                         T.C. Memo. 2002-52




                      UNITED STATES TAX COURT



        DEAN MONAHAN AND ROSALIE MONAHAN, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16864-96.                 February 25, 2002.



     Tobias Weiss, for petitioners.

     Andrew M. Winkler, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     SWIFT, Judge:   This case is before us on respondent’s motion

for entry of decision.   In an “affected-items” notice of

deficiency, respondent determined additions to tax relating to

petitioners’ Federal income tax for 1982 as follows:
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                Additions to Tax
                      Sec.                        Amount
                   6653(a)(1)                    $ 2,225
                   6653(a)(2)                         *
                   6661                            10,353

     *   50 percent of interest due on related tax deficiency of $41,412.


     After concessions, the threshold issue for decision is

whether resolution in this case of underlying issues (namely, a

statute of limitations defense and petitioners’ liability for

additions to tax) is controlled by resolution of similar

underlying issues in a related case.

     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the year in issue.


                            FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

     At the time the petition was filed, petitioners resided in

Jupiter, Florida.

     On December 29, 1982, petitioners invested $50,000 in a

limited partnership known as Barrister Equipment Associates

Series 112 (Barrister).

     On Barrister’s 1982 Federal partnership tax return, ordinary

losses and investment tax credits were reported relating to works

of literature and to microcomputer disks.         On audit of Barrister

in a partnership proceeding, respondent disallowed the claimed

losses and credits.
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       In Anderson Equip. Associates, et al., Barrister Associates,

Tax Matters Partner v. Commissioner, docket No. 27745-89,

respondent’s disallowance of the partnership losses and credits

claimed by Barrister and by other related partnerships was

challenged by Barrister and by the other partnerships.

       On February 17, 1995, a settlement was entered into and an

agreed decision was entered in Anderson Equip. Associates

reflecting the disallowance of the losses and credits claimed by

Barrister and by the other partnerships.    With respect to

petitioners, the disallowance of Barrister’s claimed losses and

credits resulted in a tax deficiency for petitioners for 1982 of

$41,412.

       On and about May 3, 1996, as a result of the disallowance of

Barrister’s claimed losses and credits, respondent issued

affected-items notices of deficiency to petitioners and to the

other limited partners of Barrister and of the other related

partnerships.    The affected-items notice of deficiency that

petitioner received from respondent asserted, among other things,

the additions to tax at issue herein.

       Rosalie Monahan, a petitioner herein, also participated as

an executrix for a relative in the related case of Chimblo v.

Commissioner, 177 F.3d 119 (2d Cir. 1999), affg. T.C. Memo. 1997-

535.    Chimblo involved investments similar to those involved in
                               - 4 -

Barrister and a limited partnership that also was a party in

Anderson Equip. Associates v. Commissioner, supra.

     Our opinion in Chimblo v. Commissioner, supra, was filed in

December of 1997.   Therein, we sustained respondent’s imposition

of sections 6653(a)(1), (a)(2), and 6661 additions to tax.

     On March 16, 1998, in the instant case, petitioners and

respondent entered into a settlement stipulation, referred to by

the parties as a piggyback agreement, which provided that all of

the issues in the instant case would be resolved on the same

basis as those issues are finally resolved in Chimblo v.

Commissioner, supra.   The stipulation specifically stated as

follows:


                 All of the remaining issues in this case
           shall be resolved on the same basis and by
           application of the same formula as that which
           resolves the like issues in the case in this
           Court of Catherine Chimblo and Estate of Gus
           Chimblo, Deceased, Catherine Chimblo,
           Executrix, Docket No. 16546-96 (hereafter the
           CONTROLLING CASE), as if Petitioners in this
           case were the same as the taxpayers in the
           CONTROLLING CASE. If an issue in the
           CONTROLLING CASE is appealed, the final
           decision, whether on appeal or on remand,
           shall be binding on the like issue in this
           case.


     In a number of motions for continuance of scheduled trial

dates (filed subsequently to the above March 16, 1998, settlement

stipulation), the parties herein represented to the Court that

all of the disputed issues in this case would be resolved on the
                               - 5 -

same basis as the final resolution of those issues in Chimblo v.

Commissioner, supra.   In a motion for continuance filed on

August 31, 1998, the parties represented “that all of the issues

in this case shall be resolved on the same basis as such issues

are resolved in the case in this Court of * * * [Chimblo]”.     In a

motion for continuance filed on December 15, 1999, the parties

again represented “that all of the issues in this case shall be

resolved on the same basis as such issues are resolved in the

case in this Court of * * * [Chimblo]”.

     Based on the above representations, we granted the requested

continuances of the scheduled trial dates, awaiting the outcome

of the appeal to the Court of Appeals for the Second Circuit that

had been filed in Chimblo.

     Among other issues, the primary issue decided in Chimblo was

whether individual partners could, in an affected-items

proceeding, raise a statute of limitations issue relating to the

audit of the underlying partnership where such statute of

limitations issue had not been raised in the related partnership

level proceeding.   In its opinion filed on May 17, 1999, the

Court of Appeals for the Second Circuit affirmed our decision in

Chimblo and held that the failure to raise a statute of

limitations issue in a partnership level proceeding precluded the

issue being raised in an affected-items proceeding.   Chimblo v.

Commissioner, supra at 125.   The Court of Appeals for the Second
                               - 6 -

Circuit also affirmed imposition against the taxpayers therein of

additions to tax under sections 6653(a)(1), (a)(2), and 6661.

Id.


                              OPINION

      A settlement stipulation, such as a stipulation to be bound

by a controlling case, is “in all essential characteristics a

mutual contract * * * entitled to all of the sanctity of any

other contract.”   Saigh v. Commissioner, 26 T.C. 171, 177 (1956).

General principles of contract law are applied in construing such

agreements.   Robbins Tire & Rubber Co. v. Commissioner, 52 T.C.

420, 435-436 (1969).

      As we understand the language of petitioners’ and of

respondent’s March 16, 1998, settlement stipulation, it provides

that all of the remaining issues in this case shall be resolved

on the same basis as those issues are finally resolved in Chimblo

v. Commissioner, supra.

      As indicated, in Chimblo, the Court of Appeals for the

Second Circuit concluded, as have other courts, that under the

Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L.

97-248, sec. 402, 96 Stat. 648, a statute of limitations defense

regarding an adjustment to a “partnership item” must be raised in

a partnership level proceeding.   Chimblo v. Commissioner, supra

at 125; Kaplan v. United States, 133 F.3d 469, 473 (7th Cir.

1998); Crowell v. Commissioner, 102 T.C. 683, 693 (1994); Saso v.
                                 - 7 -

Commissioner, 93 T.C. 730, 734 (1989); Maxwell v. Commissioner,

87 T.C. 783, 788 (1986); Thomas v. United States, 967 F. Supp.

505, 506 (N.D. Ga. 1997).

     The TEFRA partnership procedures are applicable to

partnership taxable years beginning after September 3, 1982, the

effective date of TEFRA.    TEFRA sec. 407, 96 Stat. 670.

     Among other arguments, petitioners argue that Barrister’s

1982 taxable year began before September 3, 1982, that the TEFRA

partnerships procedures and the above cases are not applicable,

and that petitioners individually, in the instant case, should be

allowed to assert the statute of limitations as an affirmative

defense.

     If Barrister for its 1982 tax year was not to be governed by

the TEFRA partnership proceedings, it would have been nonsensical

for petitioners to enter into the above settlement stipulation to

the effect that the issues in the instant case were to be

controlled by Chimblo v. Commissioner, supra.    Further,

petitioners did not invest in Barrister until December of 1982,

and nothing in the record indicates that Barrister’s taxable year

began before December of 1982.

     As the parties stipulated, the statute of limitations

defense that petitioners would now assert is controlled by the

resolution of that issue by the Court of Appeals for the Second
                                 - 8 -

Circuit in Chimblo, and petitioners are not allowed to raise that

issue in this case.

     Other arguments made by petitioners have been considered and

are without merit.

     To reflect the foregoing,

                                              An appropriate order and

                                         decision will be entered.
