In Uncategorized on 10/14/2020 at 13:14

Rock Bordelon eked out a win from Judge Gustafson back in February (see my blogpost “Risky Business – Part Deux,” 2/20/20). He and IRS went to the Rule 155 beancount, agreed on the numbers, but the IRS junior grade who did up the final agreed decision doc blew it big time. Instead of putting in the $675K deficiency, the JG put in $24K.

As is not uncommon, the JG cloned a prior decision doc from another case in the old wordprocessor, and changed all the numbers except the bottom line. Neither IRS nor Rock’s trusty attorney (whom I’ll call RCM) caught the error, says Judge David Gustafson, obligingly acquitting said RCM of having played “gotcha” and letting the goof go by. And Judge Gustafson didn’t proofread the signed-off document; after all, that’s counsels’ job.

IRS, hamstrung by COVID-19, awakens after the Section 7481 90-day finality cutoff, and wants to revise or vacate. RCM says he hasn’t had time to do the numbers, so can’t agree to any change, because can’t verify the “calculation.”

“To our reading, this statement about the ‘calculation’, which is silent about the amount stated in the proposed decision document, is ambiguous. Of course, ‘verify[ing] the accuracy’ of the proposed decision amount would have been downright impossible, since we now know it was wildly inaccurate; and counsel might have been ‘not able to agree to it’ for the reason that it bore a gross and obvious error. Petitioner’s counsel did not request additional time to prepare an alternative calculation or to otherwise determine whether he agreed to respondent’s proposed stipulated decision. That might mean that (in view of the magnitude of the error) he perceived an apparent petitioner-favorable error in the too-good-to-be-true proposed decision and decided to sign it without doing his own computation, which could only be disadvantageous to his client. For purposes of this order, however, we assume that petitioner’s counsel perceived no error but simply thought it appropriate to rely on his opponent.” Rock Bordelon, Docket No. 11905-14, filed 10/14/20. (Emphasis by the Court).

Taishoff says the foregoing is Gustafson for “don’t play the wag here, Laddie.” Remember ABA Model Rule 3.3(a).

 Now pore l’il ole Article I Tax Court hasn’t got the sweeping FRCP 60 powers of Article III Courts to clean up all goofs whenever they may have occurred.

“However, because Tax Court decisions become final by an express statute (I.R.C. sec. 7481), the Tax Court’s authority to vacate a decision under Tax Court Rule 162 is more limited than a district Court’s authority to grant relief from a judgment under Fed. R. Civ. P. 60(b), and in an appeal from a Tax Court decision the power of the Court of Appeals is similarly constrained. See Wapnick v. Commissioner, 365 F.3d 131, 132 (2d Cir. 2004) (‘In considering the predecessor to section 7481, the Supreme Court ruled that after an order of the Tax Court has become final the “statute deprives us of jurisdiction over the case.” R. Simpson & Co. v. Commissioner, 321 U.S. 225, 230 (1944); see also Lasky v. Commissioner, 235 F.2d 97, 99 (9th Cir. 1956). The Court recognized that “the usual rules of law applicable in court procedure must be changed” to achieve the finality needed in the realm of tax decisions. See Simpson, 321 U.S. at 228“). Order, at p. 7.

Now Tax Court has jurisdiction and there wasn’t fraud. And though RCM claims there was only unilateral mistake by IRS, reading RCM’s papers and IRS’, Judge Gustafson finds there was mutual mistake. Nobody challenges the $675K number.

“We do not need to set aside an agreement; we do not need a new trial; we do not need to retract a wrongful purported exercise of jurisdiction. Rather, we see on the computation the parties’ concurrence about the amount of the decision, and there is no dispute that the computation is correct. That is, contrary to petitioner’s characterization, there was no ‘mathematical error’ by one of the parties in the computation. Rather, by an error (of an employee of one of the parties’ counsel) left uncorrected by both parties, the wrong number–a number other than the agreed-upon and correct number– was printed on the stipulated decision document. That is, we know quite precisely the error on the decision, how it was made, and how to fix it.” Order, at pp. 7-8 (Emphasis by the Court).

Tax Court can correct clerical errors.

“…our authority to correct clerical errors in otherwise final decisions derives from Tax Court Rule 1(b), which allows us to adapt Federal Rules of Civil Procedure when no Tax Court rule applies, and from Fed. R. Civ. P. 60(a), which allows a court to correct clerical errors at any time. See Snow v. Commissioner, 142 T.C. at 420 (‘We may also “correct” a final decision where a clerical error in the decision is discovered after the decision has become final’). In that connection,”[c]lerical mistakes need not be made by the clerk, but they must be in the nature of recitation of amanuensis mistakes that a clerk might make.” Jones v. Anderson-Tully Co., 722 F.2d 211, 212 (5th Cir. 1984). In other words, a clerical mistake, i.e., a mistake that we can correct without vacating our decision, can include failing to update an entry on the face page of a computation statement and on a proposed decision document, where the actual agreed computation was correct. And though the petitioner contends that this mistake was not the Court’s mistake, and thus would not be something we have power to correct, we disagree. The mistake was originated by respondent, concurred in by petitioner, proposed by the parties jointly, and adopted by the Court–and it was a clerical mistake.” Order, at p. 9.

And Judge Gustafson puts in the right numbers into the order and decision.

What a misfortune he wasn’t there in 1991, for the celebrated $92 million misunderstanding.

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