DocketNumber: Docket Nos. 20375-87, 20378-87, 12791-88, 12989-88
Citation Numbers: 62 T.C.M. 83, 1991 Tax Ct. Memo LEXIS 360, 1991 T.C. Memo. 308
Judges: WELLS
Filed Date: 7/8/1991
Status: Non-Precedential
Modified Date: 11/20/2020
*360
MEMORANDUM OPINION
The instant case is before us on respondent's motion for entry of decision which is based upon a settlement reached by the parties during trial.
In his notices of deficiency, respondent determined deficiencies in and additions to tax as follows:
Petitioner Yoo Han & Co, Ltd. | ||
Addition to Tax | ||
Year Ended | Deficiency | Under Section 6653(b)(1) 2 |
April 30, 1984 | $ 11,186.57 | $ 5,593.28* |
April 30, 1985 | 9,895.79 | 4,947.90* |
Petitioners John & Woo Young Yoo | |||
Additions to Tax | |||
Under Sections | |||
Year | Deficiency | 6653(b)(1) | 6661 |
1983 | $ 14,199.81 | $ 7,099.90* | -- |
1984 | 16,907.00 | 8,454.00* | $ 4,227 |
*361 At the beginning of the trial of the instant case, the parties filed a stipulation of facts pursuant to Rule 91. The stipulation of facts and accompanying exhibits are incorporated herein.
At the time their petitions in the instant case were filed, petitioners John Yoo and Woon Young Yoo (hereinafter petitioners) resided in Larchmont, New York, and petitioner Yoo Han & Co., Ltd. (the corporation) was a corporation with its principal place of business in New York, New York. Petitioner John Yoo was at all relevant times the sole shareholder, officer, director, and employee of the corporation, which was engaged in the performance of accounting, bookkeeping, and tax preparation services.
The deficiencies in issue were based on the corporation's failure to report income from the performance of accounting services and petitioners' diversion of unreported corporate income for their benefit, resulting in constructive dividends. The gross amounts of such unreported income and constructive dividends stated in the notices of deficiency were as follows:
Amounts Determined by Respondent | ||
Taxable Year | Taxable Year | |
Ended 4/30/84 | Ended 4/30/85 | |
Unreported Income | $ 60,897.35 | $ 54,732.58 |
of the Corporation | ||
(using bank deposits | ||
and specific items | ||
method) | ||
1983 | 1984 | |
Constructive Dividends | $ 45,588.60 | $ 50,926.00 |
to Petitioners |
*362 In an amended answer, respondent reduced the deficiency determined with respect to the corporation's taxable year ended April 30, 1984, to $ 9,499.07, based upon unreported income of $ 55,272.35 as opposed to $ 60,897.35.
After the trial of the instant case had begun, the parties announced to the Court that they had reached a settlement.
The following terms of the parties' settlement were read into the record: Number One. Total adjustments to income for the corporation, Yoo Han and Company, Ltd. for the fiscal year ending April 30, 1985 is $ 13,919.00. Number Two. Total adjustment to income for the corporation, Yoo Han and Company, Ltd. for the fiscal year ending April 30, 1984 is $ 13,818.00 Number Three. John Yoo received self-employment income in the taxable amount of $ 34,191.00 for the taxable year 1983, and this income is subject to self-employment tax. Number Four. John Yoo received dividend income from Yoo Han and Company, Ltd. in the amount of $ 11,397.00 for the taxable year 1983. Number Five. John Yoo received self-employment income in the amount of $ 38,195.00 for the taxable year 1984, and this income is subject to self-employment tax. Number Six. John*363 Yoo received dividend income from Yoo Han and Company, Ltd. in the amount of $ 12,731.00 for the taxable year 1984. Number Seven. The fraud penalty pursuant to The fraud penalty, pursuant to Number Nine. The Government concedes the addition to tax pursuant to And that is the total settlement between the parties.
Petitioners now assert that, in computing their tax liability for the years in issue, they should be allowed the benefits of income averaging, an increased general sales tax deduction, and the deduction for a married couple when both work. Petitioners further assert the corporation's entitlement to offset its additional*364 taxable income for the fiscal year ended April 30, 1984, with a net operating loss carryback. 3 In support of their claims, petitioners argue that it would have been premature to claim any of the above items prior to arriving at the settlement which increased their taxable income for the years in issue. Petitioners also quote
We do not agree with petitioners' suggestion that, under
The instant case is readily distinguishable from
Although the settlement letter in
Petitioners have not asked us to set aside their settlement agreement. Therefore, our only task in the instant case is to determine the meaning of the parties' agreement. In that regard, we note that respondent made significant concessions in the settlement. We also note that counsel for the corporation described the settlement as "the total settlement between the parties." Under the circumstances of the instant case, we will not force further concessions upon respondent. We conclude that the parties did not, in entering into their settlement, intend the agreed-upon increases in petitioners' income to be mitigated in effect by tax deductions and benefits not mentioned in the settlement or raised prior to settlement. We are not inclined to insert into the settlement terms which we think petitioners mistakenly failed to include.
In conclusion, we note that had petitioners' claims to income averaging and NOL carrybacks been made in the context of a Rule 155 proceeding, such claims would have been denied as raising "new issues." See The plain, hard fact is that if we were to grant petitioners' motions, we would of necessity have to reopen the record and afford petitioners a further trial. The petitioners would have to prove, and respondent would be free to contest, any and all items of income and deduction for the base period years. * * * Petitioners could readily have pleaded income averaging as an alternative position and presented that necessary evidence at the trial of this case. It is no answer to say that the need to follow such a course could not have been ascertained until the Court had determined petitioners' income and allowable deductions for the years involved. * * *
*370 The reasoning in
To reflect the foregoing, respondent's motion for entry of decision will be granted.
To reflect the foregoing,
1. Cases of the following petitioners have been consolidated herein: John & Woon Young Yoo, docket No. 20378-87; John Yoo and Woon Young Yoo, docket No. 12791-88; and Yoo Han & Co., Ltd., docket No. 12989-88. Except as otherwise noted, for convenience we will refer to the foregoing consolidated cases collectively as "the instant case."↩
2. Unless otherwise indicated, all section references are to the Internal Revenue Code as amended and in effect for the years at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.
* plus 50 percent of the interest due on the deficiency under section 6653(b)(2).↩
3. Petitioners agree with respondent's computations for the corporation's fiscal year ended April 30, 1985.↩
4. We recognize that in
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