Stoy v. Commissioner

Names: Melvin and Barbara Pinto

Tax Court Docket No.: *379 17407-86

(hereafter the CONTROLLING CASE)

3. All issues involving the above adjustments shall be resolved as if the petitioners in this case were the same as the taxpayers in the CONTROLLING CASE;

* * *

5. A decision shall be submitted in this case when the decision in the CONTROLLING CASE (whether litigated or settled) becomes final under I.R.C. § 7481;

* * *

The parties agree to this STIPULATION OF SETTLEMENT.

Respondent filed a motion for entry of decision with this Court on October 30, 1995. Attached as an exhibit to said motion was a decision document (the Document) that respondent claims to be in accordance with the stipulation. By Order dated November 7, 1995, the Court directed petitioners to show cause why respondent's above-referenced motion should not be granted. Petitioners filed their response on December 13, 1995. They contend that respondent's determinations involve incorrect calculations and suggest that corrections are necessary before a decision can be entered in this case. More specifically, petitioners claim that respondent's determinations fail to account for their pro rata share of a partnership deduction stemming from various guaranteed payments*380 and fail to allow petitioners the benefit of income-averaging.

By Order dated April 16, 1996, the Court directed respondent to address petitioners' above-referenced response. On June 10, 1996, respondent filed her response. Respondent principally argues that petitioners are bound by the stipulation, and the objections raised in petitioners' above-referenced response amount to new issues that are not now before the Court.

Discussion

The general principles of contract law govern the compromise and settlement of tax cases. In essence, settlement stipulations are contracts, and this Court is bound to enforce them. Stamos v. Commissioner, 87 T.C. 1451, 1454 (1986). During the process of negotiation, each party agrees to concede rights that may be asserted against his or her adversary as consideration for those secured in the agreement. Saigh v. Commissioner, 26 T.C. 171, 177 (1956). We enforce settlement stipulations unless justice requires otherwise. Adams v. Commissioner, 85 T.C. 359, 375 (1985); Saigh v. Commissioner, supra.We also enforce stipulations *381 where the parties agree to be bound by the outcome of a test case. Hillman v. Commissioner, T.C. Memo. 1982-468. In determining the proper meaning of the terms of settlement, we look to the language of the stipulation and the circumstances surrounding its execution. Robbins Tire & Rubber Co. v. Commissioner, 52 T.C. 420, 435-436 (1969).

Petitioners request that we instruct respondent to prepare a decision document that incorporates several noncomputational adjustments. We decline this invitation. The adjustments sought by petitioners are not addressed in the stipulation agreement and involve issues that are not now before the Court. The stipulation is clear and shows that the parties agreed to resolve this case in the manner set forth therein. It was incumbent upon petitioners' counsel to understand the significance of the stipulation before agreeing to its content on behalf of petitioners. The stipulation was voluntarily entered into and must be given binding effect. The interests of justice do not require otherwise. The parties struck a bargain, and petitioners must live with its benefits and burdens.

Respondent requests*382 that the Court impose against petitioners and their counsel a penalty pursuant to section 6673(a)(1) and (2). In support of this request, respondent contends that petitioners advanced arguments primarily for the purpose of delaying entry of decision. In the exercise of our discretion, we shall not grant respondent's request.

To reflect the foregoing,

An appropriate order will be issued granting respondent's motion for entry of decision, and decision will be entered accordingly.