                                T.C. Memo. 2012-150



                          UNITED STATES TAX COURT



     THOMAS C. SANDOVAL AND BOBBIE J. SANDOVAL, Petitioners v.
         COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 25881-10L.                         Filed May 29, 2012.



      Thomas C. Sandoval and Bobbie J. Sandoval, pro sese.

      Bruce M. Wilpon, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


      COHEN, Judge: This case was commenced under section 6330(d)(1) in

response to a notice of determination concerning collection action. The issue for

decision is whether petitioners may challenge in this case the failure of decisions in

prior cases to allow net operating loss carryforwards. All section references are to
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the Internal Revenue Code, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

                                FINDINGS OF FACT

       Some of the facts have been stipulated, and the stipulated facts are

incorporated in our findings by this reference. Petitioners resided in Texas when

their petition was filed.

       Petitioners’ Federal income tax liabilities for 1985, 1987, 1989, and 1990

were the subject of this Court’s docket No. 21220-96, filed September 30, 1996.

After extended pretrial proceedings, the case was tried April 19, 1999. A

Memorandum Opinion was filed June 27, 2000, as T.C. Memo. 2000-189 and

directed entry of decision under Rule 155. Among the issues decided was “whether

petitioners may claim net operating loss carrybacks or carryforwards      * * * for the

years in issue.” The Court held that they could not because they offered only tax

returns for prior years and no other evidence of such losses. Petitioners and

respondent each filed separate computations for decision under Rule 155, and the

Court ultimately accepted respondent’s computation and rejected petitioners’. The

decision was entered June 12, 2001, and was not appealed.
                                         -3-

      Thomas C. Sandoval, Jr.’s (petitioner) income tax liability for 1994 was the

subject of docket No. 16395-98, filed October 5, 1998. After multiple pretrial

proceedings, the case was tried March 13, 2001. A Memorandum Opinion was

filed December 11, 2001, as T.C. Memo. 2001-310 and directed entry of decision

under Rule 155. Among the issues decided was whether petitioner “has net

operating losses to offset a portion of his 1994 taxable income”. As to this issue,

the Court held:

                   A.     Net Operating Loss Carryforwards

             Petitioner contends, but failed to establish, that his 1994 income is
      offset by net operating losses. See Jones v. Commissioner, 25 T.C.
      1100, 1104 (1956) (holding that a taxpayer must prove the amount of the
      net operating loss carryforward deductions claimed and that his gross
      income in other years did not offset those losses), revd. and remanded
      on other grounds 259 F.2d 300 (5th Cir. 1958). Petitioner’s
      documentary evidence consisted of his tax returns and a worksheet with
      figures differing from those on the returns. See Wilkinson v.
      Commissioner, 71 T.C. 633, 639 (1979) (holding that tax returns alone
      do not establish a taxpayer’s entitlement to claimed deductions).
      Respondent concedes petitioner had eligible net operating losses of
      $15,546, $3,577, $35,791, and $9,573 in 1982, 1989, 1991, and 1992,
      respectively. These losses were absorbed by income in carryback and
      carryover years prior to 1994. See sec. 172(b) (stating that net operating
      losses must be carried back 3 years and the remaining portion carried
      forward 15 years). Accordingly, petitioner does not have a net operating
      loss carryfoward in 1994. [Id.]

Petitioner and respondent filed separate computations for decision. The Court

accepted respondent’s computations and entered a decision on May 24, 2002.
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Petitioner filed a motion to vacate or revise the decision and to grant a new trial, but

that motion was denied. Petitioner appealed the decision to the Court of Appeals

for the Fifth Circuit, and the decision was affirmed by mandate issued July 7, 2003.

In Sandoval v. Commissioner, 67 Fed. Appx. 252 (5th Cir. 2003), aff’g T.C. Memo.

2001-310, the Court of Appeals stated, in part: “[T]he Tax Court found that

Sandoval had incurred net operating losses in past years, but those losses had been

absorbed prior to 1994. Sandoval challenges this finding, but he presents no

substantive evidence in support of his argument. For this reason, the Tax Court’s

judgment is not clearly erroneous.”

      Petitioners’ income tax liability for 1995 was the subject of docket No.

14962-99 filed September 8, 1999. After the case was set for trial, the parties

stipulated a decision that was entered March 1, 2002.

      On July 27, 2009, a notice of intent to levy for unpaid income taxes for

1990, 1994, and 1995 was sent to petitioners. Petitioners requested and were

granted a hearing pursuant to section 6330. Petitioners did not seek alternatives to

collection and raised only petitioner’s underlying liability for 1994 as determined

in the decision in docket No. 16395-98, contending that the Court of Appeals for

the Fifth Circuit had ruled that petitioner was entitled to net operating loss
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carryovers. A notice of determination sustaining the levy was sent November 4,

2010.

        The parties here stipulated: “The only issue in this case is whether the

computations of tax in petitioners’ prior Tax Court cases were accurate.”

                                       OPINION

        Section 6330(a) establishes a taxpayer’s right to notice and the opportunity

for a hearing before a levy to collect assessed Federal taxes may be made. Section

6330(c) specifies the matters to be considered at the hearing. Section 6330(c)(2)(B)

provides:

        Underlying liability.--The person may also raise at the hearing
        challenges to the existence or amount of the underlying tax liability for
        any tax period if the person did not receive any statutory notice of
        deficiency for such tax liability or did not otherwise have an
        opportunity to dispute such tax liability.

Section 6330(c)(4)(A) provides:

        Certain issues precluded.--An issue may not be raised at the hearing
        if--

                    (i) the issue was raised and considered at a previous
              hearing under section 6320 or in any other previous
              administrative or judicial proceeding; and

                   (ii) the person seeking to raise the issue participated
              meaningfully in such hearing or proceeding* * *
                                          -6-

These sections adopt the generally recognized doctrines of res judicata and

collateral estoppel in the collection due process category of tax litigation. Res

judicata bars repetitious suits on the same claim, and collateral estoppel precludes

the relitigation of an issue previously litigated between the parties in one

controversy when it recurs in other litigation between those parties. See generally

Koprowski v. Commissioner, 138 T.C.          ,     (slip op. at 10-12) (Feb. 6, 2012).

      Petitioners contend that their right to offset net operating loss carryforwards

was never fairly addressed in the prior cases in which their liabilities for 1990,

1994, and 1995 were finally adjudicated. The records in those cases belie their

assertion, however. The claimed net operating losses for 1990 and 1994 were

specifically rejected for lack of proof in T.C. Memo. 2000-189 and T.C. Memo.

2001-310, respectively, after petitioners actively litigated those claims. They

subsequently disputed the computations for decision in each case and appealed the

decision as to 1994. The Court of Appeals for the Fifth Circuit affirmed this Court’s

conclusion that there was no proof that petitioner’s net operating losses had not

been absorbed and were available to offset petitioner’s liability for 1994. That

conclusion necessarily means that there were no net operating losses available to be

carried over to 1995, the year that was resolved by entry of a stipulated decision.
                                        -7-

      Petitioners’ attempt to relitigate matters previously decided against them is

exactly what section 6330(c)(2)(B) and (4)(A) is intended to preclude. They persist

in the previously rejected implication that all they must show to be allowed a net

operating loss carryover are copies of their tax returns claiming the losses. They

have not raised (and have by stipulation excluded) any other argument. The notice

of determination was not erroneous factually or legally, and


                                                 Decision will be entered

                                           for respondent.
