                         T.C. Memo. 2001-84



                       UNITED STATES TAX COURT



             CHIH H. AND CHU F. CHU, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 24861-97.                        Filed April 9, 2001.


     Chih H. and Chu F. Chu, pro sese.

     David R. Jojola, for respondent.



                         MEMORANDUM OPINION


     CHIECHI, Judge:    This case is before the Court on petition-

ers’ motion for leave to file motion to vacate decision (peti-

tioners’ motion).   Respondent filed an objection to petitioners’

motion and a declaration by David R. Jojola (Mr. Jojola) in

support of that objection.   Petitioners filed a reply to respon-

dent’s objection (petitioners’ reply).   We shall deny petition-
                                      - 2 -

ers’ motion.

Background

     On October 29, 1997, respondent issued a notice of defi-

ciency (notice) to petitioners that determined the following

deficiencies in, and fraud penalties under section 6663(a)1 on,

petitioners’ Federal income tax (tax):

                                                 Fraud Penalty
         Year            Deficiency           Under Sec. 6663(a)
         1991             $18,508                  $13,881
         1992              40,931                   30,698
         1993              70,662                   52,997

     On December 29, 1997, petitioners timely filed pro sese a

petition.       This case was calendared for trial at the Court’s

trial session in Los Angeles, California, that commenced on

February 8, 1999.

     On February 2, 1999, Robert H. Appert (Mr. Appert) entered

an appearance on behalf of petitioners.          On February 8, 1999, the

parties filed a stipulation of settled issues, a first supplemen-

tal stipulation of settled issues, and a second supplemental

stipulation of settled issues (collectively, stipulations of

settled issues).       Each of those stipulations was signed on

February 6, 1999, by Mr. Appert on behalf of petitioners as well

as by each petitioner and by Mr. Jojola on behalf of respondent.

On March 11, 1999, the parties submitted to the Court a stipu-



     1
      All section references are to the Internal Revenue Code in
effect at relevant times. All Rule references are to the Tax
Court Rules of Practice and Procedure.
                               - 3 -

lated decision document (stipulated decision document) that was

signed on March 10, 1999, by Mr. Appert on behalf of petitioners

and by a representative of respondent and that reflected the

agreement of the parties as set forth in the stipulations of

settled issues.

     On March 15, 1999, the Court entered a decision in this case

pursuant to the agreement of the parties as reflected in the

stipulated decision document2 that petitioners are not liable for

the fraud penalty under section 6663(a) for any of the years at

issue and that they are liable for deficiencies in, and accuracy-

related penalties under section 6662(a) on, petitioners’ tax, as

follows:

                            Fraud Penalty      Accuracy-Related Penalty
   Year      Deficiency   Under Sec. 6663(a)      Under Sec. 6662(a)
   1991        $2,973            None                    $595
   1992         6,008            None                   1,202
   1993        20,379            None                   4,076

Discussion

     The Court’s decision in this case was entered pursuant to

the agreement of the parties on March 15, 1999.        No notice of

appeal or timely motion to vacate or revise the decision was

filed in this case, see sec. 7483 and Rule 162, and the decision

herein became final on June 13, 1999, see sec. 7481(a)(1); Fed.

R. App. P. 13(a).


     2
      On Mar. 26, 1999, after the decision in this case was
entered, Mr. Appert filed a motion to withdraw as attorney of
record for petitioners in this case. On Apr. 22, 1999, the Court
granted Mr. Appert’s motion.
                               - 4 -

     Petitioners’ motion was filed on February 12, 2001, almost

two years after the Court entered the decision in this case and

20 months after that decision became final.   Once a decision

becomes final, the Court may vacate it only in narrowly circum-

scribed situations, such as where the decision was obtained

through fraud on the Court, see Abatti v. Commissioner, 859 F.2d

115, 118 (9th Cir. 1988), affg. 86 T.C. 1319 (1986), or where the

decision is void or a legal nullity for lack of this Court’s

jurisdiction over either the subject matter or the party, see

Billingsley v. Commissioner, 868 F.2d 1081, 1084-1085 (9th Cir.

1989); Abeles v. Commissioner, 90 T.C. 103, 105-106 (1988).3

     The Court of Appeals for the Ninth Circuit has defined the

phrase “fraud on the court” to be “‘an unconscionable plan or

scheme which is designed to improperly influence the court in its

decision.’”   Toscano v. Commissioner, 441 F.2d 930, 934 (9th Cir.

1971)(quoting England v. Doyle, 281 F.2d 304, 309 (9th Cir.

1960)), vacating 52 T.C. 295 (1969); see Abatti v. Commissioner,



     3
      The Court of Appeals for the Fifth Circuit has indicated
that in extraordinary circumstances this Court has the power in
its discretion to vacate and correct a final decision where it is
based on a mutual mistake of fact. See La Floridienne J.
Buttgenbach & Co. v. Commissioner, 63 F.2d 630 (5th Cir. 1933).
The Court of Appeals for the Ninth Circuit, to which an appeal in
this case would normally lie, does not recognize this Court’s
power to vacate and correct a final decision where it is based on
a mutual mistake of fact. See Abatti v. Commissioner, 859 F.2d
115, 118 (9th Cir. 1988), affg. 86 T.C. 1319 (1986); Lasky v.
Commissioner, 235 F.2d 97, 99-100 (9th Cir. 1956), affd. per
curiam 352 U.S. 1027 (1957).
                                  - 5 -

supra.    In order to prove fraud on the Court, petitioners have

the burden of establishing that “an intentional plan of deception

designed to improperly influence the Court in its decision has

had such an effect on the Court.”         Abatti v. Commissioner, 86

T.C. 1319, 1325 (1986), affd. 859 F.2d 115 (9th Cir. 1988); see

Drobny v. Commissioner, 113 F.3d 670, 677-678 (7th Cir. 1997),

affg. T.C. Memo. 1995-209, and cases cited therein.

     The Court has carefully reviewed petitioners’ motion and

petitioners’ reply.      Petitioners’ motion states in pertinent

part:

     1)       IRS hold the document (from the Bank Deposits) and
              made the copies of receipts back to 1995 of tax-
              able year 1991-1993; But, never exchange to tax-
              payer or CPA even requested for years to see what
              the results from and run out of the appealing
              time, jumped to the conclusion which no one would
              believe it * * *.

          *        *       *        *         *       *       *

     3)       It was found IRS made mistakes for taxable year of
              1990 by double taxing on the petitioners because
              IRS always using the worksheets to jot down the
              numbers which could be partially reported and IRS
              examiners never recreated on the official forms to
              show or exchange to the taxpayers.

     4)       IRS eventually released the data in Dec. of 1998
              and petitioners hired the attorney Robert H.
              Appert to check and recreate the official 1040
              forms for taxable year of 1991-1993 as the refer-
              ence to the Tax Court.

     5)       The counsel for Petitioners did not attend the
              conference meeting on time held by judge Carolyn
              Chiechi, nor recreated the 1040/Schedule C offi-
              cial forms as all the receipts, cancelled checks
              were available.
                          - 6 -

6)    The motion to withdraw the counsel of petitioners
      was ordered from the court because Robert with CPA
      background charging $200/hr and did not prepare
      the 1040 forms either as the supporting document
      to the court and both parties.

7)    From the IRS booklets; When all the data are
      available, the professionals require only hours to
      fill out 1040 forms; Actually, back to 1995, when
      auditor Jennifer was in CPA’s office to examine
      the taxable year of 1991; The CPA took only half
      hour to accomplish the 1040 forms with schedule C
      to auditor for information when all the receipts
      and cancelled checks were copied by the auditor.

8)    The reason to use official 1040 forms was easy to
      communicate with the other party and should any
      number in doubt, the taxpayers can have receipts
      or cancelled check or bank statement to prove it.
      To prevent IRS examiners to hide or delete items
      or made partial report to jump to the conclusion
      misleading the judgments; It must have the 1040
      forms to be as the reference. It does not matter
      which 1040 forms to be used.

9)    The petitioner has been in electronics industry
      for 16 years and being laid off from July 1991 due
      to the Eaton Corp. closed completely in Los An-
      geles; Since the petitioners have no idea of ac-
      counting/book keeping, every year must have the
      CPA/tax specialist to prepare the 1040 forms.

10)   In 1992, petitioner could not find the right job
      after being laid off For almost one year starting
      to do import/trade business using the Savings or
      IRA funds to purchase the goods. The Cost of
      goods in the year 1992 was Around $54,000 plus the
      operation expenses of startup this new field of
      business. Definitely, the operating expenses
      (Schedule C) for this new trade business was far
      more than the profits of selling the products. It
      does not matter which official forms (1040 EZ or
      1040A) to be used; The results of the income loss
      (profits) should be the same.

11)   It does not matter what method to be used to anal-
      ysis the new startup business; The bank saving
      dropping from 1991 to 1993 indicated the seeds
                           - 7 -

       money being used up for the import business start-
       up, and in 1992 & 1993, even could not afford to
       hire the part time bookkeeper. Mrs. Chu majoring
       in Music helped to just put all the receipts aside
       without knowing how to organize it. But, everyone
       knows without investing or buying the seeds to
       fertilize it, the fruits will not be there years
       after. In other words, no one would expect the
       profits (Fruits) in the first few years of startup
       a new business (seeds). [Reproduced literally.]

Petitioners’ reply states in pertinent part:

12)    This Court has jurisdiction to vacate a final
       decision if the decision of the Court was obtained
       by fraud on the Court. Partially report the COG
       is the act of fraud, which would influence the
       judgment. Treating petitioners unfairly or dif-
       ferently will be justified by the court as the act
       of fraud or one kind of discriminating the peti-
       tioners had no tax/accounting background or knowl-
       edge.

   *        *       *        *       *       *       *

14)    The definition of Fraud is an act of deliberate
       deception with the design of securing something by
       taking unfair advantage of another-New Interna-
       tional Dictionary; A deliberate deception for
       unfair or unlawful gain-American Heritage Diction-
       ary. Respondent is a tax professional, hold the
       documents retrieved from the bank without exchange
       to the petitioners for four years (1995-1999) and
       jump to the decision without providing the appeal
       meeting for petitioners to explain until tax solv-
       ing date requested by the congressman to release
       the files to the petitioners to check.

15)    To prove such fraud, petitioners (No Tax back-
       ground) hired the CPA and attorney to analyze and
       prepare the detailed 1040 forms and schedule C for
       easy understanding without eliminating or modified
       the numbers where the banks statements or re-
       ceipts/cancelled checks were all available. The
       respondent (Professional tax expert) claimed in
       his office the preparation of 1040 forms need one
       more year and he could not find help to prepare it
       based on the receipts/cancelled checks and bank
                           - 8 -

       transaction statement. Actually, respondent spent
       only two hours to put the numbers into the 1040
       forms (See Exhibit A), but, hold the progress of
       checking the taxable years of 1992 and 1993.
       Because respondent knowing that petitioner lost
       the main job in 1992 and started to import the
       different small quantities of samples of audio
       devices from April of 1992. Respondent deliber-
       ately hold the progress of reviewing the expenses
       of start-up business, which was about two weeks
       from Feb. 8, 1999. (Deadline to turn in the paper
       to the court). The petitioners hired the attorney
       to continue to review and prepare the 1040 form
       and schedule C which estimated only need four
       hours required, but, not successful and on Feb.
       6th, 1999, petitioners being told that counsel
       could do it at the second phase; First phase he
       did not care about what respondent did. This was
       the main reason the petitioner had the motion to
       withdraw the counsel.

   *        *       *        *       *       *       *

17)    The legal counsel was hired to make the progress
       of reviewing the COGs of 1992, 1993 and few ex-
       penses items which respondent deliberately hold or
       partially report in his stipulation report. Dur-
       ing the time of hiring, not only the counsel was
       late in the meeting called by the judge, but, he
       did not make any progress report to petitioners
       until Feb. 6th, 1999 (Two days away from the dead-
       line set by the court); Besides, the petitioner
       (spouse) had the operation of the chest and under
       daily radiation treatment of cancer disease; Under
       such mentally pressure, Robert forced the peti-
       tioners to sign the incompletely stipulation re-
       port by saying he can fix it at the second phase.
       As the Fraud is an act; only if the professional
       made it, later can be caught what did the respon-
       dent make. During the stage of professional’s
       intention to design the scheme, it was hard to get
       the evidence. As Fraud is an act using profes-
       sional knowledge to take advantage of the non-
       professionals by treating the taxpayer unfairly,
       differently or not just. As people say that non-
       professionals might use tangible weapons to rob
       the bank to get money illegally; But, profession-
       als can use intangible way (their knowledge to
                          - 9 -

      write the makeup figures) to take the money from
      the taxpayer pockets illegally. As the profes-
      sional always use the rules in favor of his mis-
      conduct as the fraud activity, he would never tell
      anyone by holding such case for how many years
      would dismiss (drop) the case; Since by holding
      the case, IRS put the interest on it, and when IRS
      owed petitioner money, also, holding the check for
      the taxable year of 1990 without releasing by
      making the excuses. As there are two different
      issues.

18)   Because of the following reasons, the settlement
      was never reached.

      A) The deficiency of taxable year 1991, 1992 and
      1993 came out without giving the petitioners the
      documents describing where the figures from or how
      it was calculated. The only paper received was
      last week the exhibits of respondent letter, which
      had lots of expenses, items being deleted or par-
      tially report. In other words, The stipulation
      issues were not only vague, incomplete but, very
      confusing to the court if the judge knowing in
      1992 and 1993 the petitioners had no main job and
      using up the savings or even the IRA fund as emer-
      gency seed money used to start up the new trade
      business; The tax deficiency in 1992 (Petitioner
      lost the main job) was calculated twice as higher
      as in the 1991 ($2,973.00 + $595) which petitioner
      still had the main job. In 1993 (the second year
      of the new start-up trade business), the defi-
      ciency was calculated eight times ($20,379 +
      $4076) higher than the 1991. It would make the
      judge very confused by just looking at the above
      figures made-up by the respondent deliberately to
      deceive the court judgment.

      (B) Before the deadline (Feb. 2, 1999); Judge
      agreed the withdrawal of petitioners counsel.
      Because no progress report and even negligence of
      the meeting called by the judge.

      (C) The petitioner (Spouse) was under cancer
      treatment and mentally in the bad shape. Peti-
      tioners have to totally trust and rely on the
      counsel hired with the $200/hr rate.
                              - 10 -

          (D) Under above stress conditions, the petition-
          ers’ counsel talked into the petitioners to sign
          the incomplete stipulation issues made up by the
          respondent at the last minute on Feb. 6th, 1999 by
          saying he could do the second phase work or he
          would not represent the petitioners on the Feb.
          8th, 1999 in the court.

          (E) In the morning (About 9:00 A.M.) of Feb. 8th,
          1999; Petitioner did turn in the above situation
          paper and requested the Judge to consider the COGs
          of 1992, 1993 and few expenses items which respon-
          dent deliberately drop or cut off in respondent
          issues two days ago. Showing the stipulations has
          the figures made up by the respondent except the
          taxable year of 1991. Starting from the end of
          January 1999; The respondent just hold the pro-
          gress of reviewing the taxable year of 1992 and
          1993; Do not mention to exchange the documents or
          provide the opportunity for petitioners until Feb.
          6th, 1999. All the papers were prepared for last
          minutes signatures. This was the way the profes-
          sional designed the trap to take advantage of the
          taxpayers unfairly by giving petitioners no oppor-
          tunity at all saying the court need the signatures
          to turn in. The petitioners did not sign the
          stipulations of facts at the first place because
          the respondent did not provide the complete ex-
          penses report when reviewing the taxable year of
          1991. I believe the laws give the taxpayers to
          know how the deficiency being calculated and based
          on. Respondent hold or hide the documentations
          and provided no chance for petitioners to explain
          or exchange are not only unfair, but, trying to
          stop the court to review what figures respondent
          made up deliberately to take advantage of the
          petitioners is obviously seen. If the respondent
          did not make up the figures or untruth report to
          the court, respondent should not be afraid of any
          questions to be asked by the Judge during the next
          investigation. [Reproduced literally.]

     We find petitioners’ motion and petitioners’ reply to be

vague and confusing.   However, those filings do not appear to

suggest or argue that we had no jurisdiction over the subject
                               - 11 -

matter or petitioners in this case.     Nor do petitioners’ motion

and petitioners’ reply appear to suggest or argue that there was

any corruption of the Court.    Assuming arguendo that petitioners

are contending in petitioners’ motion and petitioners’ reply that

some sort of fraud was perpetrated on the Court, on the instant

record, we reject any such contention.    That record establishes

that:    Petitioners retained legal counsel shortly before the

scheduled trial in this case was to begin; after retaining legal

counsel, the parties reached a basis of settlement and memorial-

ized that settlement in the stipulations of settled issues which

were signed by petitioners’ counsel, Mr. Appert, on behalf of

petitioners as well as by each petitioner and by Mr. Jojola on

behalf of respondent; the Court entered a decision in this case

pursuant to the agreement of the parties as shown in the stipu-

lated decision document4 that was signed by Mr. Appert on behalf

of petitioners and by a representative of respondent and that

reflected the stipulations of settled issues;5 and petitioners

did not appeal the decision in this case or timely move to vacate



     4
      It is noteworthy that the stipulated decision document
reflects a substantial concession by respondent regarding the
determinations in the notice.
     5
      Contrary to the allegations in petitioners’ motion and
petitioners’ reply, petitioners’ counsel, Mr. Appert, did not
file a motion to withdraw as attorney of record for petitioners
in this case until Mar. 26, 1999, after the decision in this case
was entered on Mar. 15, 1999. The Court granted that motion on
Apr. 22, 1999.
                             - 12 -

or revise that decision.

     Based on our review of the entire record before us, we find

that petitioners have failed to show that the decision entered in

this case is the result of fraud on the Court or any other

situation that warrants our exercise of our discretion under Rule

162 to grant petitioners’ motion.    Based on that record, we find

that petitioners have failed to persuade us that we should grant

them leave to file a motion to vacate the decision.

     To reflect the foregoing,

                                      An order will be issued deny-

                                 ing petitioners’ motion for leave

                                 to file motion to vacate decision.
