RESPONSE TO MOTION TO COMPEL STIPULATION

UNITED STATES TAX COURT

 

NNABUGWU C. EZE,

                      Petitioner 

                                 v. 

COMMISSIONER OF INTERNAL REVENUE 

                  Respondent

 CASE NO. 21425- 19

 

RESPONSE TO MOTION TO COMPEL STIPULATION

COMES NOW Petitioner NNABUGWU C. EZE, and files this Response to the Respondent’s Motion to Compel Stipulation under Tax Court Rule 91(f). In support of this Response, Petitioner states as follows:

  1. On or about January 31, 2022, Respondent emailed Petitioner a copy of the Proposed Stipulation of Facts along with Exhibits, and a passcode for the attachment thereof.
  2. Later on or about January 26, 2022, the Petitioner sent a facsimile to the Respondent containing copies of Petitioner’s additional documents. 
  3. On or about February 3, 2022, the Respondent emailed Petitioner enquiring whether Petitioner would sign the Proposed Stipulation if the Respondent included the Petitioner’s additional documents. 
  4. On or about February 9, 2022, Respondent and Petitioner discussed about the terms in the Proposed Stipulation. Petitioner proposed changes to the Stipulation. Petitioner also objected to paragraphs 42 and 43 of the Stipulation. Paragraph 42 of the Stipulation provided thus: “Petitioner received $20,355 in connection to his residential construction business in tax year 2015. This income did not appear in Exhibit 4-R.” Paragraph 43 stated: “Petitioner received $27,875 in connection to his residential construction business in tax year 2016. This income did not appear in Exhibit 5-R.”
  5. On or about February 11, 2022, the Respondent filed a Motion for an order to show cause why proposed facts and evidence in the Respondent’s Proposed Stipulation should not be accepted as Established. Petitioner hereby makes this response to the said Motion.

ARGUMENTS

  • The Proposed Stipulation does not include pertinent information
  1. Stipulation process has been called “the bedrock of Tax Court practice,” Branerton Corp. v. Commissioner, 61 T.C. 691, 692, 1974 WL 2703 (1974). It is for that reason that under Rule 91(e), a stipulation is treated “as a conclusive admission by the parties.” Tax Ct. R. 91(e) (emphasis added). See also Ballard v. Commissioner of Internal Revenue, No. 11554-21. Tax Court Rule 91(a)(1) requires that the parties stipulate to the fullest extent possible to “all facts, all documents and papers or contents or aspects thereof, and all evidence which fairly should not be in dispute.” (Emphasis added). 
  2. In the instant action, the Proposed Stipulation lacked crucial information. It is instrumental to note that on or about February 3, 2022, Mr. Warren, the attorney for the Respondent, emailed Petitioner inquiring whether the Proposed Stipulation would be signed if Petitioner included the items that Petitioner had faxed to the Respondent. However, Mr. Warren did not include the following items that were mailed, emailed, and/or faxed to him per the attached Information Document Request forms from March 13, 2019 to December 6, 2019. These documents are:
  1. Northrop Grumman ID for consulting business;
  2. Northrop Grumman Work Authorization Forms for consulting business;
  3. Time-sheets with email approval from Northrop Grumman management for consulting business;
  4. Unsworn affidavit;
  5. Home Improvement Invoices;
  6. Information Document Request form-Old IDR, New IDR, (Last IDR- in separate email); and
  7. Bank statement.
  1. The Notice of Deficiency was incorrect

“As a general rule, this Court will not look behind a deficiency notice to examine the evidence used or the propriety of respondent’s motives or of the administrative policy or procedure involved in making his determinations.” Greenberg’s Express, Inc. v. Commissioner, 62 T.C. 324, 327 (1974). However, where there is substantial evidence of unconstitutional conduct by respondent in connection with the deficiency determined, the Court has, as an exception and on occasion, may look behind the notice of deficiency. Riland v. Commissioner, 79 T.C. 185, 207 (1982); Greenberg’s Express, Inc. v. Commissioner, supra at 328; Suarez v. Commissioner, 58 T.C. 792, 814 (1972), overruled in part. If in “looking behind” a deficiency notice the Court finds that the IRS did not have sufficient information to make a determination or that the determination was based upon illegally seized evidence, the notice would not be afforded the usual presumption of correctness. 

In the instant action, the notice of deficiency (NOD) listed all issues as outstanding hence the stipulated facts document completed by the IRS counsel listed all items as disputed. However, the last Information document request (IDR) on December 5, 2019 from the IRS auditor had only two items remaining that the Petitioner could not agree on. Petitioner maintains that a NOD informs a taxpayer that their prior tax payment was deficient, or lacking necessary funds. The only contention that remained was with two items in the Respondent’s December 5th IDR. It follows; the NOD is incorrect and reliance on it would be against the interest of justice. 

  1. The Proposed Stipulation contains erroneous information
  1. The stipulation process has broad scope, and is not confined to the stipulation of facts or evidence. Willamette Indus. v. Commissioner, 69 T.C.M. (CCH) 2319 (1995).
  2. Rule 91 of the Tax Court Rules of Practice and Procedure, requires the parties to stipulate, to the fullest extent to which complete or qualified agreement can or fairly should be reached. It is also instrumental to note that stipulations have binding effect. Tax Rule 91(e) provides in that regard that “[a] stipulation should be treated as a conclusive admission by the parties to the stipulation, unless otherwise permitted by the Court or agreed upon by those parties.” Further, “[t]he Court will not permit a party to a stipulation to qualify, change, or contradict a stipulation in whole or in part, except that it may do so where justice requires.” 
  3. The foregoing shows that because of their binding nature, stipulations need to reflect the intention and agreement of the parties. In Estate of Quirk v. Commissioner, 928 F.2d 751, 759 (6th Cir.1991), the Court held in this regard that “if parties could challenge their prior stipulations at will, stipulations would lose much of their purpose.” See also Kampel v. Commissioner, 634 F.2d 708 (2d Cir.1980). 
  4. In the instant action, Petitioner raises concerns over paragraphs 42 and 43 of the Proposed Stipulation. 
  5. Paragraph 42 of the Stipulation provided thus: “Petitioner received $20,355 in connection to his residential construction business in tax year 2015. This income did not appear in Exhibit 4-R.” Petitioner avers that personal contract business was reported on return not w2 wages. Petitioner further maintains that 4R is for quarterly reporting of income, and that the 2015 1099 income from consulting does not appear on Exhibit 4R either. It is worth noting that the Petitioner’s objection as to relevance of the assertion in paragraph 42 was not noted in the stipulation. 
  6. Paragraph 43 stated: “Petitioner received $27,875 in connection to his residential construction business in tax year 2016. This income did not appear in Exhibit 5-R.” Petitioner avers that personal contract business was reported on return. Petitioner further avers that 5R is for quarterly reporting of income, and that the 2016 1099 income from consulting does not appear on Exhibit 5R either. It is worth noting that the Petitioner’s objection as to relevance of the assertion in paragraph 43 was not noted in the stipulation.

WHEREFORE, the foregoing considered, Petitioner requests this Court denies Respondent’s Motion to Compel Stipulation. It is only when the response to a Rule 91(f) Motion is evasive or not fairly directed to the proposed stipulation that the Tax Court will deem the proposed facts and documents stipulated. See Tax Ct. R. 91(f)(3). Cain v. Commissioner for Internal Revenue, 460 F2d 1243. Petitioner avers that this Response suffices an adequate answer and/or opposition to Respondent’s Motion to Compel Stipulation. 

 

 

Respectfully submitted,

 

                                                                                                

              

 

DATED:   _________

 

CERTIFICATE OF SERVICE

 

The undersigned hereby certifies that he served a copy of the foregoing on the Respondent by depositing a copy, contained in a first-class postage-paid wrapper or envelope, at an office of the United States Postal Service, addressed as follows: 

 

[ENTER RESPONDENT’S ADDRESS]


   

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