Marcus v. Comm'r of Internal Revenue
| Decision Date | 31 July 1978 |
| Docket Number | 8257-72.,Docket Nos. 8256-72 |
| Citation | 70 T.C. 562 |
| Parties | CHARLES MARCUS, PETITIONER v. COMMISSIONER of INTERNAL REVENUE, RESPONDENTANITA MARCUS, PETITIONER v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Despite repeated orders of the Court, petitioners failed, over a period of several years, to answer respondent's interrogatories, to respond to respondent's request for admissions, or to cooperate in the stipulation process. Held, on respondent's motion for sanctions under Rule 104(c), Tax Court Rules of Practice and Procedure, the allegations of error and allegations of fact in petitioners' petitions for 1959, 1960, and 1961 are stricken, and respondent's affirmative allegations of fraud in his answer and amendment to answer to petitioner-husband's petition are deemed admitted. Held, further, partial summary judgments sustaining respondent's determinations of deficiencies for 1959, 1960, and 1961 against both petitioners and of fraud penalties against petitioner-husband are granted. Held, further, as to 1957 and 1958, respondent's proposed supplemental stipulation of facts is deemed admitted, in view of petitioners' repeated failure to comply with orders of the Court requiring them to show specifically why the matters set forth therein should not be admitted. Williard A. Herbert, for the petitioners.
Robert M. Smith, for the respondent.
These proceedings arise on this Court's order dated April 7, 1978, directing petitioners to file a response with the Court showing why the matters set forth in respondent's proposed additional supplemental stipulation of facts should not be deemed admitted for purposes of these cases, and on respondent's motion filed April 10, 1978, to impose sanctions under Rule 104 (Tax Court Rules of Practice and Procedure) and requesting partial summary judgment.
In notices of deficiency dated August 9, 1972, respondent determined the following deficiencies and additions to tax:1
I. Background
Petitioners filed their petitions on November 6, 1972. In both petitions, petitioners alleged errors in respondent's adjustments with respect to (1) unreported income reflected in unidentified bank deposits, (2) the disallowance of various itemized deductions, and (3) the additions to tax under sections 6651(a), 6653(a), 6653(b), and 6654.
These cases were first set for trial at Dallas, Tex., on May 7, 1974. On April 23, 1974, on petitioners' motions, the cases were continued generally.
Following an unsuccessful attempt in September 1974 to meet with petitioners' then counsel for purposes of entering into a stipulation of facts, respondent, on October 4, 1974, served interrogatories in docket No. 8256-72 (Charles) on petitioners' then attorney. Attached to the interrogatories were 29 exhibits containing schedules of approximately 5,000 checks and 1,600 deposit slips on Charles' and Anita's joint accounts and on Charles' separate accounts. The interrogatories requested Charles to classify each of these items.
On October 17, 1974, respondent also served a 64-page, 144-paragraph request for admissions in docket No. 8256-72 (Charles) on petitioners' then attorney and on that same day served a request for production of documents on petitioners' then attorney. With respect to docket No. 8257-72 (Anita), respondent served on petitioners' then attorney a 5-page, 20-paragraph request for admissions.
Thereafter, on October 31, 1974, this Court set the cases for trial on February 3, 1975, in Dallas, Tex.
On December 24, 1974, respondent filed motions for leave to file out-of-time motions (1) to have the requested admissions deemed admitted with respect to Charles and Anita, (2) for an order compelling Charles to serve answers or submit objections to respondent's interrogatories or to impose sanctions under Rule 104, and (3) for an order compelling Charles to respond to respondent's request for production of documents or impose sanctions under Rule 104. On the same day, respondent lodged the 3 out-of-time motions with the Court.
On January 28, 1975, a hearing was held in Dallas, Tex., before Judge Fay on respondent's motion for leave to file the 3 out-of-time motions. At that hearing petitioners' then counsel orally informed the Court that he was considering withdrawing from the case. The Court reserved its ruling on these motions until the call of the calendar for the Dallas trial session on February 3, 1975.
On February 3, 1975, at the trial session in Dallas, petitioners' then counsel orally moved to withdraw as counsel in these cases. This motion was granted and Judge Fay instructed petitioner Charles Marcus as follows:
you're going to have to get these facts out on the table, Mr. Marcus and I'm not just talking to hear myself talk. If there —- if you don't get counsel and there is not full and complete cooperation with respondent's counsel by your new counsel, then the Court will entertain a motion to impose sanctions.
Now whatever lack of cooperation there has been in the past, that's over with. We've now arrived at a juncture where, if you don't cooperate, sanctions will be imposed, and that's the order of the Court.
By written order the same day, the Court continued the cases generally and denied without prejudice to renew respondent's motion for leave to file out-of-time motions for (1) an order to have respondent's requests for admissions deemed admitted by petitioners, (2) an order to compel answers to respondent's interrogatories, and (3) an order to compel response to respondent's requests for production of documents. The Court also stated in its order that “petitioner is hereby notified that upon his failure to proceed expeditiously as to the oral directions of the Court, the Court will be forced to take appropriate actions.”
On March 25, 1975, petitioners' new counsel informed the Court by letter that he had been engaged to handle the pending cases. On June 30, 1975, respondent filed a motion to consolidate these cases.
On July 1, 1975, respondent served on petitioners' new attorney copies of the interrogatories previously served on October 4, 1974, and requests for admissions and production of documents previously served October 17, 1974. Subsequently, on July 25, 1975, respondent renewed his motions to compel Charles to answer interrogatories and produce the documents requested or impose sanctions under Rule 104. In addition, respondent on the same day filed motions with respect to both Charles and Anita to declare his requests for admissions deemed admitted.
A hearing was held on these motions and respondent's motion to consolidate on August 27, 1975, in Washington, D.C. At that hearing this Court granted respondent's motion to consolidate and by order dated September 4, 1975, directed the parties to submit a detailed stipulation of facts in accordance with Rule 91(a) by November 15, 1975. The Court also ordered the parties to report on the status of the cases at the call of the calendar for the Dallas trial session beginning December 1, 1975. The Court further ordered that action on respondent's motions regarding discovery was to be held in abeyance.
Subsequently, on November 10, 1975, the Court on petitioners' motion extended to January 15, 1976, the date for filing a detailed stipulation of facts.
On November 14, 1975, the Court granted respondent's motion to set for hearing the motions to compel answers to interrogatories and to compel production of documents or impose sanctions under Rule 104, filed July 25, 1975, and which had been held in abeyance by the order dated September 4, 1975. A hearing on respondent's motions was held on December 1, 1975, in Dallas, Tex., before Judge Scott at which time the parties represented to the Court that they had reached an agreement to stipulate facts which might render respondent's motions moot. The Court thus entered an order dated December 1, 1975, suspending action on respondent's motions to compel answers to interrogatories and for production of documents or to impose sanctions until after the filing of a stipulation, and the Court denied respondent's motion for order to have his requests for admissions deemed admitted without prejudice to the right of respondent to again file the requests for admissions.
Thereafter, on December 5, 1975, the parties through their counsel held a conference with Judge Scott in Dallas and agreed to make every effort to stipulate the cases, and petitioners' counsel agreed to begin working with petitioners' accountant in preparing schedules of petitioners' checks and deposit slips for the years in issue.
On January 23, 1976, the parties submitted a 9-page, 64-paragraph partial stipulation of facts to the Court. On January 28, 1976, respondent again renewed his motions to compel answers to interrogatories and for production of documents or to impose sanctions with respect to Charles. On February 27, 1976, this Court, on representation of petitioners' counsel that he had furnished respondent with details of...
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