In Uncategorized on 12/03/2019 at 15:21

The motto of the old Cuban League Cienfuego Elefantes “El paso de elefante es lento pero esplantante” (I need not of course translate) might well apply to the progress of Eaton Corporation and Subsidiaries, 280140-14, filed 12/3/19.

I’ve oftimes blogged Eaton, but Judge Kerrigan seems to be running out of patience. “This case has been pending for over five years and is not currently calendared for trial.” Order, at p. 1. Right now they’re holding short, pending decision (or opinion) on a Rule 161 reconsideration of Judge Kerrigan’s last decision, for which see my blogpost “Twelve Pages, Twenty-Two Lawyers,” filed 10/28/19.

Well, before the opinion above-referred-to, IRS wanted to amend their answer for the second time. “The second amendment to answer raises a new issue in this case that proposes an adjustment to income of $192,617,171, and an increase to the deficiency of $26,116,392 for taxable year 2010. These amounts were determined pursuant to section 951(a)(1) and section 1.951-1(h), Income Tax Regs.” Order, at p. 1.

IRS issued regs to Section 951 this past July, changing the whole story retroactive to May 14, 2010. This is the famous Global Intangible Low-Taxed Income fix. Eaton’s tax year ended 12/31/10. Except two years before the present proposed amendment, IRS and Eaton stiped to the pre-reg arrangement, which IRS now wants to torpedo.

Judge Kerrigan is definitely unhappy with these shenanigans.

“Rule 91(e) provides that ‘[a] stipulation shall be treated, to the extent of its terms, as a conclusive admission by the parties to the stipulation, unless otherwise permitted by the Court or agreed upon by those parties.’ The Rule further states: ‘The Court will not permit a party to a stipulation to qualify, change, or contradict a stipulation in whole or part, except that it may do so where justice requires.’ In Stanley v. Commissioner, T.C. Memo. 1991-20, we concluded that the parties should be bound by their stipulation even though petitioner contended the stipulation was inconsistent with a recent decision of the Fifth Circuit. In BankAmerica Corp. v. Commissioner, 109 T.C. 1, 12 (1997), the taxpayer was relieved from the effects of a stipulation for the narrow purpose of redetermining interest in a stipulated computation.

“The interest of justice does not require us to allow respondent to take a position inconsistent with the parties’ stipulations and responses to the Court and petitioner. The Court relied upon the stipulation in question when drafting its Opinion addressing the cross-motions for partial summary judgment. Respondent should have foreseen the proposed regulations, but instead pursued a different legal theory.” Order, at p. 4.

No second amendment for IRS.

Once again, a case for the old Taishoff slogan “Stipulate, Don’t Capitulate.”



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