Goettee v. Commissioner
| Decision Date | 25 February 2003 |
| Docket Number | Docket No. 26591-96. |
| Parties | John G. Goettee, Jr. and Marian Goettee v. Commissioner. |
| Court | U.S. Tax Court |
Matthew J. McCann, for the petitioners.
Elizabeth S. Henn and William J. Gregg, for the respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
Respondent issued a notice of determination partially disallowing petitioners' claim to abate interest with respect to underpayments for 1978, 1979, 1981, 1982, and 1983. Petitioners petitioned the Court under section 64041 to review this abatement disallowance as to all 5 years. We granted respondent's motion for partial summary judgment that respondent does not have authority to abate interest as to 1978. Goettee v. Commissioner [Dec. 52,289(M)], T.C. Memo. 1997-454. Petitioners have conceded as to 1983. As a result, only 1979, 1981, and 1982 remain before the Court in the instant case.
After concessions by both sides,2 there are two categories of issues for decision, as follows:
(1) Whether respondent's failure to abate interest for certain time periods constitutes an abuse of discretion.
(2) Whether respondent's interest computations are correct.
Some of the facts have been stipulated; the stipulations and the stipulated exhibits are incorporated herein by this reference.
When the petition was filed in the instant case, petitioners, John G. Goettee, Jr. (hereinafter sometimes referred to as John), and Marian Goettee (hereinafter sometimes referred to as Marian), husband and wife, resided in New Windsor, Maryland; their collective net worth did not exceed $2 million.
At all relevant times, John was self-employed as a dentist, and Marian was employed as the office administrator for John's dental practice. Marian is also a licensed and certified speech and language pathologist.
Petitioners filed joint Federal income tax returns for 1979, 1981, and 1982. They made their tax returns on the basis of the calendar year. Petitioners paid the entire amount of the tax liabilities shown on each of their tax returns for 1979, 1981, and 1982 before the respective tax return was required to be filed. In particular, petitioners' 1979 tax return was filed on or before April 15, 1980, and the $19,821.50 liability shown thereon was paid in full by a combination of withheld taxes ($1,135.20), estimated tax payments ($18,000), and payment with the tax return ($636.30). Petitioners' 1981 tax return was filed on or before April 15, 1982, and the $6,277 liability shown thereon was paid in full by a combination of withheld taxes ($1,135.20), estimated tax payments ($11,500), and other refundable credits ($1,095). On June 7, 1982, respondent refunded the $7,453.20 overpayment claimed on the 1981 tax return. Respondent did not pay interest on this refund for 1981. Petitioners' 1982 tax return was filed on or before April 15, 1983, and the $4,919 liability shown thereon was paid in full by a combination of withheld taxes ($1,868), estimated tax payments ($17,000), and other refundable credits ($500). On June 13, 1983, respondent refunded to petitioners $14,851.79, consisting of $14,549 plus interest thereon (for the period Apr. 15 through June 1, 1983) in the amount of $302.79 for 1982.
On the recommendation of John's father, an accountant and tax attorney, John3 acquired a limited partnership interest in The Thompson Equipment Associates partnership (hereinafter sometimes referred to as TEA) during September 1981. John acquired the interest in TEA in exchange for a $12,500 check and a $12,500 promissory note which matured on February 15, 1982. Marian issued a check on February 10, 1982, that paid the promissory note in full.
Petitioners claimed flowthrough losses from TEA on their tax returns for 1981, 1982, and 1983. Petitioners carried back "credits/losses" from 1981 to 1978 and 1979. As a result of the "credits/losses" carried back from 1981 to 1979, on June 28, 1982, respondent refunded to petitioners $10,375.38, consisting of $9,568 plus interest thereon (for the period Jan. 1 through June 16, 1982) in the amount of $807.38. Respondent did not credit petitioners' 1979 account with interest for the period June 16 through June 28, 1982. On June 13, 1983, when respondent refunded to petitioners the overpayment petitioners claimed on their 1982 tax return, respondent did not credit petitioners' 1982 account with interest for the period June 1 through June 13, 1983.
On October 15, 1986, respondent sent to petitioners a notice of deficiency, in which respondent made adjustments on account of TEA items and determined deficiencies and additions to tax as shown in table 1.
Table 1
Additions to Tax
Sec. Sec
Year Deficiency 6653(a)(1) 6653(a)(2) Sec. 6659
1978 ....... $ 14,607 $730 -- $4,382
1979 ....... 8,208 410 -- 2,462
1981 ....... 9,537 477 1 2,861
1982 ....... 8,129 406 2 2,439
1 50 percent of the interest due on $9,537
2 50 percent of the interest due on $8,129
Respondent also determined that petitioners' deficiencies are subject to an increased rate of interest under section 6621(c) ().4
On November 3, 1986, petitioners filed a petition with this Court seeking a redetermination of their tax liabilities for 1978, 1979, 1981, and 1982. John R. Shematz (hereinafter sometimes referred to as Shematz), who was in business with John's father, signed the petition and initially represented petitioners in this Court.
Petitioners' case was assigned to a group of cases collectively referred to as the Barrister Books project (hereinafter sometimes referred to as Barrister). The Barrister partnerships started to be formed in 1981. Andrew M. Winkler (hereinafter sometimes referred to as Winkler) served as lead counsel for the Commissioner in the Barrister cases. Sometime around 1986, the Commissioner extended a uniform settlement offer to any Barrister investor. The Commissioner withdrew the offer on or about May 16, 1989.
Another tax case project, the Bromwell Book project (hereinafter sometimes referred to as Bromwell), was active at the same time as Barrister. The Bromwell partnerships started to be formed in 1978 or 1979. Winkler served as the Commissioner's lead counsel for Bromwell; he considered Bromwell to be a predecessor of Barrister.
For the years before the enactment of the so-called "partnership litigation" provisions in the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA 1982), Pub. L. 97-248, 96 Stat. 324,5 efforts were made to (1) group related partnership cases, (2) designate one or more cases in a group as "lead cases", and (3) try to have the parties in other cases in the related partnership group agree to be bound by the outcome of the lead cases. On January 2, 1986, Special Trial Judge Pate issued a Memorandum Sur Order which, the parties have stipulated, established Leger v. Commissioner, Docket No. 18640-84, as "a test case with regard to all of the Bromwell Book cases."
On September 22, 1986, Shematz notified petitioners that respondent intended to seek continuances in the Bromwell cases pending resolution of Leger v. Commissioner, supra, and that the decision in Leger v. Commissioner, supra, was likely to be appealed and would thus delay the outcome of their case for several years.
On March 18, 1987, we filed our opinion in Leger v. Commissioner [Dec. 43,780(M)], T.C. Memo. 1987-146, affd. without published opinion 860 F.2d 435 (5th Cir. 1988), wherein we sustained the Commissioner's determinations that the taxpayers were not entitled to claim their distributive share of the partnership investment credit and losses, because the partnership was not engaged in for-profit activities under section 183.
On May 15, 1987, petitioners' case was assigned to Special Trial Judge Pate for trial or other disposition.
On March 20, 1989, Special Trial Judge Pate invited Winkler and the Barrister cases taxpayers or their counsel (including petitioners' case) to a pretrial conference scheduled for June 16, 1989, in order to consider and decide a number of procedural matters, including "The choice of lead cases (a maximum of four)".
Winkler determined that, if the Tax Court was going to try a Barrister case, then the Commissioner and the taxpayers should follow the Tax Court's opinion, rather than the Commissioner's settlement package. As a result, the uniform settlement package was withdrawn a month before the scheduled pretrial conference.
At the June 16, 1989, pretrial conference, representatives of the promoters for the Barrister partnerships suggested that it would be better to have a promoter-funded TEFRA partnership case as a lead Barrister case. Special Trial Judge Pate agreed with that approach. That pretrial conference did not result in the selection of a Barrister lead case.
During September 1989, Barrister Equipment Assocs. Series #115 v. Commissioner, Docket No. 23263-89 () was selected as the lead case for Barrister. Series 115 involved 1983 and 1984; it was a TEFRA partnership case.
In late 1989, the Court was informally advised that Shematz had died. Thereafter, petitioners proceeded pro se.
On October 20, 1989, a motion was filed in Series 115 to reassign that case from Special Trial Judge Pate to a Presidentially appointed Judge of this Court. The motion was based on contentions that assignment of that case to a Special Trial Judge was not authorized by statute and that it violated the United States Constitution. The motion also requested that, if the...
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