                       T.C. Memo. 2008-145




                     UNITED STATES TAX COURT



          THOMAS J. AND BONNIE F. RATKE, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent*



     Docket No. 9641-01L.             Filed May 28, 2008.



          In connection with Ps’ motions under secs. 7430
     and 6673(a)(2), I.R.C. 1986, Ps move to compel
     stipulations under Rule 91(f), Tax Court Rules of
     Practice and Procedure. R objects to the motion to
     compel.

          1. Held: R’s general objections to the motion to
     compel are overruled.

          2. Held, further, R’s objections to specific
     proposed stipulations are sustained in large part and
     overruled in part.




     *
      This opinion supplements Ratke v. Commissioner, T.C. Memo.
2004-86, and 129 T.C. 45 (2007).
                                - 2 -

     Jack B. Schiffman, for petitioners.

     Robert M. Fowler, for respondent.



                   SUPPLEMENTAL MEMORANDUM OPINION


     CHABOT, Judge:    This matter is before us on petitioners’

motion to compel stipulations pursuant to Rule 91(f),1 in

connection with their motion for award of reasonable litigation

and administrative costs under section 74302 as well as their

motion for sanctions under section 6673(a)(2) in the instant

collection proceeding.

     The issues for decision are:

     (1) Whether petitioners’ motion to compel stipulations was

filed timely;

     (2) whether petitioners’ motion to compel stipulations

sufficiently comports with the requirements of Rule 91(f); and

     (3) whether petitioners’ proposed stipulations should be

deemed admitted.




     1
       Unless indicated otherwise, all Rule references are to the
Tax Court Rules of Practice and Procedure.
     2
       Unless indicated otherwise, all section references are to
sections of the Internal Revenue Code of 1986 as in effect for
proceedings commenced on the day the petition in the instant case
was filed.
                               - 3 -

                            Background

      When the petition was filed in the instant case, petitioners

resided in Arizona.   The parties have filed fairly extensive

stipulations with respect to petitioners’ motions under sections

7430 and 6673(a)(2); these stipulations and the stipulated

exhibits are incorporated herein by this reference.

      Petitioners’ deficiency case in this Court was settled and

decision was entered pursuant to the parties’ stipulated

agreement.   A dispute arose regarding the meaning of that

stipulated agreement, leading to the instant collections case.

This dispute was resolved in petitioners’ favor by our opinion in

Ratke v. Commissioner, T.C. Memo. 2004-86.   Thereafter,

petitioners moved for an award of costs under section 7430 and

later moved for sanctions under section 6673(a)(2).   In

connection with these motions, petitioners moved to require

disclosure of two memoranda.   Our opinion in Ratke v.

Commissioner, 129 T.C. 45 (2007), resolved that matter in

respondent’s favor.   Petitioners’ motion to compel stipulations,

also in connection with petitioners’ motions under sections 7430

and 6673(a)(2), is the matter before us at this stage of the

proceedings in the instant case.

                            Discussion

A.   Parties’ Contentions; Conclusions

      Petitioners contend that the matters proposed for

stipulation are “relevant to critical factual issues” the Court
                                - 4 -

will need to consider when ruling on petitioners’ motions under

sections 7430 and 6673(a)(2).   Respondent argues:    (1)

Petitioners’ motion is untimely; (2) petitioners’ motion does not

comport with the requirements of Rule 91(f); and (3) petitioners’

proposed stipulations are not appropriate for stipulation.

      Petitioners’ motion to compel stipulations is timely and, in

general, sufficiently comports with the requirements of Rule

91(f).

      We shall grant petitioners’ motion as to:   (1) The first

sentence of petitioners’ proposed stipulation 3, (2) petitioners’

proposed stipulation 4, and (3) the first sentence of

petitioners’ proposed stipulation 8.    In all other respects, we

shall deny petitioners’ motion.

B.   Analysis

      1.   In General

      The stipulation process is “the bedrock of Tax Court

practice” and is designed “as an aid to the more expeditious

trial of cases as well as for settlement purposes.”      Branerton

Corp. v. Commissioner, 61 T.C. 691, 692 (1974).      The stipulation

process serves the same function with respect to disposition of

posttrial motions, such as the motions in the instant case, as

the process serves with respect to trials.   See, e.g., Goettee v.

Commissioner, 124 T.C. 286, 290, 293, 294 (2005), affd. 192 Fed.

Appx. 212, 223 (4th Cir. 2006); Hong v. Commissioner, 100 T.C.
                                  - 5 -

88, 89-90, 92 (1993).      Rule 91 governs the Court’s approach to

stipulations, as well as the mechanical process by which

stipulations are made.      See Rule 230(a).   We have set forth in

the margin portions of Rule 91 that are helpful to our analysis

of the motion now before us, and also portions that the parties

must consider in their continued dealings in the instant case.3


     3
         Rule 91 provides, in pertinent part, as follows:

            Rule 91.   STIPULATIONS FOR TRIAL

          (a) Stipulations Required: (1) General: The
     parties are required to stipulate, to the fullest
     extent to which complete or qualified agreement can or
     fairly should be reached, all matters not privileged
     which are relevant to the pending case, regardless of
     whether such matters involve fact or opinion or the
     application of law to fact. Included in matters
     required to be stipulated are all facts, all documents
     and papers or contents or aspects thereof, and all
     evidence which fairly should not be in dispute. Where
     the truth or authenticity of facts or evidence claimed
     to be relevant by one party is not disputed, an
     objection on the ground of materiality or relevance may
     be noted by any other party but is not to be regarded
     as just cause for refusal to stipulate. The
     requirement of stipulation applies under this Rule
     without regard to where the burden of proof may lie
     with respect to the matters involved. Documents or
     papers or other exhibits annexed to or filed with the
     stipulation shall be considered to be part of the
     stipulation.

                *      *      *     *     *      *     *

          (e) Binding Effect: 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 Court will not permit a party to a
     stipulation to qualify, change, or contradict a
                                                   (continued...)
                              - 6 -

     We consider first the question of the timeliness of

petitioners’ motion to compel stipulations, then the effect of

the specific requirements of Rule 91(f), then the application of

Rule 91 to each of the stipulations petitioners seek to compel.




     3
      (...continued)
     stipulation in whole or in part, except that it may do
     so where justice requires. A stipulation and the
     admissions therein shall be binding and have effect
     only in the pending case and not for any other purpose,
     and cannot be used against any of the parties thereto
     in any other case or proceeding.

          (f) Noncompliance by a Party: (1) Motion To
     Compel Stipulation: If, after the date of issuance of
     trial notice in a case, a party has refused or failed
     to confer with an adversary with respect to entering
     into a stipulation in accordance with this Rule, or a
     party has refused or failed to make such a stipulation
     of any matter within the terms of this Rule, the party
     proposing to stipulate may, at a time not later than 45
     days prior to the date set for call of the case from a
     trial calendar, file a motion with the Court for an
     order directing the delinquent party to show cause why
     the matters covered in the motion should not be deemed
     admitted for the purposes of the case. The motion
     shall (A) show with particularity and by separately
     numbered paragraphs each matter which is claimed for
     stipulation; (B) set forth in express language the
     specific stipulation which the moving party proposes
     with respect to each such matter and annex thereto or
     make available to the Court and the other parties each
     document or other paper as to which the moving party
     desires a stipulation; (C) set forth the sources,
     reasons, and basis for claiming, with respect to each
     such matter, that it should be stipulated; (D) show
     that opposing counsel or the other parties have had
     reasonable access to those sources or basis for
     stipulation and have been informed of the reasons for
     stipulation; and (E) show proof of service of a copy of
     the motion on opposing counsel or the other parties.
                                - 7 -

     2.    Timeliness

     Respondent argues that petitioners’ motion to compel

stipulations is not timely.   Respondent points out that

petitioners’ motion to compel stipulations was filed shortly

before the parties were scheduled to file their legal memoranda

on petitioners’ motions under sections 7430 and 6673(a)(2).

Respondent further claims that the Court’s scheduling orders

“clearly anticipated that the stipulation process would have been

completed at the late date petitioners filed their Rule 91(f)

motion.”

     Petitioners contend that the cause of their motion to

compel, and the resulting delay in further proceedings in their

motions under sections 7430 and 6673(a)(2), was respondent’s

refusal to agree to their proposed stipulations.

     Both sides agree that the “45-day rule” of Rule 91(f)(1)

does not strictly apply to petitioners’ motion to compel

stipulations.

     We have examined the materials submitted by both sides on

this matter.    These materials show that the stipulation process,

which had hitherto produced much material that was submitted to

the Court, was breaking down.   Petitioners’ motion to compel has

contributed to the delay, but the basic cause was each side’s

increasing unwillingness to resolve stipulation disputes in a
                                - 8 -

reasonable manner.    Petitioners’ motion essentially served to

bring this breakdown to the attention of the Court.

     We have concluded that the purposes of Rule 91 would not be

served by sustaining respondent’s timeliness objection to the

granting of petitioners’ motion to compel stipulations.

     We hold for petitioners on this matter.

     3.   Requirements of Rule 91(f)--Conditions Necessary
          for Filing Motion; Format of Motion

     Respondent argues that the conditions necessary for filing a

motion under Rule 91(f) have not been met because respondent has

neither refused nor failed to either confer with petitioners

regarding the stipulations or stipulate any matter within the

terms of Rule 91.    Respondent also contends that petitioners’

motion to compel stipulations does not comply with four of the

five form requirements specified in the text of Rule 91(f)(1).4

     Petitioners reply that respondent’s efforts were not enough

to complete the stipulation process.    Also, petitioners attach

additional communications, including two communications after

petitioners’ motion to compel stipulations was filed, proposing

numerous other stipulations.

     By and large, respondent’s analysis of the formal defects in

petitioners’ motion is correct.    However, we have concluded that



     4
       Respondent concedes only that petitioners’ motion complies
with Rule 91(f)(1)(E) in that it includes the required
certificate of service on respondent’s counsel.
                               - 9 -

it is better to take those defects into account in analyzing

petitioners’ specific proposed stipulations rather than to deny

petitioners’ motion in toto.

     We hold for petitioners on this matter, but not completely.

     4.   Petitioners’ Proposed Stipulations

     Petitioners, in their motion to compel stipulations,

interspersed numbered paragraphs headed “Matters Claimed For

Stipulation” with numbered paragraphs headed “Proposed

Stipulations”.   In the response to petitioners’ motion,

respondent followed petitioners’ numbering system.    To facilitate

our analysis and the parties’ understanding, we will also use

petitioners’ numbers for the proposed stipulations--2, 3, 4, 5, 6

and 6(a), 7, 8, and 13 and 13(a)--in this report.    We have

reproduced the proposed stipulations literally as they appear in

petitioners’ motion.   Any stipulations resulting from our action

on petitioners’ motion to compel stipulations shall be

appropriately renumbered to take into account the stipulations

already filed in the instant case; also, minor errors shall be

corrected.

           (a) Proposed Stipulation 2

          2. When a case is settled and the stipulated
     decision document is prepared by an appeals officer, it
     is Respondent’s policy to require its litigation
     Counsel to review the computational documents (audit
     statement) to determine whether the amounts set forth
     in the computational documents (audit statement) are
     consistent with the amounts that are required to be set
     forth in the stipulated decision. If the amounts set
                             - 10 -

     forth in the computational documents (audit statement)
     are not consistent with the amounts that are required
     to be set forth in the stipulated decision,
     Respondent’s litigating Counsel is responsible for
     assuring that any agreements between the parties of
     additional amounts that are set forth in the
     computational documents (audit statement) as being owed
     are stipulated to as a “below the line” stipulation in
     the stipulated decision filed with the Tax Court.

Rule 91(a)(1) provides:

     Included in matters required to be stipulated are all
     facts, all documents and papers or contents or aspects
     thereof, and all evidence which fairly should not be in
     dispute. * * * [Emphasis added.]

Respondent states:

     Respondent does not believe that he has any policy
     resembling what petitioners have described, especially
     one referring to the particular “responsibility” of its
     attorneys. Respondent offered to stipulate to a
     provision of its manual discussing the situation
     similar to the situation petitioners have described in
     paragraph 2.

     Petitioners failed, in both their motion papers and their

reply to respondent’s response, to present any source, reason, or

basis (see Rule 91(f)(1)(C)) for our concluding that respondent

has the policy described in petitioners’ proposed stipulation 2.

In the light of respondent’s denial, and taking into account

respondent’s offer to stipulate a provision in respondent’s

manual, we conclude that we shall not compel stipulation of

petitioners’ proposed stipulation 2.

     We hold for respondent on this matter.
                              - 11 -

          (b) Proposed Stipulation 3

           3. Respondent’s attorney Ann Welhaf[5] was
     Respondent’s litigation Counsel in Docket No. 5931-
     96.[6] She was responsible for reviewing the
     computational documents (audit statement) and the
     stipulated decision document prepared by Appeals
     Officer Cary Reese in the prior Tax Court case (Docket
     No. 5931-96).

Respondent’s response does not deny the truth of the first

sentence of petitioners’ proposed stipulation 3.   As to the

second sentence, respondent states:

     There are no policies that spell out the duties of
     respondent’s attorneys in the detail that petitioners
     are seeking to attribute. * * * Respondent notes that
     the parties have stipulated that Ms. Welhaf reviewed
     the proposed decision document. See ¶ 39. of the
     Second Supplemental Stipulation of Facts.

     Petitioners failed, in both their motion papers and their

reply to respondent’s response, to present any source, reason, or

basis (see Rule 91(f)(1)(C)) for our concluding that respondent

has the policy described in the second sentence of petitioners’

proposed stipulation 3.   In the light of respondent’s failure to

deny the truth of the matter stated in the first sentence,

respondent’s denial of the truth of the matter stated in the

second sentence, and respondent’s noting that the parties had

already stipulated Welhaf’s actions, we conclude that we shall


     5
       Ann Welhaf is referred to as Welhaf in our opinion in
Ratke v. Commissioner, 129 T.C. 45, 47 (2007).
     6
       Docket No. 5931-96 is described in our opinion in Ratke v.
Commissioner, 129 T.C. at 46, and is there referred to as the
1996 case.
                               - 12 -

compel stipulation of the first sentence of petitioners’ proposed

stipulation 3 and we shall not compel stipulation of the second

sentence.

     We hold in part for petitioners and in part for respondent

on this issue.

            (c) Proposed Stipulation 4

          4. Ann Welhaf approved the stipulated decision
     prepared by Appeals Officer Cary Reese by initialing
     the “initialed copy” of the stipulated decision and
     forwarded the original stipulated decision to Doreen
     Susi, Respondent’s supervisory attorney, for her
     signature. Doreen Susi signed the stipulated decision
     document and forwarded it to the Tax Court for entry as
     the decision of the Tax Court. The stipulated decision
     approved by Ann Welhaf did not have a “below the line”
     stipulation that referenced the $12,655 assessment made
     by Respondent that was set forth in the computational
     documents (audit statement) in Docket No. 5931-96.

Respondent’s response is:

          4. The matters contained in paragraph 4. have
     already been stipulated to in paragraphs 40. and 55. of
     the Second Supplemental Stipulation of Facts.

     Respondent does not deny the truth of the matters in

petitioners’ proposed stipulation 4, and so we conclude that we

shall compel this stipulation.

     We hold for petitioners on this issue.

            (d) Proposed Stipulation 5

          5. The attached time sheets for Attorney Ann
     Welhaf do not indicate any time was charged by Ann
     Welhaf for reviewing the computational documents (audit
     statement) that accompanied the stipulated decision
     document prepared by Appeals Officer Cary Reese in
     Docket No. 5931-96.
                             - 13 -

     The timesheets (apparently, six pages attached to

petitioners’ motion as exhibit 1) do not indicate what specific

work Welhaf did on the 1996 case.   Thus, petitioners’ proposed

stipulation’s focus on a particular item that is not on the

timesheets does not advance our understanding of what did or did

not happen during the course of the 1996 case.

     Letters attached to respondent’s response and petitioners’

reply show that the parties made efforts to deal with what Welhaf

did or did not do with respect to the computational documents

accompanying the stipulated decision document in the 1996 case.

Those attached letters foster a hope that the parties may be able

to stipulate as to Welhaf’s actions.   In the meanwhile,

petitioners’ proposed stipulation 5 is not helpful, and it

appears to have a potential for misleading the Court.

Accordingly, we conclude that we shall not compel stipulation of

petitioners’ proposed stipulation 5.

     We hold for respondent on this matter.   However, we expect

the parties to stipulate the relevant underlying information.

          (e) Proposed Stipulations 6 and 6(a)

          6. Ann Welhaf did not review the computational
     documents (audit statement) accompanying the stipulated
     decision prepared by Appeals Officer Cary Reese in
     Docket No. 5931-96.
          6(a). ALTERNATIVE TO NO. 6 ABOVE: Ann Welhaf did
     review the computational documents (audit statement)
     accompanying the stipulated decision prepared by
     Appeals Officer Cary Reese in Docket No. 5931-96.
                              - 14 -

     If the words in petitioners’ proposed stipulation 6 have the

same meaning as the same words in petitioners’ proposed

stipulation 6(a),7 then at least one of the proposed stipulations

cannot be true.   If petitioners offer alternatives that cannot

both be true, then they have failed to comply with their

obligation to demonstrate that either alternative “fairly should

not be in dispute”, within the meaning of Rule 91(a)(1).8

     We will not enter into a discussion as to whether these

alternatives properly are contradictories or contraries.    The

truth may be far more nuanced.

     We hold for respondent on this matter but expect the parties

to work out proper stipulations.   See our comments with respect

to proposed stipulation 5.

          (f) Proposed Stipulation 7

          7. Other than the reference to the $12,655
     assessment in the computation documents (audit
     statement) provided to the Ratkes’ Counsel with the
     stipulated decision, there is no documentation in the
     administrative file in Docket No. 5931-96 or in Ratkes’
     Counsel, David Bosse’s file that Appeals Officer Cary




     7
       See, e.g., Zuanich v. Commissioner, 77 T.C. 428, 443 n.26
(1981) (quoting Dickerson, The Interpretation and Application of
Statutes 224 (1975)).
     8
       Rule 91(f)(3) provides that a failure to respond to a
matter, or an evasive or not fairly directed response to a
matter, will result in that matter’s being deemed stipulated.
The structure established by Rule 91(f) does not accommodate the
simultaneous offering of alternative stipulations that cannot
both be true.
                             - 15 -

     Reese informed the Ratkes’ Counsel of the $12,655
     assessment made by Respondent after the Tax Court
     petition was filed in Docket No. 5931-96.

Respondent “does not agree that the statement is accurate.”

     We cannot tell from petitioners’ motion to compel

stipulations, respondent’s response, and petitioners’ reply,

whether petitioners’ proposed stipulation 7 “fairly should not be

in dispute”, within the meaning of Rule 91(a)(1).   Accordingly,

we shall not compel petitioners’ proposed stipulation 7.

     We hold for respondent on this issue.   However, the parties

should be able to stipulate relevant matters.   If respondent

contends there are documents in the administrative file or in

petitioners’ former counsel’s file that show that petitioners’

former counsel was informed of the assessment, then the parties

should stipulate those documents and perhaps the parties’

conflicting interpretations of those documents.

          (g) Proposed Stipulation 8

          8. Respondent did not put a freeze code on the
     Ratkes’ 1993 account after the Notice of Deficiency was
     mailed. Had Respondent put a freeze code on the
     Ratkes’ account, the $12,655 reported by the Ratkes as
     additional tax on their Second Amended Return for 1993
     would not have been assessed by Respondent after the
     Ratkes’ petition was filed with the Tax Court in Docket
     No. 5931-96.

     Respondent does not object to the first sentence of this

proposed stipulation but contends the second sentence is “purely

speculative.”
                              - 16 -

     Petitioners have not explained why they believe the $12,655

would not have been assessed had a freeze code been placed on

their account.   They have neither cited nor included in their

motion to compel stipulations or their reply any part of a manual

or other authority on this matter.     Even if they had cited or

included such material, the most we could conclude would be in

terms of “oughtness” and likelihood.     Oughtness and likelihood

may turn out to be significant in resolving petitioners’ motions

under sections 7430 and 6673(a)(2), but they are not the same as

the absolute statement in the second sentence of proposed

stipulation 8.

     We conclude that we shall compel the stipulation of the

first sentence, but not the second sentence, of petitioners’

proposed stipulation 8.

     We hold in part for petitioners and in part for respondent

on this issue.

          (h) Proposed Stipulations 13 and 13(a)

          13. Respondent changed its litigation strategy
     set forth in the Notice of Determination and in the
     Chief Counsel’s Memorandum of January 16, 2002 because
     Respondent determined this strategy would not be
     successful in having the Tax Court vacate the
     stipulated decision in Docket No. 5931-96 and reenter a
     new decision in that case that set forth the $12,655
     assessment as a deficiency. Instead, Respondent
     relitigated the Ratkes’ liability for the $12,655
     assessment in the Collection Due Process Review
     Proceeding before Judge Foley. At trial, Respondent’s
                              - 17 -

     Counsel pursued a litigation strategy, which would have
     had the Tax Court recognize the $12,655 disputed
     assessment as an agreed deficiency that was subject to
     collection.
          13.(a) ALTERNATIVE TO NO 13 ABOVE: Respondent
     changed its litigation strategy set forth in the Notice
     of Determination and in the Chief Counsel’s Memorandum
     of January 16, 2006[9] because it determined [to be
     competed by Respondent............................].
     Instead, Respondent litigated the Ratkes’ liability for
     the $12,655 assessment in the Collection Due Process
     Review Proceeding before Judge Foley. At trial,
     Respondent’s Counsel pursued a litigation strategy,
     which would have had the Tax Court recognize the
     $12,655 disputed assessment as an agreed deficiency
     that was subject to collection.

     See our comments in (e) Proposed Stipulations 6 and 6(e),

supra p. 14.   We shall not compel petitioners’ proposed

stipulations 13 and 13(a).

     We hold for respondent on this matter.



     The stipulation process should enable each side to put its

best foot forward and not have to waste everyone’s time and

energy on matters which fairly should not be in dispute.   When

the Court has the impression that the parties are engaging in

obstructive wrangling, rather than constructive cooperation in

stipulating, it is just a short step to a conclusion that the

obstructors do not have good feet to put forward.   In the instant



     9
       We assume petitioners intend to refer to the memorandum
dated Jan. 16, 2002, which was one of the memoranda dealt with in
our opinion in Ratke v. Commissioner, 129 T.C. 45 (2007), and
therein sometimes referred to as the Hyman memorandum. See id.
at 47.
                              - 18 -

proceeding, the parties already have filed extensive

stipulations.   They should be able to agree to stipulations that

clarify the disputed matters dealt with in petitioners’ motion to

compel stipulations.   Then we can deal properly with petitioners’

motions under sections 7430 and 6673(a)(2).    For now, we choose

to regard both sides’ efforts in connection with petitioners’

motion to compel stipulations as an unwelcome but brief detour in

an otherwise productive stipulation process.


                                         An appropriate order will

                                    be issued granting in part and

                                    denying in part petitioners’

                                    motion to compel stipulations.
