CHIH H. v. COMMISSIONER

MEMORANDUM OPINION

CHIECHI, JUDGE: This case is before the Court on petitioners' motion for leave to file motion to vacate decision (petitioners' motion). Respondent filed an objection to petitioners' motion and a declaration by David R. Jojola (Mr. Jojola) in support of that objection. Petitioners filed a reply to respondent's objection (petitioners' reply). We shall deny petitioners' motion.

BACKGROUND

On October 29, 1997, respondent issued a notice of deficiency (notice) to petitioners that determined the following deficiencies in, and fraud penalties under section 6663(a) ¹ on, petitioners' Federal income tax (tax):

    *110                  Fraud Penalty

  Year       Deficiency       Under Sec. 6663(a)

  ____       __________       __________________

  1991       $ 18,508          $ 13,881

  1992        40,931           30,698

  1993        70,662           52,997

On December 29, 1997, petitioners timely filed pro sese a petition. This case was calendared for trial at the Court's trial session in Los Angeles, California, that commenced on February 8, 1999.

On February 2, 1999, Robert H. Appert (Mr. Appert) entered an appearance on behalf of petitioners. On February 8, 1999, the parties filed a stipulation of settled issues, a first supplemental stipulation of settled issues, and a second supplemental stipulation of settled issues (collectively, stipulations of settled issues). Each of those stipulations was signed on February 6, 1999, by Mr. Appert on behalf of petitioners as well as by each petitioner and by Mr. Jojola on behalf of respondent. On March 11, 1999, the parties submitted to the Court a stipulated decision document*111 (stipulated decision document) that was signed on March 10, 1999, by Mr. Appert on behalf of petitioners and by a representative of respondent and that reflected the agreement of the parties as set forth in the stipulations of settled issues.

On March 15, 1999, the Court entered a decision in this case pursuant to the agreement of the parties as reflected in the stipulated decision document ² that petitioners are not liable for the fraud penalty under section 6663(a) for any of the years at issue and that they are liable for deficiencies in, and accuracy-related penalties under section 6662(a) on, petitioners' tax, as follows:

             Fraud Penalty    Accuracy-Related Penalty

Year   Deficiency    Under Sec. 6663(a)    Under Sec. 6662(a)

____   __________ *112    _________________   ________________________

1991    $ 2,973        None          $ 595

1992     6,008        None          1,202

1993    20,379        None          4,076

DISCUSSION

The Court's decision in this case was entered pursuant to the agreement of the parties on March 15, 1999. No notice of appeal or timely motion to vacate or revise the decision was filed in this case, see sec. 7483 and Rule 162, and the decision herein became final on June 13, 1999, see sec. 7481(a)(1); Fed. R. App. P. 13(a).

Petitioners' motion was filed on February 12, 2001, almost two years after the Court entered the decision in this case and 20 months after that decision became final. Once a decision becomes final, the Court may vacate it only in narrowly circumscribed situations, such as where the decision was obtained through fraud on the Court, see Abatti v. Commissioner, 859 F.2d 115, 118 (9th Cir. 1988), affg. 86 T.C. 1319 (1986), or where the decision is void or a legal nullity for lack of this Court's jurisdiction over either the subject matter or*113 the party, see Billingsley v. Commissioner, 868 F.2d 1081, 1084-1085 (9th Cir. 1989); Abeles v. Commissioner, 90 T.C. 103, 105-106 (1988). ³

The Court of Appeals for the Ninth Circuit has defined the phrase "fraud*114 on the court" to be "'an unconscionable plan or scheme which is designed to improperly influence the court in its decision.'" Toscano v. Commissioner, 441 F.2d 930, 934 (9th Cir. 1971)(quoting England v. Doyle, 281 F.2d 304, 309 (9th Cir. 1960)), vacating 52 T.C. 295 (1969); see Abatti v. Commissioner, supra. In order to prove fraud on the Court, petitioners have the burden of establishing that "an intentional plan of deception designed to improperly influence the Court in its decision has had such an effect on the Court." Abatti v. Commissioner, 86 T.C. 1319, 1325 (1986), affd. 859 F.2d 115 (9th Cir. 1988); see Drobny v. Commissioner, 113 F.3d 670, 677-678 (7th Cir. 1997), affg. T.C. Memo 1995-209, and cases cited therein.

The Court has carefully reviewed petitioners' motion and petitioners' reply. Petitioners' motion states in pertinent part:

   1) IRS hold the document (from the Bank Deposits) and made the

    copies of receipts back to 1995 of taxable year 1991-1993;

    But, never exchange to taxpayer or CPA even requested for

    years to see what the*115 results from and run out of the

    appealing time, jumped to the conclusion which no one would

    believe it * * *.

                * * * * * * *

   3) It was found IRS made mistakes for taxable year of 1990 by

    double taxing on the petitioners because IRS always using the

    worksheets to jot down the numbers which could be partially

    reported and IRS examiners never recreated on the official

    forms to show or exchange to the taxpayers.

   4) IRS eventually released the data in Dec. of 1998 and

    petitioners hired the attorney Robert H. Appert to check and

    recreate the official 1040 forms for taxable year of 1991-

    1993 as the reference to the Tax Court.

   5) The counsel for Petitioners did not attend the conference

    meeting on time held by judge Carolyn Chiechi, nor recreated

    the 104

   6) The motion to withdraw the counsel of petitioners was ordered

    from the court because Robert with CPA background charging

    $ 20

   7) From the IRS booklets; When all*116 the data are available, the

    professionals require only hours to fill out 1040 forms;

    Actually, back to 1995, when auditor Jennifer was in CPA's

    office to examine the taxable year of 1991; The CPA took only

    half hour to accomplish the 1040 forms with schedule C to

    auditor for information when all the receipts and cancelled

    checks were copied by the auditor.

   8) The reason to use official 1040 forms was easy to communicate

    with the other party and should any number in doubt, the

    taxpayers can have receipts or cancelled check or bank

    statement to prove it. To prevent IRS examiners to hide or

    delete items or made partial report to jump to the conclusion

    misleading the judgments; It must have the 1040 forms to be

    as the reference. It does not matter which 1040 forms to be

    used.

   9) The petitioner has been in electronics industry for 16 years

    and being laid off from July 1991 due to the Eaton Corp.

    closed completely in Los Angeles; Since the petitioners have

    no*117 idea of accounting/book keeping, every year must have the

    CPA/tax specialist to prepare the 1040 forms.

  10) In 1992, petitioner could not find the right job after being

    laid off For almost one year starting to do import/trade

    business using the Savings or IRA funds to purchase the

    goods. The Cost of goods in the year 1992 was Around $ 54,000

    plus the operation expenses of startup this new field of

    business. Definitely, the operating expenses (Schedule C)

    for this new trade business was far more than the profits of

    selling the products. It does not matter which official

    forms (1040 EZ or 1040A) to be used; The results of the

    income loss (profits) should be the same.

  11) It does not matter what method to be used to analysis the new

    startup business; The bank saving dropping from 1991 to 1993

    indicated the seeds money being used up for the import

    business startup, and in 1992 & 1993, even could not afford

    to hire the part time bookkeeper. Mrs. Chu majoring in Music

    helped*118 to just put all the receipts aside without knowing how

    to organize it. But, everyone knows without investing or

    buying the seeds to fertilize it, the fruits will not be

    there years after. In other words, no one would expect the

    profits (Fruits) in the first few years of startup a new

    business (seeds). [Reproduced literally.]

Petitioners' reply states in pertinent part:

  12) This Court has jurisdiction to vacate a final decision if the

    decision of the Court was obtained by fraud on the Court.

    Partially report the COG is the act of fraud, which would

    influence the judgment. Treating petitioners unfairly or

    differently will be justified by the court as the act of

    fraud or one kind of discriminating the petitioners had no

    tax/accounting background or knowledge.

                * * * * * * *

  14) The definition of Fraud is an act of deliberate deception

    with the design of securing something by taking unfair

    advantage of another-New International Dictionary; A

*119     deliberate deception for unfair or unlawful gain-American

    Heritage Dictionary. Respondent is a tax professional, hold

    the documents retrieved from the bank without exchange to the

    petitioners for four years (1995-1999) and jump to the

    decision without providing the appeal meeting for petitioners

    to explain until tax solving date requested by the

    congressman to release the files to the petitioners to check.

  15) To prove such fraud, petitioners (No Tax background) hired

    the CPA and attorney to analyze and prepare the detailed 1040

    forms and schedule C for easy understanding without

    eliminating or modified the numbers where the banks

    statements or receipts/cancelled checks were all available.

    The respondent (Professional tax expert) claimed in his

    office the preparation of 1040 forms need one more year and

    he could not find help to prepare it based on the

    receipts/cancelled checks and bank transaction statement.

    Actually, respondent spent only two hours to put the numbers

*120     into the 1040 forms (See Exhibit A), but, hold the progress

    of checking the taxable years of 1992 and 1993. Because

    respondent knowing that petitioner lost the main job in 1992

    and started to import the different small quantities of

    samples of audio devices from April of 1992. Respondent

    deliberately hold the progress of reviewing the expenses of

    start-up business, which was about two weeks from Feb. 8,

    1999. (Deadline to turn in the paper to the court). The

    petitioners hired the attorney to continue to review and

    prepare the 1040 form and schedule C which estimated only

    need four hours required, but, not successful and on Feb.

    6th, 1999, petitioners being told that counsel could do it at

    the second phase; First phase he did not care about what

    respondent did. This was the main reason the petitioner had

    the motion to withdraw the counsel.

                * * * * * * *

  17) The legal counsel was hired to make the progress of reviewing

    the*121 COGs of 1992, 1993 and few expenses items which

    respondent deliberately hold or partially report in his

    stipulation report. During the time of hiring, not only the

    counsel was late in the meeting called by the judge, but, he

    did not make any progress report to petitioners until Feb.

    6th, 1999 (Two days away from the deadline set by the court);

    Besides, the petitioner (spouse) had the operation of the

    chest and under daily radiation treatment of cancer disease;

    Under such mentally pressure, Robert forced the petitioners

    to sign the incompletely stipulation report by saying he can

    fix it at the second phase. As the Fraud is an act; only if

    the professional made it, later can be caught what did the

    respondent make. During the stage of professional's intention

    to design the scheme, it was hard to get the evidence. As

    Fraud is an act using professional knowledge to take

    advantage of the non-professionals by treating the taxpayer

    unfairly, differently or not just. As people say that*122 non-

    professionals might use tangible weapons to rob the bank to

    get money illegally; But, professionals can use intangible

    way (their knowledge to write the makeup figures) to take the

    money from the taxpayer pockets illegally. As the

    professional always use the rules in favor of his misconduct

    as the fraud activity, he would never tell anyone by holding

    such case for how many years would dismiss (drop) the case;

    Since by holding the case, IRS put the interest on it, and

    when IRS owed petitioner money, also, holding the check for

    the taxable year of 1990 without releasing by making the

    excuses. As there are two different issues.

  18) Because of the following reasons, the settlement was never

    reached.

    A) The deficiency of taxable year 1991, 1992 and 1993 came

    out without giving the petitioners the documents describing

    where the figures from or how it was calculated. The only

    paper received was last week the exhibits of respondent

    letter, which had lots*123 of expenses, items being deleted or

    partially report. In other words, The stipulation issues were

    not only vague, incomplete but, very confusing to the court

    if the judge knowing in 1992 and 1993 the petitioners had no

    main job and using up the savings or even the IRA fund as

    emergency seed money used to start up the new trade business;

    The tax deficiency in 1992 (Petitioner lost the main job) was

    calculated twice as higher as in the 1991 ($ 2,973.00 + $ 595)

    which petitioner still had the main job. In 1993 (the second

    year of the new start-up trade business), the deficiency was

    calculated eight times ($ 20,379 + $ 4076) higher than the

    1991. It would make the judge very confused by just looking

    at the above figures made-up by the respondent deliberately

    to deceive the court judgment.

    (B) Before the deadline (Feb. 2, 1999); Judge agreed the

    withdrawal of petitioners counsel. Because no progress report

    and even negligence of the meeting called by the judge.

    (C) *124 The petitioner (Spouse) was under cancer treatment and

    mentally in the bad shape. Petitioners have to totally trust

    and rely on the counsel hired with the $ 20

    (D) Under above stress conditions, the petitioners' counsel

    talked into the petitioners to sign the incomplete

    stipulation issues made up by the respondent at the last

    minute on Feb. 6th, 1999 by saying he could do the second

    phase work or he would not represent the petitioners on the

    Feb. 8th, 1999 in the court.

    (E) In the morning (About 9:00 A.M.) of Feb. 8th, 1999;

    Petitioner did turn in the above situation paper and

    requested the Judge to consider the COGs of 1992, 1993 and

    few expenses items which respondent deliberately drop or cut

    off in respondent issues two days ago. Showing the

    stipulations has the figures made up by the respondent except

    the taxable year of 1991. Starting from the end of January

    1999; The respondent just hold the progress of reviewing the

    taxable year of 1992 and 1993; Do*125 not mention to exchange the

    documents or provide the opportunity for petitioners until

    Feb. 6th, 1999. All the papers were prepared for last minutes

    signatures. This was the way the professional designed the

    trap to take advantage of the taxpayers unfairly by giving

    petitioners no opportunity at all saying the court need the

    signatures to turn in. The petitioners did not sign the

    stipulations of facts at the first place because the

    respondent did not provide the complete expenses report when

    reviewing the taxable year of 1991. I believe the laws give

    the taxpayers to know how the deficiency being calculated and

    based on. Respondent hold or hide the documentations and

    provided no chance for petitioners to explain or exchange are

    not only unfair, but, trying to stop the court to review what

    figures respondent made up deliberately to take advantage of

    the petitioners is obviously seen. If the respondent did not

    make up the figures or untruth report to the court,

    respondent*126 should not be afraid of any questions to be asked

    by the Judge during the next investigation. [Reproduced

    literally.]

We find petitioners' motion and petitioners' reply to be vague and confusing. However, those filings do not appear to suggest or argue that we had no jurisdiction over the subject matter or petitioners in this case. Nor do petitioners' motion and petitioners' reply appear to suggest or argue that there was any corruption of the Court. Assuming arguendo that petitioners are contending in petitioners' motion and petitioners' reply that some sort of fraud was perpetrated on the Court, on the instant record, we reject any such contention. That record establishes that: Petitioners retained legal counsel shortly before the scheduled trial in this case was to begin; after retaining legal counsel, the parties reached a basis of settlement and memorialized that settlement in the stipulations of settled issues which were signed by petitioners' counsel, Mr. Appert, on behalf of petitioners as well as by each petitioner and by Mr. Jojola on behalf of respondent; the Court entered a decision in this case pursuant to the agreement of the parties as shown*127 in the stipulated decision document ⁴ that was signed by Mr. Appert on behalf of petitioners and by a representative of respondent and that reflected the stipulations of settled issues; ⁵ and petitioners did not appeal the decision in this case or timely move to vacate or revise that decision.

Based on our review of the entire record before us, we find that petitioners have failed to show that the decision entered in this case is the result of fraud on the Court or any other situation that warrants our exercise of our discretion under*128 Rule 162 to grant petitioners' motion. Based on that record, we find that petitioners have failed to persuade us that we should grant them leave to file a motion to vacate the decision.

To reflect the foregoing,

An order will be issued denying petitioners' motion for leave to file motion to vacate decision.