                        T.C. Memo. 2002-138



                      UNITED STATES TAX COURT



                 MICHAEL BUCHSBAUM, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5379-98.                 Filed May 31, 2002.



     Michael Buchsbaum, pro se.

     Ric D. Hulshuff and Lorraine Wu, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COLVIN, Judge:   Respondent determined deficiencies in

petitioner’s Federal income taxes and additions to tax as

follows:
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                                       Additions to tax
    Year          Deficiency     Sec. 6651(a)(1)    Sec. 6654
    1991           $1,504                $376               --
    1992           90,846           22,567                $3,937
    1993           28,820               7,213              1,209

     The parties have settled all issues except whether

petitioner incurred a loss in any year in issue from Arcanum One

Partners (Arcanum), a New York limited partnership, and, if so,

the amount of the loss.

     By stipulation of settled issues, the parties agreed to the

amount of petitioner’s deficiencies in tax for 1991, 1992, and

1993, and additions to tax for those years.       The parties also

stipulated that any loss that petitioner may have incurred from

Arcanum will offset the stipulated deficiencies.       After

concessions, the issues for decision are:

     1.    Whether petitioner is bound by the stipulation of

settled issues.    We hold that he is.

     2.    Whether we have jurisdiction to decide whether

petitioner incurred a loss from Arcanum.        We have jurisdiction if

Arcanum is a small partnership under section 6231(a)(1)(B) and

thus excepted from the unified partnership procedures.         We hold

that we lack jurisdiction because Arcanum is not a small

partnership.
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     Section references are to the Internal Revenue Code in

effect for the applicable years.   Rule references are to the Tax

Court Rules of Practice and Procedure.

                         FINDINGS OF FACT

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

A.   Petitioner

     Petitioner was incarcerated in Florence, Colorado, when he

filed the petition in this case.   He resided in California before

and after his incarceration.

     Petitioner devised a scheme to obtain funds fraudulently

from certain individuals from 1991 to 1993.   He falsely

represented to these individuals that members of his family

needed emergency medical care and that he could not pay their

medical expenses.   He did not repay or ever intend to repay the

funds he received from those individuals.   Petitioner received

$115,000 in 1991, $246,833 in 1992, and $48,800 in 1993 as a

result of this scheme.   Petitioner did not file income tax

returns for 1991, 1992, or 1993.

B.   Arcanum

     Arcanum was established as an investment partnership on

February 4, 1981.   Petitioner was Arcanum’s sole general partner

and one of its limited partners in the years in issue.

     Petitioner signed Arcanum’s Form 1065, U.S. Partnership

Return of Income, for 1990.    He checked a box on Arcanum’s return
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indicating that it was not subject to TEFRA partnership

procedures.    Secs. 6221-6233.   Arcanum attached to its return 10

Schedules K-1, Partner’s Share of Income, Credits, Deductions,

etc.    One Schedule K-1 identified the partner as “Arthur Stern

Jr. Account #2".    Line C of that Schedule K-1 states that Arthur

Stern Jr. Account #2 is a trust.     Another K-1 identified the

partner as “Stuart D. Grodd IRA Account”.     Line C of that

Schedule K-1 states that Stuart D. Grodd IRA Account is an IRA.

The other 8 partners were individuals.

       On October 9, 1992, Arcanum filed a petition with the

Bankruptcy Court for the Northern District of California under

Chapter 11 of the U.S. Bankruptcy Code.     Charles E. Sims (Sims)

was the trustee for Arcanum’s bankruptcy estate.     Arcanum did not

file partnership returns for 1991 or 1992.     On December 9, 1993,

the bankruptcy court granted Arcanum’s motion to convert its

Chapter 11 proceeding to a Chapter 7 proceeding.     Sims signed and

filed Arcanum’s 1993 partnership return in May 1995.     He

indicated on the return that Arcanum was not subject to the TEFRA

partnership procedures.    Attached to Arcanum’s 1993 partnership

return were 7 Schedules K-1, one of which identified the partner

as “Stuart D. Grodd IRA Account”, an IRA.

       Respondent determined deficiencies in petitioner’s Federal

income taxes for 1991, 1992, and 1993, and additions to tax under

sections 6651(a)(1) and 6654 for those years.     Respondent did not
                               - 5 -

determine any deficiencies based on adjustments to partnership

items.   Petitioner filed a petition in which he contended, among

other things, that he had incurred a loss from Arcanum, which

would offset the deficiencies determined.

     The parties filed a stipulation of settled issues about

1 year before trial.   In it, the parties stipulated that

petitioner is liable for the following:

          1. Subject to the provisions of paragraph 4,
     below, there are deficiencies in income tax due from
     petitioner in the amounts of $31,804.00, [$]71,964.00,
     and [$]9,747 for the taxable years 1991, 1992, and
     1993, respectively. It is further stipulated that
     respondent claims an increased deficiency in income tax
     for the taxable year 1991 in the amount of $30,300.00,
     pursuant to the provisions of I.R.C. § 6214(a).

          2. Subject to the provisions of paragraph 4,
     below, petitioner is liable for delinquency penalties
     under I.R.C. § 6651(a)(1) in the amounts of $7,771.00,
     $17,991.00, and $2,436.75 for taxable years 1991, 1992,
     and 1993, respectively. It is further stipulated that
     respondent claims an increased delinquency penalty for
     the taxable year 1991 in the amount of $7,395.00,
     pursuant to the provisions of I.R.C. § 6214(a).

          3. Subject to the provisions of paragraph 4,
     below, petitioner is liable for estimated tax penalties
     under I.R.C. § 6654 in the amounts of $1,776.47,
     $3,138.77, and $408.38 for taxable years 1991, 1992,
     and 1993, respectively. It is further stipulated that
     respondent claims an increased estimated tax penalty
     for the taxable year 1991 in the amount of $1,776.47,
     pursuant to the provisions of I.R.C. § 6214(a).

          4. This stipulation resolves all issues in the
     case with the exception of the issues raised by
     petitioner in his petition, to wit, whether petitioner
     has incurred a loss from Arcanum One Partners, a New
     York limited partnership, in any year at issue, which
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     would be required to be offset against the deficiency
     amounts set forth above, and if so, the amount of any
     such loss for each year.

                              OPINION

A.   Whether Petitioner Is Bound by the Stipulation of Settled
     Issues

     At trial, petitioner moved that he not be bound by the

stipulation of settled issues because the amounts to which he

agreed were incorrect.   He contended that the settlement did not

take into account payments that he claims he made to the

Fireman’s Fund in 1986 in the amount of $677,000 and in January

1997 in the amount of $300,000.1

     We denied petitioner’s motion at trial because respondent

would have been prejudiced if we did not enforce the stipulation.

Respondent relied on the settlement as shown by the fact that, in

the pretrial memo, respondent listed no witnesses for trial; in

contrast, respondent had listed 10 witnesses in a prior pretrial

memo filed before the parties signed the stipulation of settled

issues.

     General principles of contract law govern the compromise and

settlement of Federal tax cases.   Dorchester Indus. Inc. v.

Commissioner, 108 T.C. 320, 329-330 (1997), affd. 208 F.3d 205

(3rd Cir. 2000).   We enforce a stipulation of settled issues


     1
        Petitioner testified that he paid $300,000 to Magistrate
Hamilton’s court (not otherwise identified in the record).
However, he did not indicate that the payment was for Arcanum or
why he paid this amount after its bankruptcy case had closed.
                               - 7 -

unless wrongful misleading conduct or mutual mistake is shown,

Stamm Intl. Corp. v. Commissioner, 90 T.C. 315, 321-322 (1988),

or unless justice requires that we relieve a party of the

stipulation, Rule 91(e); Korangy v. Commissioner, 893 F.2d 69

(4th Cir. 1990), affg. T.C. Memo. 1989-2; Adams v. Commissioner,

85 T.C. 359, 375 (1985).

     Petitioner did not contend on brief that he should not be

bound by the stipulation of settled issues.   Thus, we deem that

issue to be waived.   State Farm Fire & Cas. Co. v. Mhoon, 31 F.3d

979, 984 n.7 (10th Cir. 1994); Burbage v. Commissioner, 82 T.C.

546, 547 n.2 (1984), affd. 774 F.2d 644 (4th Cir. 1985); Wolf v.

Commissioner, T.C. Memo. 1992-432, affd. 13 F.3d 189 (6th Cir.

1993).

     Even if petitioner still sought relief from the stipulation

of settled issues, he would not prevail because he has not shown

that manifest injustice will result if we enforce the stipulation

of settled issues or that the settlement was the result of mutual

mistake.   We conclude that petitioner is bound by the stipulation

of settled issues.

B.   Whether We Have Jurisdiction To Decide Whether Petitioner
     Incurred Losses From Arcanum

     1.    TEFRA Partnership Procedures

     Respondent contends that we lack jurisdiction to decide

whether petitioner incurred losses from Arcanum because,

respondent contends, Arcanum is subject to the unified
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partnership procedures.   Secs. 6221-6233; see Tax Equity & Fiscal

Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, sec. 401(a),

96 Stat. 648.

     Under the TEFRA partnership procedures, the tax treatment of

items of income, loss, deductions, and credits is determined in

partnership-level proceedings rather than in separate proceedings

involving each partner.   Sec. 6221; H. Conf. Rept. 97-760, at

599, (1982), 1982-2 C.B. 600, 662.

     Petitioner’s claimed loss from Arcanum is a partnership

item, sec. 6231(a)(3); Sente Inv. Club Pship. of Utah v.

Commissioner, 95 T.C. 243, 247 (1990); Maxwell v. Commissioner,

87 T.C. 783, 790 (1986); and must be decided in a partnership

proceeding, Carmel v. Commissioner, 98 T.C. 265, 267 (1992);

Trost v. Commissioner, 95 T.C. 560, 563 (1990); Maxwell v.

Commissioner, supra at 787-788, unless Arcanum is exempt from

TEFRA as a small partnership under section 6231(a)(1)(B).

     2.   Small Partnership Exemption

     Partnerships with 10 or fewer partners, each of whom is a

natural person or an estate and none of whom is a pass-thru

partner, e.g., a partnership or trust, are exempt from the TEFRA

partnership procedures.   Sec. 6231(a)(1)(B), (a)(9).   Petitioner

contends that Arcanum is not subject to the TEFRA procedures

because it was a small partnership for purposes of section

6231(a)(1)(B).
                               - 9 -

     Respondent contends that Arcanum was not a small partnership

for purposes of section 6231(a) because Arcanum’s partners Arthur

Stern Jr. Account # 2 and Stuart D. Grodd IRA Account were

trusts.   Respondent points out that Arcanum’s 1990 return

included a Schedule K-1 for a trust named Arthur Stern Jr.

Account # 2, and that Arcanum’s 1990 and 1993 returns each

included a Schedule K-1 for Stuart D. Grodd IRA Account, which

was identified as a trust on the Schedules K-1.

     Since petitioner contends that we have jurisdiction to

decide whether Arcanum had partnership losses, he must prove by a

preponderance of the evidence that jurisdiction exists, Irwin v.

VA, 874 F.2d 1092, 1096 (5th Cir. 1989), affd. 498 U.S. 89

(1990); Wheeler’s Peachtree Pharmacy, Inc. v. Commissioner, 35

T.C. 177, 180 (1960); La. Naval Stores, Inc. v. Commissioner, 18

B.T.A. 533, 536-537 (1929), that is, that each of Arcanum’s

partners was an individual or an estate.

     Petitioner points out that Arcanum checked a box on its

1990, 1993, and 1994 returns indicating that it was not subject

to the TEFRA partnership procedures and contends that the returns

establish that fact.   We disagree.    Tax returns do not establish

the truth of the facts stated in them.     Lawinger v. Commissioner,

103 T.C. 428, 438 (1994); Wilkinson v. Commissioner, 71 T.C. 633,

639 (1979); Roberts v. Commissioner, 62 T.C. 834, 837 (1974).

However, statements in a tax return signed by the taxpayer are
                                - 10 -

admissions unless overcome by cogent evidence that they are

wrong.    Waring v. Commissioner, 412 F.2d 800, 801 (3d Cir. 1969),

affg. per curiam T.C. Memo. 1968-126; Estate of Hall v.

Commissioner, 92 T.C. 312, 337-338 (1989); Lare v. Commissioner,

62 T.C. 739, 750 (1974), affd. without published opinion 521 F.2d

1399 (3d Cir. 1975).

        Arcanum’s 1990 and 1993 returns included Schedules K-1 which

identified two of its partners as trusts:     Arthur Stern Jr.

Account # 2 and Stuart D. Grodd IRA Account.     Petitioner signed

Arcanum’s 1990 return.     Thus, Arcanum’s 1990 return is an

admission by petitioner that two of Arcanum’s partners were not

individuals in 1990.    Schedules K-1 for both of those partners

are attached to Arcanum’s 1993 return.     We infer that not all of

Arcanum’s partners were individuals or estates in 1991, 1992, or

1993.     Petitioner has not shown that all of Arcanum’s partners

were natural persons or estates.     Thus, we conclude that Arcanum

was not a small partnership under section 6231(a)(1)(B).       As a

result, we lack jurisdiction to decide whether petitioner

incurred a loss from Arcanum in the years in issue.

     Due to concessions of the parties and for reasons stated

above,

                                                Decision will be

                                           entered under Rule 155.
