d 855, 856–57 (11th Cir. 1986)). In considering whether the
nonmoving party would be prejudiced by the granting of a motion to
voluntarily dismiss, the Court must “weigh the relevant equities and do
justice between the parties in each case.” Id. (quoting McCants, 781 F.2d
at 857). Where the Commissioner does not object to the granting of a
taxpayer’s motion to dismiss, the Court has concluded that he will not
be prejudiced. See, e.g., Stein, 156 T.C. at 170; Wagner, 118 T.C. at 331,
333–34. The Court also considers whether the statutory period for filing
a petition has expired and has granted motions to voluntarily dismiss
where the period for filing had expired. E.g., Jacobson, 148 T.C.
at 70–71; Wagner, 118 T.C. at 333–34.

       Consistent with our holdings in Stein, Mainstay, Jacobson,
Davidson, and Wagner, we hold it is within the Court’s discretion to
grant motions for voluntary dismissal in nondeficiency cases filed
pursuant to section 7476. Respondent does not object to the granting of
petitioner’s Motion, the statutory period for refiling a petition has
expired, and we conclude he would not be prejudiced by the dismissal.
Accordingly, we will grant the Motion and dismiss the case without
prejudice.

      An order granting petitioner’s Motion to Dismiss will be entered.