Abeson v. Commissioner

• Decision Date: 11 April 1990
• Docket Number: Docket No. 19577-81,18015-82.,16463-82,16504-82,14410-82,16381-82
• Citation: 59 TCM (CCH) 391,1990 TC Memo 190
• Parties: Gregory H. Abeson and Arline H. Abeson, et al. v. Commissioner.
• Court: U.S. Tax Court

59 TCM (CCH) 391

1990 TC Memo 190

T.C. Memo. 1990-190.

Gregory H. Abeson and Arline H. Abeson, et al.¹ v. Commissioner.

Docket Nos. 19577-81, 14410-82, 16381-82, 16463-82, 16504-82, 18015-82.

United States Tax Court.

Filed April 11, 1990.

John W. Wegge, 225 W. Broadway, Glendale, Calif., for the petitioners. Ross Paulson, Monica Melgarejo, and John Kent, for the respondent.

Memorandum Findings of Fact and Opinion

FAY, Judge:

This case was heard by Special Trial Judge Peter J. Panuthos pursuant to the provisions of section 7443A of the Code.² The Court agrees with and adopts the Special Trial Judge's opinion, which is set forth below.

Opinion of the Special Trial Judge

Findings of Fact

PANUTHOS, Special Trial Judge:

Respondent issued statutory notices of deficiency in these consolidated cases which determined deficiencies in petitioners' Federal income taxes as follows:

                Date
                Addition Notice of
                Docket                              -----------------------         Deficiency
                Petitioners No. Year Deficiency Sec. 6651(a) Sec. 6653(a) Issued
                Gregory H. Abeson & ...........  19577-81    1974     $ 1,070.90          -          $54        4/15/81
                Arline H. Abeson                             1975     $   929.10          -          $46
                Gregory H. Abeson & ...........  14410-82    1978     $ 1,235.00          -            -        4/14/82
                Arline H. Abeson                             1979     $ 1,307.00
                Stanley Downs & ...............  16381-82    1976     $ 3,297.00          -            -         4/9/82
                Janae Downs                                  1977     $ 3,374.00          -            -
                                                             1978     $ 1,684.00          -            -
                                                             1979     $ 9,339.00          -            -
                                                             1980     $10,001.50          -            -
                Thomas A. Duffy & .............  16463-82    1975     $ 2,901.00          -            -         4/7/82
                Ann D. Duffy                                 1976     $ 3,776.00          -            -
                                                             1977     $ 5,253.00          -            -
                                                             1978     $ 8,722.00          -            -
                                                             1979     $ 7,076.00          -            -
                                                             1980     $ 5,039.00          -            -
                Robert Pease & ................  16504-82    1975     $ 3,034.00          -            -         4/7/82
                S. Madalene Pease                            1976     $ 4,165.00          -            -
                                                             1977     $ 4,137.00          -            -
                                                             1978     $ 5,615.00          -            -
                                                             1979     $ 9,231.06          -            -
                                                             1980     $13,622.69       $250.60         -
                Delores P. Rivera .............  18015-82    1976     $ 1,954.00          -            -         4/14/82
                                                             1977     $ 3,144.00          -            -
                                                             1978     $ 5,283.00          -            -
                                                             1979     $ 5,920.00          -            -
                                                             1980     $ 5,408.00          -            -
                

These dockets have been selected by counsel for the parties as representative of various fact patterns involving a much larger group of cases. Counsel for the parties have executed a stipulation with respect to test case selection wherein they agreed to litigate common issues in these representative cases. Counsel further agreed to execute stipulations to be bound with respect to those cases not consolidated as part of the test group.

History of the Litigation

During 1981 and 1982, respondent issued more than 300 notices of deficiency to individuals who were clients of the law firm of Berg & Allen (Berg & Allen or the Firm) in Los Angeles. Respondent determined in the notices that petitioners were not entitled to losses, carryback losses, and investment credits generated by investments in various limited partnerships created to acquire and distribute master recordings. More than 300 petitions were filed in response to the notices of deficiency.

A pre-trial hearing was held in these cases in February 1985 for the purpose of selecting a test case or cases. At that hearing the Court heard from a number of attorneys representing some of the more than 300 petitioners. Counsel advised the Court of the many preliminary problems existing which were an impediment to setting these cases for an early trial. On October 25, 1985, the Court ordered all discovery be completed by February 10, 1986.

Despite the Order of October 25, 1985, the Court, recognizing some of the rather complex factual and logistical problems in these cases, considered petitioners' motions to compel discovery filed March 31, 1986. After additional preliminary hearings, the Court on May 11, 1987, issued Orders and Memoranda Sur Order relating to petitioners' interrogatories and request for documents. The Memoranda Sur Order dealt with issues of respondent's objections, including relevancy, Grand Jury, and certain privileges. The Court ordered respondent to comply with the discovery requests except to the extent petitioners sought Grand Jury information which was not available to respondent's counsel. The Court also scheduled a further hearing in order to allow respondent to provide in camera responses with respect to certain documents to which respondent claimed a privilege.

In the Orders dated May 11, 1987, the Court ordered respondent to turn over many documents to petitioners. Numerous documents were turned over to petitioners as a result. At the hearing held on June 18, 1987, respondent provided some documents to the Court in camera. In an Order dated August 18, 1987, the Court protected 13 groups of documents from disclosure.

This litigation has also been the subject matter of other pretrial motions and a number of preliminary opinions. See for example Naftel v. Commissioner Dec. 42,414, 85 T.C. 527 (1985); Rosenberg v. Commissioner Dec. 42,418(M), T.C. Memo. 1985-514; Cornick v. Commissioner Dec. 42,417(M), T.C. Memo. 1985-513. In March 1986 the parties executed Stipulations With Respect to Test Case Selections. The stipulation stated as follows:

Petitioners and respondent, through their respective Counsel, hereby stipulate and agree:

1. These cases are part of a group of approximately 325 cases referred to as the "Berg and Allen group" which have been assigned to Special sic Judge Panuthos for handling.

2. The petitioners' counsel is the counsel of record in approximately 210 of the Berg and Allen group of cases.

3. The petitioners and the respondent agree that a common issue remaining which requires a decision by the Court in these cases involves whether or not the petitioners actually or constructively received the refund checks that were issued by the respondent to the petitioners for the taxable years at issue in this case (hereinafter referred to as the refund check issue).

4. The petitioners and the respondent have agreed that there will be the following four categories of test cases:

a. Those cases where the taxpayers signed a Form entitled "Verification of Funds or Verification of Return and Receipt" and a Form 1045 or Form 1040X.

b. Those cases where the taxpayers signed a document entitled "Verification of Funds or Verification of Return and Receipt" and Charles Berg or a member of the law firm of Berg and Allen signed a Form 1045 or Form 1040X.

c. Those cases where the taxpayers did not sign a document entitled "Verification of Funds or Verification of Return and Receipt" but the taxpayers did sign the Form 1045 or Form 1040X.

d. Those cases where the taxpayers did not sign a document entitled "Verification of Funds or Verification of Return and Receipt" and Charles Berg or a member of the law firm of Berg and Allen signed a Form 1045 or Form 1040X.

e. Those cases where the taxpayer signed the "Verification of Funds or Verification of Return and Receipt" and the Form 1045, Form 1040X or Form 1040 is lost or unsigned.

f. Those cases where one or more government refund checks can not be located.

5. The petitioners and the respondent agree that all of the 210 cases of which John Wegge, Esq. is the counsel of record can be grouped into the four categories sic set forth in paragraph 5. sic above.

6. Selection has been made of at least one case in each of the four sic aforementioned categories by the parties.

7. The petitioners' counsel and respondent's counsel are filing a motion to consolidate the cases set forth herein for trial, briefing and opinion concurrently with this stipulation.

8. The petitioners and respondent agree that the parties will sign and file with the Court a stipulation to be bound with respect to all the cases represented by the petitioners' counsel which are not part of the motion to consolidate filed concurrently herewith.

Attorney Wegge (Wegge) executed more than 150 such stipulations with respect to petitioners represented by him. Similar stipulations were executed on behalf of approximately 50 petitioners by attorneys Joseph F. Moore and Jonathan Cole. Based on the representations in the stipulations, the Court consolidated two groups of cases. By orders dated January 7, 1988, the two groups of cases were set for trial for June 14, 1988. One group is the instant six dockets³ in which petitioners are represented by Wegge. The second group consisted of nine dockets in which petitioners were represented by attorneys Cole and Moore.

The two groups of cases were called for trial on June 14, 1988. With respect to the group of petitioners represented by attorneys Cole and Moore, the parties advised that settlement negotiations...