Keenan v. Commissioner

FILED
NOT FOR PUBLICATION
MAR 29 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JERRY L. KEENAN; CYNTHIA S. ) No. 15-70997
KEENAN, )
) Tax Ct. No. 8917-09
Petitioners-Appellants, )
) MEMORANDUM*
v. )
)
COMMISSIONER OF INTERNAL )
REVENUE, )
)
Respondent-Appellee, )
)
Appeal from a Decision of the
United States Tax Court
Submitted March 14, 2017**
San Francisco, California
Before: FERNANDEZ, MURGUIA, and WATFORD, Circuit Judges.
Jerry and Cynthia Keenan (hereafter “Taxpayers”) appeal the decision1 of
the United States Tax Court that determined the deficiency in their income tax for
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The panel unanimously finds this case suitable for decision without oral
argument. Fed. R. App. P. 34(a)(2).
1
Order and Decision dated January 5, 2015.
2003 and the amount of the accuracy-related penalty thereon issued after the Tax
Court had entered an order2 precluding them from filing a motion to be relieved
from the effect of a stipulation. We vacate the decision and remand for further
proceedings.
As relevant here, Taxpayers entered into a stipulation with the
Commissioner of Internal Revenue (“Commissioner”) that they would be bound by
the ultimate decision in the then pending case of Curcio v. Commissioner, Tax
Court Docket No. 1768-07, regarding the manner of calculation of the adjustment
and redetermination of “the tax consequences of participation in the ‘Benistar 419
Advantage Plan.’” In that stipulation, they also agreed that “the applicability of the
penalty under I.R.C. § 6662(a)” would be determined “in the same manner that
such penalty” was determined in Curcio. After the issues were decided in a
manner adverse to their position,3 Taxpayers sought to be relieved from their
stipulation insofar as it related to the penalty. The parties agree that a taxpayer can
be relieved from the effect of a stipulation when “manifest injustice would result.”
Bail Bonds by Marvin Nelson, Inc. v. Comm’r, 820 F.2d 1543, 1547 (9th Cir.
2
Order dated December 3, 2014.
3
See Curcio v. Comm’r, 689 F.3d 217, 229 (2d Cir. 2012), cert. denied, __
U.S. __, 133 S. Ct. 2826, 186 L. Ed. 2d 884 (2013).
2
1987); see also Tax Ct. R. 91(e); cf. United States v. Baker, 790 F.2d 1437, 1438
(9th Cir. 1986) (defining manifest injustice in the area of “postsentencing
motions”).
Here, in its order of December 3, 2014, the Tax Court determined that any
motion by the Taxpayers to set aside the stipulation would be untimely because of
their failure to comply with its order “served January 23, 2014, in which they were
ordered to show cause in writing why decision should not be entered based on the
stipulation to be bound by the Curcio case.” That foreclosed the filing of a motion
to set aside the stipulation. However, the Tax Court overlooked the fact that the
January 23, 2014, order directed that Taxpayers’ response should be filed on a date
after the Commissioner filed “a proposed decision.” The Commissioner did not
file that proposed decision before the December 3, 2014, order was issued. Thus,
the Tax Court’s decision was based upon a clear factual error, and resulted in an
abuse of discretion. See Bail Bonds, 820 F.3d at 1547; see also United States v.
Hinkson, 585 F.3d 1247, 1261–63 (9th Cir. 2009) (en banc). Because the Tax
Court’s order essentially precluded the Taxpayers from presenting their position to
that court in any meaningful way,4 we are unable to hold that they did not suffer
4
As the Tax Court noted in its January 5, 2015, order, it based its decision on
the fact that the Taxpayers did not file a motion, detail unusual facts, or file
(continued...)
3
prejudice from the court’s error.
VACATED and REMANDED. Costs are to be taxed against the
Commissioner.
4
(...continued)
affidavits. While the Taxpayers did submit some limited argument about the
merits of their proposed position on the stipulation, the Tax Court’s order of
December 3, 2014, left the Tax Court with a record from which it did not and could
not “detail its reasoning” in that regard. See Estate of Trompeter v. Comm’r, 279
F.3d 767, 770 (9th Cir. 2002).
4