Commenter in chief, Bob Kamman, recently alerted us again to orders from the Tax Court in which the Court rejects the filings by the parties because of mistakes in the filings. This is not the first time he has noticed mistakes in filing documents at the Tax Court. I wrote a pair of posts, here and here, about mistakes Bob identified last year.
As I mentioned in one of the prior posts, at Chief Counsel’s office the Procedure and Administration Division of the National Office, and its predecessor the Tax Court Division, kept track of Tax Court bounces when I worked there. Bounces were not a good thing since they signified that the local office had made a mistake in filing a document with the Court. Not only did the national office let you know when a bounce occurred, but whenever there were intra-Chief Counsel office CLE programs, the speaker from the national office would present a 10-15 minute monologue describing the bloopers produced by the field offices over the past year or so.
The mistaken filings often involve matters filed by both the Chief Counsel’s office and the petitioner (or petitioner’s counsel). It’s possible to see some of these bloopers by following the Court orders. Bob found them using a search in the orders for “deemed stricken.” I will talk about one order in this post and occasionally come back to these types of orders as we identify them. These orders usually provide a lesson on what not to do in a case. Those lessons, while generally painful, can be useful.
The case I will discuss today involves a proposed decision document. The Court rejects the document. In this blog we sometimes criticize the Court for the slowness with which it delivers opinions, but it’s easy to forget that the judges have many tasks which they must perform with care. While they rely on the litigants to assist them, they must constantly check behind the litigants to make sure that even where the litigants agree, the matter presented is correct. Chief Judge Kerrigan found that the agreed decision document the parties requested she sign did not reach her desk with the appropriate background. Here is the order:
JESSICA YADIRA GADDIE, Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12604-22
ORDER
On November 21, 2022, the parties filed a Proposed Stipulated Decision for the Court’s consideration. However the deficiency proposed therein for the 2018 taxable year, $5,173.00, is more than the deficiency determined for that year in the Notice of Deficiency, $3,449.00. Respondent did not assert an increased deficiency in the Answer and nothing below the line in the Proposed Stipulated Decision accounts for the increase. Accordingly, the Court is unable to process the parties’ Proposed Stipulated Decision.
For cause, it is
ORDERED that the Proposed Stipulated Decision, filed November 21, 2022, is hereby deemed stricken from the Court’s record in this case. It is further
ORDERED that the parties shall, on or before December 20, 2022, file a revised Proposed Stipulated Decision.
The Gaddie case, like 75% of the Tax Court’s cases, was filed pro se. She filed her petition on June 6, 2022 and the Chief Counsel attorney filed an answer on June 23, 2022. That is amazingly quick for an answer reflecting that the Tax Court had solved it delays in providing petitions to the IRS and that the attorney or paralegal in the Dallas office of Chief Counsel assigned to the case was on top of their docket. The next entry in the case is the proposed stipulated decision. The docket sheet indicates that the proposed stipulated decision was filed on November 21, 2022 as stated in the order copied above.
The order striking the document from the record was entered just two days later which means the order received a very quick review. Since the case had not yet appeared on a calendar, I would have expected the case to be in the general docket of the Court unassigned to a specific judge; however, the order here was entered by Chief Judge Kerrigan as mentioned above. Perhaps decision documents get assigned out of the general docket. I do not know whether the mistake here was detected by someone in the records section of the Court, the Chief Judge’s staff, or the judge. Someone, however, paid close attention to the document filed and the notice of deficiency.
The order points out that the IRS seeks to obtain a larger assessment against Ms. Gaddie than the IRS put into the notice of deficiency. One of the dangers of filing a Tax Court petition is that the filing places the case in the hands of a Chief Counsel attorney who may notice mistakes on the return that the auditors did not notice. While the Independent Office of Appeals has a policy of not raising new issues which would increase the amount of the deficiency, the Office of Chief Counsel does not have such a policy and regularly seeks increased deficiencies if it identifies a mistake. In the Tax Court case the IRS can seek an increased deficiency. For this reason, before filing a petition you must think about the possible downsides as well as the upsides.
While the proposed stipulated decision would not typically discuss the reason for an increased deficiency, this proposed stipulated decision clearly creates an increased deficiency. The Court notes the increase but strikes the document because the IRS never asked for the increase. The IRS needed to ask for the increase in the answer or in an amendment to the answer if it wanted to recover an amount in excess of the deficiency listed in the notice of deficiency. I cannot see the answer without taking steps I am unwilling to do for purposes of this post, but I can see from the docket sheet that the IRS did not file an amendment to the answer. I assume that in the answer it so quickly filed in this case it did not seek to recover additional amounts of tax above the amounts listed in the notice of deficiency.
The Court also knows that because Ms. Gaddie is pro se she may not have an appreciation for what the IRS should do if it wants to obtain an increase in the deficiency it set forth in the notice of deficiency. Striking the proposed stipulated decision now places the IRS in a position of filing a new document seeking a decision in an amount equal to or less than the amount in the notice of deficiency or filing a motion seeking permission to amend its answer. In the motion it will need to explain the reason for the increased deficiency and Ms. Gaddie will have the opportunity to agree or oppose the motion. The Court will have the opportunity to know that Ms. Gaddie understands the increased amount and the Court will have the ability to satisfy itself that the amount listed in the proposed stipulated decision is not a typo or mistake of another kind.
It’s great that the Court looks out for these types of mistakes. The order here provides a lesson to the Chief Counsel docket attorney on how to obtain an increased deficiency and the care with which a stipulated decision must be drafted. We get the opportunity to observe what appears to be a blooper and to be thankful for the care and time the Court devotes to making sure that cases before it end correctly.