Schussel v. Comm'r, 149 T.C. No. 16
| Decision Date | 05 October 2017 |
| Docket Number | 149 T.C. No. 16,Docket No. 30639-15. |
| Parties | GEORGE SCHUSSEL, TRANSFEREE OF DRIFTWOOD MASSACHUSETTS BUSINESS TRUST, f.k.a. DIGITAL CONSULTING, INC., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
P petitioned the Court for redetermination of his liability as a transferee under I.R.C. sec. 6901(a), but now moves that we dismiss his petition with prejudice.
Held: Because a taxpayer's liability as a transferee is "assessed, paid, and collected in the same manner and subject to the same provisions and limitations" as a deficiency in tax, sec. 6901(a), a dismissal of a petition for redetermination of transferee liability, just like a dismissal of a petition for redetermination of a deficiency, for any reason other than lack of jurisdiction requires that we enter a decision as to the amount of the liability. Estate of Ming v. Commissioner, 62 T.C. 519 (1974), followed.
Held, further, the Court will deny P's motion to dismiss, ordering the parties to submit an agreed stipulated decision document. Francis J. DiMento, for petitioner.
Carina J. Campobasso, for respondent.
ASHFORD, Judge: This transferee liability case is before the Court on petitioner's motion to dismiss his case with prejudice. As explained below, we will deny petitioner's motion.
The following facts are derived from the parties' pleadings and motion papers. Petitioner states in his petition that his "State of legal residence [is] now Florida".1
On September 15, 2015, respondent issued a notice of liability to petitioner as the transferee of the assets of Driftwood Massachusetts Business Trust, formerly known as Digital Consulting, Inc. (Driftwood), in the amount of $6,881,291 for Driftwood's unpaid liabilities for income tax, penalties, and interest for the taxable years ended December 31, 1988, 1991, and 1992. OnDecember 8, 2015, petitioner timely petitioned this Court for redetermination of the liability.
This case was calendared for trial at the session of the Court commencing November 28, 2016, in Boston, Massachusetts. When the case was called from that calendar, counsel for the parties appeared and counsel for petitioner filed with the Court a motion to dismiss with prejudice. As the reason therefor, petitioner stated in his motion that the parties had "reached an accord and satisfaction with respect to all claims before the Court; said accord being part of a comprehensive settlement that includes claims not before the Court". Petitioner further stated, citing our Opinion in Wagner v. Commissioner, 118 T.C. 330, 332-333 (2002), that "[i]nasmuch as this is a case only of transferee liability", he is not seeking redetermination of a deficiency and therefore section 7459(d) is inapposite, and that respondent "will not suffer clear legal prejudice" from the dismissal of this case with prejudice.2 We took petitioner's motion under advisement.
At our request, respondent filed a response to petitioner's motion on December 28, 2016. Therein he stated that the petition cannot be dismissed with or without prejudice, expressing the view that, pursuant to sections 6901(a) and7459(d) and the logic of Estate of Ming v. Commissioner, 62 T.C. 519 (1974), either petitioner must agree to a stipulated decision or the Court must enter an order and decision as to the amount of the transferee liability.
Petitioner filed a reply on January 27, 2017, contending that Estate of Ming is distinguishable from this case and reiterating that section 7459(d) is inapplicable.
Section 7459(d) provides:
SEC. 7459(d). Effect of Decision Dismissing Petition.--If a petition for redetermination of a deficiency has been filed by the taxpayer, a decision of the Tax Court dismissing the proceeding shall be considered as its decision that the deficiency is the amount determined by the Secretary. An order specifying such amount shall be entered in the records of the Tax Court unless the Tax Court cannot determine such amount from the record in this proceeding, or unless the dismissal is for lack of jurisdiction.
In Estate of Ming, the taxpayers moved this Court to allow them to withdraw their petition without prejudice in a deficiency proceeding, presumably so that they could refile their lawsuit in District Court and present the issues to a jury. We held that, in the light of section 7459(d), a taxpayer who petitions this Court under section 6213 for redetermination of a deficiency may not withdraw his petition in order to avoid the entry of a decision. Estate of Ming v. Commissioner, 62 T.C. at 522-523. Accordingly, we denied the taxpayers' motion to withdraw their petition without prejudice.
In Wagner, we found our holding in Estate of Ming to be inapplicable and held that the taxpayers could dismiss (i.e., withdraw) their petition filed pursuant to sections 6320(c) and 6330(d) for review of a notice of determination approving a notice of Federal tax lien placed on their property. In so holding we observed:
Section 7459(d) applies specifically to a petition that is filed for a redetermination of a deficiency and makes no mention of a petition that is filed under section 6320(c) to review a collection action. Section 6320 was added to the Code as part of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3401, 112 Stat. 685, 746, and that act made no amendment to section 7459(d) * * * . Nor do we know of any provision in the Code that would require us, upon dismissal of a collection action filed under section 6320(c), to enter a decision for the Commissioner consistent with the underlying notice of determination. * * *
Wagner v. Commissioner, 118 T.C. at 332. We also noted that dismissal of the taxpayers' petition was supported by rule 41(a)(2) of the Federal Rules of Civil Procedure, which allows for dismissal of a plaintiff's action after the defendant has served a motion for summary judgment, in the sound discretion of the court.3 Id. at 332-333. We properly looked to that rule (and caselaw interpreting that rule)for additional guidance because there was no controlling Tax Court Rule, see Rule 1(b); Wagner v. Commissioner, 118 T.C. at 332-333, and in doing so, we acknowledged that a court should grant dismissal under rule 41(a)(2) "unless the defendant will suffer clear legal prejudice, other than the mere prospect of a subsequent lawsuit, as a result", Wagner v. Commissioner, 118 T.C. at 333 (quoting McCants v. Ford Motor Co., 781 F.2d 855, 856-857 (11th Cir. 1986)). We concluded, after weighing the relevant equities, that the Commissioner would suffer no clear legal prejudice "in maintaining the subject collection action against petitioners as if the instant proceeding had never been commenced." Id. at 334.
More recently this Court extended the principles of Wagner to two other types of nondeficiency cases--to cases brought under section 7623(b)(4) to review the Commissioner's determination denying a claim for a whistleblower award, see Jacobson v. Commissioner, 148 T.C. ___ (Feb. 8, 2017), and to "stand alone" cases brought under section 6015(e)(1) to review the Commissioner's final determination denying relief from joint and several liability, see Davidson v. Commissioner, 144 T.C. 273 (2015).4 Accordingly, the Court in those cases andpursuant to the principles found in rule 41(a)(2) of the Federal Rules of Civil Procedure decided to grant the taxpayers' motions to withdraw their petitions and have their cases dismissed.
Whether the principles of Estate of Ming or instead the principles of Wagner, Davidson, and Jacobson apply with equal force to transferee liability cases like the instant case is a question this Court has not previously answered. To do so, we must interpret the statute establishing the Commissioner's authority to assert transferee liability, section 6901. That section provides:
In 1957 the Secretary promulgated final regulations under section 6901. See T.D. 6246, 1957-2 C.B. (Part 1) 876. These regulations (titled "Procedure in the case of transferred assets") currently appear in virtually the same form as section 301.6901-1(a) through (f), Proced. & Admin. Regs. Section 301.6901-1(a), Proced. & Admin. Regs., provides that regardless of the nature of a transferee's liability under section 6901(a)(1) (...
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