Pert v. Comm'r of Internal Revenue, s. 13783-94
| Decision Date | 15 November 1995 |
| Docket Number | Nos. 13783-94,13784-94.,s. 13783-94 |
| Citation | 105 T.C. No. 24,105 T.C. 370 |
| Parties | Harvey M. PERT, Transferee, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.Kathleen M. PERT, f.k.a. Kathleen M. Riffe, Transferee, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
B. Gray Gibbs, St. Petersburg, FL, for petitioner.
Michael A. Pesavento, Jacksonville, FL, for respondent.
Kathleen M. Pert signed closing agreements (Forms 866) pursuant to sec. 7121 I.R.C., for tax years 1986, 1988, and 1989 for both herself and as personal representative of the estate of her deceased husband, Timothy C. Riffe. Respondent accepted the closing agreements.
Timothy Riffe and Kathleen Pert filed joint returns for those years. Under the closing agreements, Timothy Riffe, deceased, is liable for the addition to tax for fraud for 1986 and Kathleen Pert is not.
Kathleen Pert signed a settlement stipulation for 1987 on her own behalf and as personal representative of the Estate of Timothy Riffe. The Tax Court entered a decision based on that settlement stipulation.
Respondent determined that petitioner, Kathleen Pert's second husband, Harvey Pert, is liable as a transferee of assets from Kathleen Pert and as a successor transferee of assets from Timothy Riffe, deceased.
Respondent filed a motion for partial summary judgment to establish that: (1) Petitioner may not contest Timothy Riffe's and Kathleen Pert's tax liability, and that (2) the statute of limitations does not bar assessment of transferee liability against petitioner Harvey Pert for 1986.
Held: If it is established that petitioner Harvey Pert is a transferee, then: (1) He may not contest the deficiencies and additions to tax for fraud as established by the closing agreements except on the grounds available to the parties to the closing agreements under sec. 7121 I.R.C. (); and (2) the statute of limitations does not bar assessment of transferee liability against petitioner.
This case is before the Court on respondent's motion for partial summary judgment on two issues:
(1) Whether petitioner may contest (on grounds other than fraud, malfeasance, or misrepresentation of a material fact) the tax liability established by closing agreements for 1986, 1988, and 1989 under section 7121 which were agreed to: (a) By Kathleen Pert, and (b) by Kathleen Pert, personal representative of the Estate of Timothy C. Riffe, the alleged transferors in this case. We hold that he may not.
(2) Whether the statute of limitations bars assessment of transferee liability against petitioner for 1986. We hold that it does not. Petitioner does not claim that the statute of limitations bars the assessment of transferee liability against him for 1987, 1988, or 1989.
Respondent's motion raises issues of first impression for this Court. Our decision on both issues is based on our holding that a transferee (and a successor transferee) is bound by a closing agreement made under section 7121 by respondent and the transferor. We leave certain other issues for trial, such as whether (or to what extent) petitioner is a transferee.
References to petitioner are to Harvey Pert. Kathleen Pert, his wife, was formerly married to Timothy Riffe, deceased. Kathleen Pert was formerly Kathleen Riffe.
Section references are to the Internal Revenue Code of 1986 as in effect during the years at issue. Rule references are to the Tax Court Rules of Practice and Procedure.
Summary judgment or partial summary judgment is appropriate if the pleadings, answers to interrogatories, depositions, admissions, affidavits and any other acceptable materials, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law. Rule 121(b); Sturniolo v. Sheaffer, Eaton, Inc., 15 F.3d 1023, 1024 (11th Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988). The moving party has the burden of making this showing. Weinberger v. Hynson, Westcott & Dunning, 412 U.S. 609, 621-622 (1973); Espinoza v. Commissioner, 78 T.C. 412, 416 (1982). In deciding whether to grant summary judgment, we view the facts and inferences drawn therefrom in the light most favorable to the nonmoving party. Velten v. Regis B. Lippert, Intercat, Inc., 985 F.2d 1515 (11th Cir. 1993); Naftel v. Commissioner, 85 T.C. 527, 529 (1985). Respondent's motion is appropriate for partial summary judgment because no fact necessary for our consideration of the motion is in dispute.
Petitioner lived in Florida when he filed the petition in this case.
For taxable years ending 1986, 1987, 1988, and 1989, Timothy Riffe, deceased, and Kathleen Pert timely filed joint Federal income tax returns reporting income from several Schedule C activities. Timothy Riffe died on February 11, 1991. When he died, he was married to Kathleen Pert.
According to Timothy Riffe's will, Kathleen Pert was appointed personal representative of his estate. She was also the sole beneficiary of his estate. On September 7, 1991, while administrating the Estate of Timothy Riffe, Kathleen Pert was married to petitioner.1
On April 23, 1993, Kathleen Pert, in her fiduciary capacity, on behalf of Timothy Riffe, deceased, and respondent, duly executed a final closing agreement (Form 866, “Agreement as to Final Determination of Tax Liability”) under section 7121. In it, respondent and Kathleen Pert, personal representative for the Estate of Timothy Riffe, agreed to deficiencies in and additions to the income tax of Timothy Riffe, deceased, for taxable years 1986, 1988, and 1989, including liability for the addition to tax for civil fraud for 1986 under section 6653(b)(1)(A) and (B).
On April 23, 1993, Kathleen Pert, on her own behalf, and respondent, duly executed another final closing agreement (Form 866) under section 7121. In it, she and respondent agreed to deficiencies in her income tax for 1986, 1988, and 1989, in the same amounts as the tax liabilities agreed to for Timothy Riffe, deceased, for those years. No additions to tax were imposed upon Kathleen Pert.
The closing agreements state:
This agreement is final and conclusive except:
(1) The liability it relates to may be reopened in the event of fraud, malfeasance, or misrepresentation of material fact and
(2) It is subject to the Internal Revenue Code sections that expressly provided that effect be given to their provisions notwithstanding any other law or rule of law except Code section 7121.
By signing this agreement, the above parties certify that they have read and agreed to its terms.
Respondent determined a deficiency in the joint tax of Timothy Riffe, deceased, and Kathleen Pert, for tax year 1987. Timothy Riffe, deceased, and Kathleen Pert petitioned the Tax Court (Docket No. 15214-91), challenging respondent's determination for that year. The parties settled that case. This Court entered a stipulated decision on June 4, 1993, in which Kathleen Pert, acting in her own behalf, and as personal representative of the Estate of Timothy Riffe, agreed to a deficiency in tax and additions to tax for 1987. Under the settlement, the Estate of Timothy Riffe and Kathleen Pert agreed to the same deficiency. Additions to tax for negligence and substantial understatement of tax were imposed on Timothy Riffe, deceased, but not on Kathleen Pert.
On May 27, 1994, respondent mailed two notices of transferee liability to petitioner in which respondent determined: (a) Petitioner is liable as a successor transferee (i.e., a transferee of a transferee) of the assets of Timothy Riffe, deceased, in the amount of $140,075 plus interest; and (b) petitioner is liable as a transferee of the assets of Kathleen Pert in the amount of $67,672, plus interest as provided by law.
Petitioner admits that Kathleen Pert, as a personal representative of the Estate of Timothy Riffe, agreed to the deficiencies and additions to tax for 1986, 1988, and 1989 with respect to the income tax of Timothy Riffe. Petitioner also admits that the copies of the Forms 866 attached to respondent's answer were the means by which the tax liabilities of Timothy Riffe, deceased, and Kathleen Pert were compromised and later assessed by the Commissioner.
Petitioner argues that he is not precluded by the closing agreements from litigating the underlying deficiencies and additions to tax of Timothy Riffe, deceased, and Kathleen Pert, in connection with respondent's determination that he is a transferee of Kathleen Pert and a successor transferee of Timothy Riffe, deceased.
Petitioner points out that Kathleen Pert was not a party in her individual capacity to the closing agreement for Timothy Riffe, deceased, and contends that the closing agreement is not binding on petitioner.
Section 7121 provides as follows:
Sec. 7121. Closing Agreements.
(a) Authorization.--The Secretary is authorized to enter into an agreement in writing with any person relating to the liability of such person (or of the person or estate for whom he acts) in respect of any internal revenue tax for any taxable period.
(b) Finality.--If such agreement is approved by the Secretary (within such time as may be stated in such agreement, or later agreed to) such agreement shall be final and conclusive, and, except upon a showing of fraud or malfeasance, or misrepresentation of material fact--
(1) The case shall not be reopened as to the matters agreed upon or the agreement modified by any officer, employee, or agent of the United States, and
(2) In any suit, action, or proceeding, such agreement, or any determination, assessment, collection, payment, abatement, refund, or credit made in accordance therewith, shall not be annulled, modified, set...
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