DocketNumber: Docket No. 18049-90.
Citation Numbers: 63 T.C.M. 2763, 1992 Tax Ct. Memo LEXIS 256, 1992 T.C. Memo. 222
Filed Date: 4/15/1992
Status: Non-Precedential
Modified Date: 11/21/2020
*256 An order denying petitioner's motion will be issued.
MEMORANDUM OPINION
BEGHE,
Petitioner wishes to avoid answering almost all of respondent's requests for admissions.2 Respondent argues that the matters for which she seeks admissions were established as facts in two cases in which petitioner was a party. In
*258 In her notice of deficiency in this case, respondent determined that a successor entity to Philatelic Leasing -- Charterhouse Leasing, Ltd. -- made distributions to petitioner of $ 64,600 in 1982 and $ 104,000 in 1983, that the distributions constituted taxable income to petitioner, that petitioner did not report the income, and that failure to report the income constituted fraud. Respondent states that she requested the admissions to avoid protracted controversy on issues that had previously been litigated.
Petitioner makes three basic arguments for the proposition that the requests to admit were improper. First, petitioner complains that the requests have not "been limited to matters of a factual nature". For instance, petitioner objects to respondent's request that he admit "Philatelic Leasing was thinly capitalized throughout its existence." Petitioner contends that the request improperly requires him to draw a legal conclusion regarding the capitalization of Philatelic Leasing, a company in which petitioner had an interest. Petitioner also objects to this request to admit: "The transfer of an uncollateralized loan to petitioner rendered Philatelic unable to pay its tax *259 liabilities." Petitioner argues that the terms "transfer", "loan", and "uncollateralized" either are ambiguous and thus open to many interpretations, or are technical words whose meaning can be divined only by the Court. Petitioner makes similar arguments regarding the terms "arm's length", "tax shelter", and "purported leasing". Petitioner states that answering the requests for admission "will result in conclusions of law and are such that they can only be made by the ultimate trier of fact". Petitioner asserts that the admissions are improper because they go to "the heart of the dispute". Second, petitioner asserts that respondent should have used some other method of discovery to learn petitioner's position on these issues. Finally, petitioner contends that the matters covered by the requests are not relevant.
Petitioner's arguments are crystallized by the following passage from his motion papers: The purpose of a notice to admit is to attempt to eliminate from contention those factual matters which can be readily demonstrated and about which there can be no dispute. It may not be used in lieu of other disclosure devices and it may not be used to relate to technical, detailed*260 and scientific matters which are the proper subject of an expert witness.
*261 The permissible scope of requests to admit under
This point is illuminated by the advisory note to As revised, * * * [ Not only is it difficult as a practical matter to separate "fact" from "opinion," * * * but an admission on a matter of opinion may facilitate proof or narrow the issues or both. An admission of a matter involving the application of law to fact may, in a given case, even more clearly narrow the issues. * * * In
Petitioner's argument that the requests are objectionable because they cover findings that "can only be made by the ultimate trier of fact" suggests an exception that would swallow the rule. Everything that can be admitted is exclusively within the fact finder's competence until an admission makes the matter "conclusively established". The proper response in such cases is an answer. The very purpose of the request is to ascertain whether the answering party is prepared to admit or regards the matter as presenting a genuine issue for trial. In his answer, the party may deny, or he may give as his reason for inability to admit or deny *265 the existence of a genuine issue. The party runs no risk of sanctions if the matter is genuinely in issue, since Rule 37(c) [equivalent to
As for petitioner's complaint that some of the requests go to central issues in the case, there is authority for the proposition that a request to admit under the Federal Rules of Civil Procedure may not involve central or ultimate facts or attempt to dispose of the entire case. See, e.g., Petitioner's remedy is contained in A party who considers that a matter, of which an admission has been requested, presents a genuine issue for trial may not, on that ground alone, object to the request; such party may, subject to the provisions of paragraph (g) of this Rule, deny the matter or set forth reasons why such party cannot admit or deny it. An objection on the ground of relevance may be noted by any party but is not to be regarded as just cause for refusal to admit or deny.
1. All Rule references are to the Tax Court Rules of Practice & Procedure. All section references are to the Internal Revenue Code.↩
2. Petitioner made a qualified admission of request No. 1 ("Petitioner was president of Philatelic Leasing, Ltd. (hereinafter referred to as Philatelic or Philatelic Leasing) during the years in issue."); petitioner admitted that he was president of Philatelic from Apr. 20, 1982, to Dec. 31, 1983. Petitioner admitted the following: 8. (a) Petitioner received a salary from Philatelic in both 1982 and 1983. * * * 12. The petitioner's income tax returns for the taxable years 1982 and 1983 were filed no earlier than April 15, 1983 and April 15, 1984, respectively. 13. Petitioner executed extensions of time to assess tax, copies of which were attached to respondent's answer in this case. 2. Philatelic promoted a tax shelter involving the purported leasing of stamp masters. 3. Philatelic purported to purchase the stamp masters from Hambrose Stamps, Ltd. for prices ranging from $ 150,000 for a two-stamp master to $ 800,000 for an eight-stamp master. 4. The United States brought suit against the petitioner to enjoin his promoting the abusive Philatelic Leasing tax shelter. The injunction was granted based upon the finding that the Philatelic Leasing stamp promotion was a scheme to promote tax fraud. 5. Philatelic Leasing prepared an offering memorandum which contained representations that individuals who purchased interests in stamp masters would be entitled to certain income tax deductions and investment tax credits. The memorandum estimated that the federal tax benefits would be four times the cash invested. 6. Philatelic Leasing did not deal at arm's length with Hambrose Stamps. 7. Philatelic Leasing was thinly capitalized throughout its existence. (a) Philatelic Leasing was set up so that seventy percent of its gross receipts were turned over to Hambrose. (b) Of the remaining thirty percent of its gross receipts, approximately twenty-six percent of its gross receipts were required to be paid as commissions to the salesmen who sold it to individual investors. (c) Of the approximately $ 16 million received by Philatelic, only approximately $ 600,000 was left over to pay salaries, advertising and other costs. (d) The transfer of an uncollateralized loan to petitioner rendered Philatelic unable to pay its tax liabilities. 8. * * * (b) In addition, from 1982 through 1984, petitioner removed certain "commissions" from Philatelic. (c) In addition, petitioner removed $ 63,600 from Philatelic in 1982 and $ 105,000 from Philatelic in 1983, which amounts were referred to on Philatelic's books as loans. (d) Petitioner sold no interests in Philatelic which would entitle him to commissions. 9. (a) The amounts referred to in paragraphs 8.(a) through (c) were not loans. (b) Neither petitioner nor the corporation treated the amounts as loans. (c) No loans [sic.] agreements were made; no collateral was provided; no interest was paid; and no collection efforts were made. (d) None of the corporate records give any sign that the loans were authorized. 10. Petitioner did not report the $ 63,600 in 1982 or the $ 105,000 in 1983 on his federal income tax returns. 11. Said transfers, as set forth in paragraphs 8.(a) through (c) were made to the petitioners without any consideration. * * * 14. Petitioner maintains that he received loans from Philatelic for which loans there was no collateral.
The requests for admissions were served by mail on petitioner on August 27, 1991. Petitioner responded by mail on October 3, 1991.↩
3. Petitioner seems to have confused the standard for taking judicial notice,