                        T.C. Memo. 2003-110



                      UNITED STATES TAX COURT



                  LIDIA LAMANNA, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent

     FRANCISCO LAMANNA, a.k.a. FRANK LAMANNA, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 7569-99, 7570-99.           Filed April 18, 2003.


     Lidia Lamanna, pro se in docket No. 7569-99.

     Francisco Lamanna, pro se in docket No. 7570-99.

     Lorraine Y. Wu, for respondent.



                        MEMORANDUM OPINION



     DAWSON, Judge:   These cases were assigned to Chief Special

Trial Judge Peter J. Panuthos, pursuant to the provisions of
                                            - 2 -

section 7443A(b)(5) and Rules 180, 181, and 183.1                        The Court

agrees with and adopts the opinion of the Chief Special Trial

Judge, which is set forth below.

                     OPINION OF THE SPECIAL TRIAL JUDGE

       PANUTHOS, Chief Special Trial Judge:                    This case is before

the Court on respondent’s motions for entry of decision in

accordance with the parties’ stipulation of settled issues filed

on May 14, 2002.         As explained in detail below, we shall grant

respondent’s motions.

                                      Background

       Respondent issued petitioners a statutory notice of

deficiency, dated January 27, 1999, determining the following

income tax deficiencies, additions to tax, and penalties:
                                          Additions to Tax                       Penalty
                       Sec.        Sec.             Sec.        Sec.     Sec.      Sec.
Year   Deficiency    6651(a)   6653(a)(1)(A)   6653(a)(1)(B)   6653(a)    6654   6662(a)

1986       $20,235   $5,059        $1,012     50% of the         ---      $980       ---
                                               interest due
                                               on $20,235
1987        48,438   12,110         2,422     50% of the         ---     2,618       ---
                                               interest due
                                               on $48,438
1988        36,091    9,023         ---           ---           $1,805   2,308     ---
1989        37,235    9,309         ---           ---            ---     2,515   $7,447
1990        38,968    8,992         ---           ---            ---     2,370    7,194
1991        55,343   13,836         ---           ---            ---     3,185   11,069

The adjustments to income in the notice of deficiency were

primarily due to respondent’s disallowance of various deductions

claimed on Schedule A and to the disallowance of total expenses




       1
        All section references are to the Internal Revenue Code
in effect for the years in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
                                 - 3 -

claimed on Schedule E of petitioners’ jointly filed Federal

income tax returns for 1986 through 1991.

     Frank Lamanna and Lidia Lamanna each filed a petition with

this Court.     At the time the petitions were filed petitioners

resided in Los Angeles, California.      Respondent filed an answer

to each petition and later filed a motion to consolidate for

trial, briefing, and opinion.     On January 20, 2000, we granted

respondent’s motion to consolidate.

     These consolidated cases were originally set for trial on

January 24, 2000.     Petitioners moved for a continuance on four

separate occasions, based on a variety of grounds, including but

not limited to an opportunity for petitioners to engage counsel.

     These cases were set for trial at the trial session

beginning May 13, 2002.     The parties executed on May 13, 2002, a

stipulation of settled issues that covered all taxable years in

issue.2    The stipulation, filed on May 14, 2002, set forth

numerous adjustments that resulted in no deficiencies, no

additions to tax, and no penalties for taxable years 1987 through

1991.     For 1986, the remaining taxable year, the stipulation

provided in pertinent part:




     2
        While there are two docketed cases before the Court,
there is one stipulation of settled issues which addresses all
issues in each of these consolidated cases.
                              - 4 -

                              1986

          1. For taxable year 1986, petitioners are
     entitled to total Schedule E expenses in the amount of
     $212,906.44.

          2. For taxable year 1986, petitioners are not
     entitled to a Schedule A medical expense deduction.

          3. For taxable year 1986, petitioners are
     entitled to a Schedule A mortgage interest expense
     deduction in the amount of $5,218.00.

          4. For taxable year 1986, petitioners are not
     entitled to a Schedule A charitable contribution
     deduction.

          5. For taxable year 1986, petitioners are subject
     to an addition to tax pursuant to I.R.C. Section
     6651(a).

          6. For taxable year 1986, petitioners are subject
     to an addition to tax pursuant to I.R.C. Section
     6653(a)(1)(A) for negligence.

          7. For taxable year 1986, petitioners are subject
     to an addition to tax pursuant to I.R.C. Section
     6653(a)(1)(B) for negligence.

          8. For taxable year 1986, petitioners are subject
     to an addition to tax pursuant to I.R.C. Section 6654
     for failure to pay estimated taxes.

        *       *       *       *         *       *       *

     For All Years (1986, 1987, 1988, 1989, 1990, and 1991)

          47. It is further stipulated that interest will
     be assessed as provided by law on any deficiencies due
     from the petitioners.

          48. This STIPULATION OF SETTLED ISSUES resolves
     all of the issues before the Court.

     Based on the stipulation, respondent prepared a decision in

each of these consolidated cases.    For the 1986 taxable year,
                                     - 5 -

respondent’s decision proposed the following deficiency and

additions to tax:

                                         Sec.            Sec.
  Year   Deficiency   Sec. 6651(a)   6653(a)(1)(A)   6653(a)(1)(B)    Sec. 6654
  1986    $3,096         $774          $154.80          $3,096        $149.78

     Respondent sent each petitioner a letter dated July 5, 2002,

enclosing the proposed decision document with supporting

computations.      Petitioners refused to sign the decision document

for a variety of reasons.        First, petitioners claim that the

decision document does not conform with the terms of the

stipulation of settled issues.         Second, they claim that they were

denied an opportunity to consult with an attorney prior to

signing the stipulation of settled issues.             Third, they claim

that respondent’s counsel misled them into believing the

stipulation they signed was not final and could be subject to

revisions.

     In particular, petitioners wanted to revise the signed

stipulation, with respect to the 1986 taxable year, to show a

Schedule A mortgage interest deduction of $29,305 instead of the

listed amount of $5,218 and to include Schedule E rental income

of only $127,752 instead of the $172,752 amount listed on their

1986 Federal income tax return.          Petitioners were aware that the

Schedule A mortgage interest deductions were in issue prior to

their signing the stipulation of settled issues.                 Petitioners

claim that respondent’s counsel agreed to allow further interest
                               - 6 -

expense deductions and Schedule E adjustments after the

stipulation of settled issues was signed and filed.   Respondent’s

counsel denies that she promised petitioners anything other than

what had been agreed upon in the stipulation.

     Respondent filed a Motion for Entry of Decision in each of

these consolidated cases.   Each petitioner filed an Objection to

respondent’s motion and a Reply to respondent’s response.3

                             Discussion

     A controversy before this Court may be settled by agreement

of the parties.    Dorchester Indus. Inc. v. Commissioner, 108 T.C.

320, 329 (1997), affd. without published opinion 208 F.3d 205 (3d

Cir. 2000).   A settlement stipulation is in essence a contract.

Stamos v. Commissioner, 87 T.C. 1451, 1455 (1986).    Accordingly,

general principles of contract law determine whether a settlement

has been reached and, if so, whether the stipulation is binding

and enforceable.   Dorchester Indus. Inc. v. Commissioner, supra

at 330.

     Under such principles, we enforce a valid settlement

stipulation absent a showing of lack of formal consent, fraud,


     3
        The documents initially submitted by petitioners on July
23 and Oct. 10, 2002, asked the Court for an entry of decision in
which there would be no deficiencies, no additions to tax, and no
penalties for all taxable years in issue. The Court filed the
documents as petitioners’ (1) Opposition to Respondent’s Motion
for Entry of Decision and (2) Reply to Respondent’s Response to
Petitioner’s Opposition to Motion for Entry of Decision,
respectively. See Rule 54.
                                - 7 -

mutual mistake, or some similar ground.     A mistake by one of the

parties alone is not a sufficient ground to vacate a settlement

agreement.    Stamm Intl. Corp. v. Commissioner, 90 T.C. 315, 320-

321 (1988).

     Moreover, we “will not permit a party to a stipulation to

qualify, change, or contradict a stipulation in whole or in part,

except * * * where justice requires”, Rule 91(e), or “unless good

cause is shown.”   Saigh v. Commissioner, 26 T.C. 171, 176 (1956).

Factors to consider include the injury to the opposing party and

the amount of inconvenience to the Court if the stipulation were

set aside or modified, as well as the possible injustice to the

moving party if the stipulation were enforced.        Adams v.

Commissioner, 85 T.C. 359, 375 (1985).     More stringent standards

to modify or set aside a settlement stipulation shall apply when

a trial is canceled as a result of the stipulation.        Stamm Intl.

Corp. v. Commissioner, supra at 321.     In such cases, the parties

are held to their agreement without regard to whether the

judgment is correct on the merits.      Id. at 322.

     In the present consolidated cases, the stipulation of

settled issues is valid.   It was signed by all parties and filed

with the Court on May 14, 2002.   It is comprehensive,

encompassing both consolidated cases, covering all taxable years

in issue, and disposing of all issues raised by the statutory

notice of deficiency dated January 27, 1999.
                               - 8 -

     Petitioners nevertheless claim that respondent’s counsel

misled them into believing the stipulation they signed was not

final and could be subject to revisions.   They have not offered

any credible evidence to support their claim.   Nor is there any

evidence to show that respondent committed fraud in having

petitioners sign the stipulation.   At most, petitioners’ claim

amounts to a unilateral mistake, which is not a sufficient ground

to vacate a settlement agreement.

     The interests of justice also do not justify setting aside

or modifying the stipulation of settled issues.   It was executed

during the late afternoon of May 13, 2002, and filed in time to

avert trial.   Prior to that, petitioners had moved for a

continuance on four separate occasions, in part because they

represented to the Court that they wanted an opportunity to

engage counsel.   Their claim now that they were unfairly denied

an opportunity for attorney consultation prior to signing the

stipulation does not satisfy the more stringent standards to

modify or set aside a settlement stipulation when a trial is

canceled as a result of the stipulation.   We note that the

stipulation of settled issues results in no deficiencies,

additions to tax, and penalties for taxable years 1987 through

1991, and for the remaining taxable year of 1986, the deficiency,

additions to tax, and penalty were substantially reduced when
                                 - 9 -

compared to the corresponding amounts in the statutory notice of

deficiency.

     Accordingly, petitioners are bound by the amounts shown in

the stipulation.

     To reflect the foregoing,

                                         An order granting respondent’s

                                 motion and decision will be entered

                                 in each docket.
