Cloes v. Comm'r of Internal Revenue

• Decision Date: 23 November 1982
• Docket Number: Docket No. 9971-80.
• Citation: 79 T.C. 933
• Court: U.S. Tax Court
• Parties: GLENN D. CLOES and MICHAL CLOES, PETITIONERS v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT

79 T.C. 933

GLENN D. CLOES and MICHAL CLOES, PETITIONERS

v.COMMISSIONER of INTERNAL REVENUE, RESPONDENT

Docket No. 9971-80.

United States Tax Court

Filed November 23, 1982.

Petitioners submitted a Rule 155 computation which sought to raise issues covered neither in the pleadings nor at the trial, most significantly the right to income average. In connection therewith, petitioners filed an application for Rule 155 hearing, a “Supplemental Statement in Support of Previously Submitted Rule 155 Computation,” and a “Motion for Leave to Amend Petition.” Held: Petitioners' motions for a Rule 155 hearing and to amend their petition will be denied. The issues raised by petitioners, particularly the claim in respect of income averaging, constitute new issues which may not be raised in a Rule 155 proceeding. Allan P. Harris, for the petitioners.

Charles P. Hanfman, for the respondent.

OPINION

TANNENWALD , Chief Judge:

The trial of this case took place on March 2, 1981. Petitioners appeared pro se. The taxable years involved are 1976, 1977, and 1978. The only items which were placed in dispute by the pleadings, and which were the subject matter of the trial involved, were whether: (1) Certain income was taxable to petitioners or a trust (the principal issue); (2) the trust or petitioners were entitled to depreciation and an investment credit for certain property leased by petitioners to the trust; (3) petitioners had substantiated certain itemized deductions; (4) petitioners were liable for additions to tax under section 6653(a).¹

On December 23, 1981, the Court issued its opinion (T.C. Memo. 1981-726), in which all the issues were decided in favor of respondent. The Court directed that “Decision will be entered under Rule 155,” as requested by respondent. Each of the parties thereafter filed a computation under Rule 155. Petitioners, in their computation, failed to take into account certain items which the Court had disposed of in its opinion. Additionally, petitioners sought to raise issues covered in neither the pleadings nor the trial. The most significant new issue thus raised was the assertion that the petitioners were entitled to income average for the 3 years before the Court under section 1301, et seq. In support of their claim, petitioners attached to their computation copies of amended tax returns for 1976, 1977, and 1978 purporting to show the effect of income averaging and certain other items of adjustment. On April 30, 1982, the Court entered its decision adopting respondent's computation. On that same day, Allan P. Harris, representing petitioners, entered his appearance, and on May 6, 1982, the Court received from Mr. Harris, on behalf of petitioners, an application for a Rule 155 hearing, a “Supplemental Statement in Support of Previously Submitted Rule 155 Computation,” and a “Motion for Leave to Amend Petition” to claim the benefits of income averaging and certain other adjustments. To the last document, petitioners again attached copies of amended 1976, 1977, and 1978 tax returns. On May 10, 1982, the Court vacated its decision of April 30, 1982, directed the Clerk of the Court to file the aforesaid supplemental statement and motions, and directed that a hearing be held in Atlanta, Ga., at a trial session of the Court commencing on June 7, 1982. As a result of postponements, that hearing was held on September 14, 1982.

Rule 155 is the mechanism whereby the Court is enabled to enter a decision for the dollar amounts of deficiencies and/or overpayments resulting from the disposition of the issues involved in a case where those amounts cannot readily be determined. Section (c) of that Rule provides—-

(c) Limit on Argument: Any argument under this Rule will be confined strictly to consideration of the correct computation of the deficiency, liability, or overpayment resulting from the findings and conclusions made by the Court, and no argument will be heard upon or consideration given to the issues or matters disposed of by the Court's findings and conclusions or to any new issues. This Rule is not to be regarded as affording an opportunity for retrial or reconsideration.

It goes without saying that issues which have been litigated at the trial of a case may not be relitigated in connection with the entry of decision under Rule 155. Equally clear, the usual rule is that a Rule 155 proceeding may not be used to raise a new issue. See Estate of Papson v. Commissioner, 74 T.C. 1338, 1340 (1980). Clearly, on the basis of this record, the right to income average raises a new issue. In those cases where a late claim of income averaging has been permitted, the record contained all of the evidence necessary to making such computation and the issue was raised no later than at the trial. Combs v. United States, 490 F. Supp. 19 (E.D. Ky. 1978), affd. on this issue 655 F.2d 90 (6th Cir. 1981) (District Court found that an amendment to a claim for refund presented no “new fact question,” and, in any event, the issue of income averaging was raised with the agreement of the parties (see 490 F. Supp. at 21 n. 1)); Hosking v. Commissioner, 62 T.C. 635 (1974) (only the timeliness of the election made at trial was at issue). By way of contrast, this Court rejected an attempt by a taxpayer to elect income averaging after the trial and the entry of decision ( Pereira v. Commissioner, T.C. Memo. 1976-66), and, in so doing, emphasized (see n. 2 to that opinion) that in Hosking v. Commissioner, supra, all the facts as to the correct amount of taxable income for each base period year were known. ² Compare Commissioner v. Meldrum B. Few__smith, Inc., 230 F.2d 283 (6th Cir. 1956), affg. 20 T.C. 790 (1953); Commissioner v. Wells, 132 F.2d 405 (6th Cir. 1942); Baruch v. Commissioner, 11 T.C. 96, 100 (1948), affd. per curiam 178 F.2d 402 (2d Cir. 1949).

Petitioner relies on Polizzi v. Commissioner, 247 F.2d 875 (6th Cir. 1957), affg. in part and remanding in part Nemmo v. Commissioner, 24 T.C. 583 (1955). In that case, a joint return was filed. Respondent thereafter determined that such filing was not proper and utilized rates applicable to an individual return in constructing his deficiency notice. However, the deficiency notice did not state that respondent was rejecting the joint return, and consequently the issue of joint versus individual rates was not put in issue either in the pleadings or at the trial. The taxpayer was sustained...