Korangy v. Commissioner, Docket No. 25984-87.
| Decision Date | 04 January 1989 |
| Docket Number | Docket No. 25984-87. |
| Citation | 1989 TC Memo 2,56 TCM (CCH) 989 |
| Parties | Amile and Parvane Korangy v. Commissioner. |
| Court | U.S. Tax Court |
Janet M. Meiburger and Carmen Irizarry-Diaz, for the petitioners. Wilton A. Baker, for the respondent.
Petitioners have filed a Motion to Modify or, in the Alternative, Vacate Stipulation of Agreed Adjustments as Based on a Fundamental Mistake of Fact and Therefore Not in Accordance with the Settlement Between the Parties (the "Motion"). Petitioners seek to avoid the provisions of a Stipulation of Agreed Adjustments (the "Stipulation") signed by them and respondent, and base the Motion on their contention that a single deposit to one of their bank accounts in the amount of $227,987.50 mistakenly was included twice in the Stipulation's calculation of their 1982 taxable income.
Respondent determined deficiencies in and additions to petitioners' Federal income tax as follows:
Additions to Tax Under Sections 1
Deficiency 6653(a) 6653(b)(1) 6653(b)(2) 6661
1981....................... $ 91,259 $4,563 -0- -0- -0-
1982....................... $321,094 -0- $160,547 * $31,560
1983....................... $155,593 -0- $ 79,038 * $15,559
1984....................... $308,046 -0- $155,678 * $30,805
* 50 percent of the interest payable on the underpayment attributable to fraud
In his Answer, respondent asserted as an alternative position that petitioners were liable for additions to tax under sections 6651(a)(1) and 6653(a)(1) and (2) for any of the years 1982-1984 in which the fraud additions under section 6653(b) were inapplicable.
Petitioners filed their petition while residing in Potomac, Maryland, and the case was set for trial on the May 23, 1988, trial calendar in Washington, D.C. On May 21, 1988, the parties signed the Stipulation. At the calendar call on May 23, 1988, the parties filed the Stipulation with the Court, and accordingly, no trial was held.
The Stipulation consists of adjustments schedules for the four years in issue and a one-page explanatory statement which states, "The below-signed parties agree that the attached schedule of agreed adjustments identified the manner in which all undisputed issues have been resolved." No final computation of the dollar amount of the deficiency for any year is set forth in the Stipulation. Rather, the adjustments schedules are a line-by-line list of all issues which had been in dispute for each of the taxable years 1981 through 1984. The format of the adjustments schedules, as shown by the entry for the item now in dispute, is as follows:
SOURCE AMOUNT OF ADJUSTMENT
------------------------------------------- ------------------------------------
Original Respondent Petitioner
Description Year Adjustment Concedes Concedes
Unexplained Deposits ............... 1982 637,647 93,120 544,527
The adjustments schedules showed either a partial concession by both petitioners and respondent or a total concession by one party for each year for each item of income or loss and for each of the additions to tax.
At the time the Stipulation was filed, the Court ordered that a decision document be filed by July 22, 1988. On July 21, 1988, petitioners' counsel sent a letter to respondent's counsel (the "July 21 letter") indicating that petitioners' position, inter alia, was that the agreed upon deficiency for 1982 was $270,415. After the Court extended the time for filing of a decision document, respondent filed a decision document on August 15, 1988, which contained, inter alia, a 1982 deficiency in the amount of $270,415 — the amount set forth in the July 21 letter from petitioners' counsel.
On September 6, 1988, petitioners filed several documents with the Court, including the Motion now before us. Petitioners' documents also included a proposed computation of decision showing a 1982 deficiency in the amount of $156,421. The difference between that deficiency amount and the $270,415 set forth in the July 21 letter and respondent's proposed decision is attributable to what petitioners assert is an erroneous inclusion of $227,987.50 in the "Unexplained Deposits" includable in petitioners' 1982 income. Petitioners assert that the $227,987.50 represents a single deposit which mistakenly was included twice in the "Unexplained Deposits" includable in their 1982 taxable income, and that they should not be taxed twice on that single deposit.
Respondent disagrees on the grounds that if the Stipulation contains a mistake, the mistake is unilateral on petitioners' part and not mutual, and the Court should enforce the Stipulation. In support of his position, respondent cites Stamm International Corp. v. Commissioner Dec. 44,584, 90 T.C. 315 (1988). In Stamm, shortly prior to the scheduled time for trial, the parties negotiated a settlement, which was reduced to a written agreement specifying the manner of resolving various issues. We held that a unilateral error by counsel, in the absence of misrepresentation by the adverse party, was not a sufficient ground to vacate a settlement agreement. We also held that the settlement agreement was susceptible of interpretation and enforcement in accordance with the terms set out in the writing.
We view the Stipulation herein as strikingly similar to the settlement agreement in Stamm, i.e., a document resolving the matters in dispute on an issue-by-issue basis. In addition, there is no indication in the instant case of any misrepresentation on the part of respondent. Last, the Stipulation is a written document which is susceptible of interpretation and enforcement in accordance with the terms set out therein. Thus, Stamm would seem to control the resolution of the instant case.
Petitioners, however, argue that both respondent and they were laboring under a mutual mistake of fact when the Stipulation was executed, and that under normal contract principles, it would be inequitable for the Court to hold the parties to an agreement based on a mutual material error. Petitioners also argue that Rule 91(e) is authority allowing us to decline enforcement of the Stipulation on the grounds that enforcement would produce an unjust result.
We are not swayed by petitioners' arguments. We acknowledge that the compromise and settlement of tax cases is governed by general principles of contract law.2 As we stated in Stamm, however, the considerations for the Court to take into account are akin to those for the vacating of a consent judgment, and parties are held to their agreements without regard to whether the judgment is correct on the merits. Stamm International Corp. v. Commissioner, 90 T.C. at 321-322. In this regard, we find instructive the words of the Supreme Court in United States v. Armour & Co., 402 U.S. 673, 681-682 (1971):
Consent decrees are entered into by parties to a case after careful negotiation has produced...
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