                       122 T.C. No. 7



                UNITED STATES TAX COURT



             JOSEPH DUTTON, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 17802-02.             Filed February 11, 2004.


     P submitted a request for relief from joint and
several liability. P subsequently submitted an offer
in compromise, which R accepted. Before the offer was
accepted, R sent P a letter explaining that it was
proposed that P be granted relief under sec. 6015(c),
I.R.C., and that P would be entitled to a refund.
After accepting the offer, R sent P a notice of
determination denying relief from joint and several
liability under former sec. 6013(e), I.R.C., and sec.
6015(b), (c), and (f), I.R.C. P petitioned the Court
under sec. 6015(e)(1), I.R.C. P argues that the
statement that P would be entitled to a refund resulted
in a mutual mistake of material fact or
misrepresentation sufficient for the offer in
compromise to be set aside. For the first time in his
answering brief, P argues that the doctrine of
equitable estoppel applies.
                               - 2 -

          Held: There was no mutual mistake or
     misrepresentation sufficient to cause the offer in
     compromise to be set aside. P’s equitable estoppel
     argument is not considered because it was not timely
     raised.


     John R. McCabe, for petitioner.

     Patrick W. Lucas, for respondent.



                              OPINION


     GOEKE, Judge:   This matter is before the Court on the issue

of whether petitioner is barred from seeking relief from joint

and several liability under former section 6013(e)1 and section

6015 for the years 1986 and 1987 because he entered into an offer

in compromise with respondent for those years.   We hold that the

offer in compromise is valid and petitioner is barred from

seeking relief from joint and several liability.

                            Background

     The parties submitted the issue fully stipulated.   The

stipulation of facts and the attached exhibits are incorporated

herein by this reference.   Petitioner’s mailing address was in

Yorba Linda, California, at the time he filed his petition.




     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code as amended. Dollar amounts are
rounded.
                                - 3 -

     On September 3, 1999, petitioner submitted a Form 8857,

Request for Innocent Spouse Relief, requesting relief from joint

and several liability for the taxable years 1984, 1985, and 1986.

     On April 24, 2001, petitioner submitted an amended Form 656,

Offer in Compromise, wherein he offered to compromise all income

tax liabilities, including any interest, penalties, additions to

tax, and additional amounts required by law, for the years 1986,

1987, and 1993 through 1999.2   Petitioner’s offer was to pay

$6,000 at a rate of $250 per month.     Petitioner’s offer in

compromise was based on doubt as to collectibility, not on doubt

as to liability or the promotion of effective tax administration.

The Form 656 states that “Once the IRS accepts the offer in

writing, I/we have no right to contest, in court or otherwise,

the amount of the tax liability.”   The form provides that the

offer in compromise may be withdrawn at any time before the

Commissioner accepts the offer.   Petitioner was represented by

Carlton V. Phillips, Jr. (Mr. Phillips), during the offer in

compromise proceedings.

     By letter dated May 7, 2001, D. Zukle (Mr. Zukle), an

Internal Revenue Service (IRS) manager, informed petitioner that

for 1986 and 1987 it was being proposed that he be granted

partial relief from joint and several liability under section



     2
      Petitioner was married during 1986 and 1987, but was single
for the years 1993 through 1999.
                                - 4 -

6015(c), but that relief under other provisions would be denied

in full.   In the letter, Mr. Zukle stated that he believed that

no additional payments would be due and, that to the best of his

knowledge, after the recommended relief was granted, petitioner

would be entitled to refunds for 1986 and 1987.

     On June 20, 2001, a Form 2848, Power of Attorney and

Declaration of Representative, was signed by petitioner and his

current counsel, John R. McCabe (Mr. McCabe).   Mr. McCabe was

retained to assist petitioner in his claim for relief from joint

and several liability.   On July 9, 2001, Mr. McCabe sent a letter

to Mr. Zukle regarding petitioner’s entitlement to relief from

joint and several liability.   The letter stated that an IRS

employee reviewing petitioner’s claim had referenced section

6015(c) and checked a form stating that there would be no refund

of the disputed debt.    In another letter to Mr. Zukle, dated July

23, 2001, Mr. McCabe stated that he had recently discussed

petitioner’s claim for relief with an “Innocent Spouse

Coordinator” and had been told that there is no refund provision

when a claim is approved under section 6015(c).

     By letter to petitioner dated July 25, 2001, respondent

accepted the offer in compromise of $6,000, subject to the

conditions and provisions stated on the Form 656.   The letter

listed petitioner’s total account balance, as of April 30, 2001,

for the years 1986, 1987, and 1993 through 1999 as $185,962.
                               - 5 -

Balances of $37,162 and $84,124 were shown for 1986 and 1987,

respectively.   The letter was signed on respondent’s behalf by

Mark Jaramillo (Mr. Jaramillo), Steve Turner, and K. Vega.   Mr.

Jaramillo also sent a copy of the acceptance letter to Mr.

Phillips on July 25, 2001.   Petitioner has completed the payment

plan for his offer in compromise, and copies of TXMODA

transcripts3 for the year 1986 and 1987 show a balance due of

zero.

     By notice of determination dated August 12, 2002, respondent

determined that petitioner was not entitled to relief from joint

and several liability under section 6013(e) and section 6015(b),

(c), and (f) for the years 1986 and 1987.4   The notice listed Al

Petroff as a contact person and was signed by Jon S. Leo, Appeals

Team Manager.   Petitioner filed a petition under section

6015(e)(1) seeking a review of respondent’s determination for the

years 1986 and 1987.




     3
      A TXMODA transcript contains current account information
obtained from the Commissioner’s master file. “TXMODA” is the
command code that is entered in the Commissioner’s integrated
data retrieval system (IDRS) to obtain the transcript. IDRS is
essentially the interface between the Commissioner’s employees
and various computer systems. Tornichio v. Commissioner, T.C.
Memo. 2002-291 n.5.
     4
      The evidence in the record does not explain why the notice
of determination addressed the years 1986 and 1987 when
petitioner’s request for relief was for the years 1984, 1985, and
1986. In his petition, petitioner does not seek relief for the
year 1984 or 1985.
                               - 6 -

                            Discussion

     Petitioner argues that the offer in compromise should be set

aside and he should be allowed to seek relief from joint and

several liability under section 6013(e) and section 6015(b), (c),

and (f) for the years 1986 and 1987.     Respondent argues that the

offer in compromise should not be set aside and, as a matter of

law, petitioner is not entitled to relief.    The issue we must

decide is whether petitioner is barred from seeking relief from

joint and several liability because the offer in compromise was

accepted or whether the offer can be rescinded on the basis of a

mutual mistake or a misrepresentation.

I.   Petitioner’s Claim for Relief Under Section 6013(e)

     As an initial matter, we address petitioner’s argument as it

pertains to section 6013(e).   The petition in this case was filed

pursuant to section 6015(e)(1).   Section 6015(e)(1) provides

jurisdiction to decide the appropriate relief available to the

taxpayer under section 6015.   There is no provision in the

Internal Revenue Code that allows us to grant relief under

section 6013(e) to a taxpayer who files a petition under section

6015(e).   Brown v. Commissioner, T.C. Memo. 2002-187.    Thus, we

do not consider petitioner’s claim for relief under section

6013(e).
                                - 7 -

II.   Whether the Offer in Compromise Bars Petitioner From Seeking
      Relief From Joint and Several Liability Under Section 6015

      Section 6015 was enacted on July 22, 1998, as part of the

Internal Revenue Service Restructuring and Reform Act of 1998,

Pub. L. 105-206, sec. 3201(a), 112 Stat. 734.    It was given

retroactive effect with respect to any liability for tax

remaining unpaid as of July 22, 1998.    Id. sec. 3201(g)(1), 112

Stat. 740.

      Section 6015 provides three avenues of relief from joint and

several liability.   Section 6015(b) provides relief similar to

that available under former section 6013(e), and also allows a

spouse to be relieved from a portion of an understatement of tax.

Section 6015(c) generally provides for an allocation of liability

for deficiencies as if the spouses had filed separate returns.

Section 6015(f) allows for equitable relief in situations where

relief is unavailable under section 6015(b) or (c).

      Section 6015(g) governs the allowance of credits and refunds

in cases where the taxpayer is granted relief under section 6015.

Except as provided otherwise in section 6015(g) and in sections

6511, 6512(b), 7121, and 7122, credit or refund is allowed or

made to the extent attributable to the application of section

6015.   Sec. 6015(g)(1).   No refund or credit is allowed under

section 6015(c).   Sec. 6015(g)(3).

      Petitioner’s claim for relief is under section 6015(b), (c),

and (f) and includes tax liabilities that were covered by the
                                - 8 -

offer in compromise.   Petitioner has completed the payment plan

under the accepted offer.   Respondent argues that the accepted

offer precludes petitioner from asserting a claim for relief

under section 6015.

      Section 7122 governs offers in compromise.   Section 7122(a)

authorizes the Commissioner to compromise a taxpayer’s

outstanding liabilities.    Taxpayers generally submit an offer in

compromise according to procedures, and in the form and manner,

prescribed by the Commissioner.   Sec. 301.7122-1T(c)(1),

Temporary Proced. & Admin. Regs., 64 Fed. Reg. 39025 (July 21,

1999).5   An offer in compromise may be withdrawn by the taxpayer

or his representative at any time before acceptance of the offer.

Sec. 301.7122-1T(c)(3), Temporary Proced. & Admin. Regs., supra.

The offer is considered withdrawn when the Commissioner receives

written notification of the withdrawal of the offer by personal

delivery or certified mail, or when the Commissioner issues a

letter confirming the taxpayer’s intent to withdraw the offer.

Id.   Generally, an acceptance of an offer in compromise will

conclusively settle the liability of the taxpayer specified in

the offer, absent fraud or mutual mistake.    Estate of Jones v.

Commissioner, 795 F.2d 566, 574 (6th Cir. 1986), affg. T.C. Memo.

1984-53; Timms v. United States, 678 F.2d 831, 833 (9th Cir.


      5
      Final regulations under sec. 7122 were promulgated
effective for offers in compromise pending on or submitted on or
after July 18, 2002. Sec. 301.7122-1(k), Proced. & Admin. Regs.
                                - 9 -

1982); sec. 301.7122-1T(d)(5), Temporary Proced. & Admin. Regs,

supra.   In order to reopen the case, the mistake must be mutual

and “of material fact sufficient to cause the offer agreement to

be reformed or set aside”.   Sec. 301.7122-1T(d)(5), Temporary

Proced. & Admin. Regs., supra.6

     An accepted offer in compromise is properly analyzed as a

contract between the parties.     United States v. Donovan, 348 F.3d

509, 512-513 (6th Cir. 2003); Roberts v. United States, 242 F.3d

1065 (Fed. Cir. 2001); Timms v. United States, supra at 833-836;

United States v. Lane, 303 F.2d 1, 4 (5th Cir. 1962); Robbins

Tire & Rubber Co., Inc. v. Commissioner, 52 T.C. 420, 436 (1969).

Consequently, an offer in compromise, like certain other

agreements between the Commissioner and taxpayers, is governed by

general principles of contract law.     Cf. Duncan v. Commissioner,

121 T.C. __, __ (2003) (slip. op. at 6) (contract law applied to

stipulated arbitration agreement); Bankamerica Corp. v.

Commissioner, 109 T.C. 1, 12 (1997) (contract law applied to

stipulations of fact); Dorchester Indus., Inc. v. Commissioner,

108 T.C. 320, 330 (1997) (contract law applied to settlement

agreement), affd. without published opinion 208 F.3d 205 (3d Cir.

2000); Woods v. Commissioner, 92 T.C. 776, 780 (1989) (contract




     6
      The final regulations under sec. 7122 contain the same
exception for a mutual mistake of material fact. See sec.
301.7122-1(e)(5)(iii), Proced. & Admin. Regs.
                              - 10 -

law applied to agreement to extend the period for making

assessments).

     Mistake is defined in 1 Restatement, Contracts 2d, sec. 152

(1981), as follows:

          (1) Where a mistake of both parties at the time a
     contract was made as to a basic assumption on which the
     contract was made has a material effect on the agreed
     exchange of performances, the contract is voidable by
     the adversely affected party unless he bears the risk
     of the mistake under the rule stated in sec. 154.

          (2) In determining whether the mistake has a
     material effect on the agreed exchange of performances,
     account is taken of any relief by way of reformation,
     restitution, or otherwise. [Emphasis supplied.]

A mutual mistake exists where there has been a meeting of the

minds of the parties and an agreement actually entered into but

the agreement in its written form does not express the actual

intention of the parties.   Woods v. Commissioner, supra at 782.

A material fact is one “that is significant or essential to the

issue or matter at hand”.   Black’s Law Dictionary 611 (7th ed.

1999).

     In Hopkins v. Commissioner, 120 T.C. 451, 462-463 (2003), we

held that a taxpayer was entitled to raise a claim for relief

under section 6015 where a closing agreement under section 7121

was signed before the effective date of section 6015, and the tax

liabilities assessed pursuant to the agreement remained unpaid as

of the effective date.   The instant case is distinguishable

because it involves an offer in compromise under section 7122
                              - 11 -

that was submitted and accepted after the effective date of

section 6015.

     Petitioner argues that the offer in compromise should be set

aside because Mr. Zukle mistakenly stated that refunds would be

allowed for any relief granted under section 6015(c).

Petitioner claims that the projected refund allowance would have

eliminated his 1986 and 1987 liabilities, fully paid his

outstanding balance for 1993 through 1999, and given him a refund

of approximately $81,000.   Petitioner contends that he would not

have agreed to an offer in compromise if he had known he was

waiving his right to any refunds.

     Petitioner’s argument is illogical.    Petitioner claims

reliance upon the mistaken suggestion in the May 7, 2001, letter

that he might receive a refund.    That date was approximately 2

weeks after he had submitted the form offering to compromise his

liabilities and waive any refunds.     Because the Form 656 states

that petitioner would no longer be able to contest the amount of

his tax liability, there is no indication that at the time the

offer was submitted petitioner was under the impression that if

the offer was approved, then respondent would issue a refund

based on relief granted under section 6015(b), (c), or (f).     On

the basis of petitioner’s own argument, such an offer would have

been unnecessary had petitioner believed that he would receive

the mistakenly suggested refund.    The incorrect statement by Mr.
                              - 12 -

Zukle and the clarification of the mistake through Mr. McCabe’s

diligence occurred between the time the offer was made and its

acceptance.   There is no evidence or reason to believe that

petitioner’s offer was originally based on his erroneous

assumption of the possible refund windfall in the first instance,

but if he later wished to withdraw the offer, he had time to do

so.   There was no mistake at the time the offer was submitted by

petitioner or when it was accepted.

      As previously noted, a valid offer in compromise

conclusively settles a taxpayer’s liability.   The reference in

section 6015(g)(1) to section 7122 indicates that under the offer

in compromise petitioner would not be entitled to a refund or

credit even if relief was ultimately granted under section

6015(b) or (f).7   As previously stated, regardless of the offer

in compromise, no refund is permitted under section 6015(c).

Sec. 6015(g)(3).

      Petitioner is correct that Mr. Zukle made a mistake when he

told petitioner that he would be entitled to refunds if partial



      7
      Although not applicable to the instant case because
petitioner’s request for relief was filed before its effective
date, sec. 1.6015-1(c)(1), Income Tax Regs., supports this
position because it provides that a requesting spouse is not
entitled to relief from joint and several liability under sec.
6015(b), (c), or (f) for any tax year for which the requesting
spouse entered into an offer in compromise with the Commissioner
that disposed of the same liability that is the subject of the
claim for relief. Cf. Hopkins v. Commissioner, 120 T.C. 451, 462
n.16 (2003).
                               - 13 -

relief was granted under section 6015(c).   However, petitioner is

incorrect in disputing that the offer in compromise waived his

right to any refund based on partial relief under section 6015(c)

because, regardless of whether an offer in compromise is

involved, refunds and credits are not allowed under section

6015(c).

     Petitioner’s arguments are also inconsistent with the reason

he stated for submitting the offer in compromise and the terms

provided on the Form 656.   While the claim for relief from joint

and several liability was pending, petitioner made the decision

to submit the offer to settle his outstanding tax liabilities on

the basis of doubt as to collectibility.    Petitioner could have

chosen to submit the offer in compromise on the basis of doubt as

to liability, which would have been consistent with his prior

claim for relief from joint and several liability.   The Form 656

specifically provided that if respondent accepted the offer, then

petitioner would have no right to contest the amount of the tax

liability.

     Petitioner claims that at the time the offer was approved he

still believed that a refund would be allowed.   As previously

noted, this claim is inconsistent with the terms of the Form 656,

section 6015(g), and the statements in the July 2001 letters from

Mr. McCabe to Mr. Zukle.    In addition, the offer and the request

for relief from joint and several liability were two separate
                               - 14 -

courses of action taken by petitioner using two different

attorneys to handle the matters.    There is no indication in the

record that Mr. Zukle knew of the pending offer in compromise,

that the IRS personnel handling the offer in compromise matter

represented to petitioner that an accepted offer would not bar

him from obtaining refunds if relief was granted under section

6015, or that petitioner ever inquired as to the effect that

acceptance of the offer would have on his claim for relief from

joint and several liability.    In any event, if petitioner had

actually believed that he was going to receive a refund based on

a grant of partial relief under section 6015(c), then he could

have withdrawn the offer before respondent accepted it.    As

previously noted, petitioner failed to do so.

       On the basis of the facts of this case, we find that there

was not a mutual mistake sufficient to set aside the offer in

compromise.    We note that petitioner has completed payment on the

accepted offer, and his account balances for the years covered by

the offer are zero.    Petitioner’s tax liabilities of

approximately $186,000 for these years were compromised for only

$6,000.

III.    Additional Arguments

       Petitioner cites Staten Island Hygeia Ice & Cold Storage Co.

v. United States, 85 F.2d 68 (2d Cir. 1936), and argues that the

offer in compromise should be set aside because Mr. Zukle
                                - 15 -

misrepresented that petitioner would be entitled to refunds under

section 6015(c).   In that case, the issue was whether an offer in

compromise could be set aside where the taxpayer entered into the

agreement after being told by an agent of the Government that the

tax liabilities covered in the agreement were not barred by the

statute of limitations.    The Court of Appeals for the Second

Circuit found that the misrepresentation by the agent induced the

offer in compromise, and therefore the agreement was voidable for

misrepresentation.     Id. at 71-72.   The circumstances of this case

are distinguishable.    As shown by our previous findings, any

misrepresentation by Mr. Zukle did not induce the offer in

compromise.   If anything, Mr. Zukle’s statement that petitioner

would be entitled to refunds under section 6015(c) should have

induced petitioner to withdraw the pending offer, at least during

the period before the mistake was corrected through Mr. McCabe’s

diligence.    Accordingly, the offer in compromise is not voidable

for misrepresentation.

     In his answering brief, petitioner argues for the first time

that the doctrine of equitable estoppel applies.     Our practice is

not to consider new issues raised for the first time in an

answering brief.     Krause v. Commissioner, 99 T.C. 132, 177

(1992), affd. sub nom. Hildebrand v. Commissioner, 28 F.3d 1024

(10th Cir. 1994); Weiss v. Commissioner, T.C. Memo. 1999-17 n.5.

The parties submitted the issue fully stipulated, and there is no
                              - 16 -

indication in the record that the equitable estoppel argument was

previously raised.   The doctrine of equitable estoppel is not

raised in the petition.   Additionally, in his response to a

motion for summary judgment by respondent on the same issue

involved in this case, petitioner did not argue that the doctrine

applied.   Respondent has not had the opportunity to respond to

the argument and address the elements of the doctrine in relation

to the facts of this case.   Therefore, we will not consider

petitioner’s equitable estoppel argument.   In any event, for the

reasons stated above, this argument is not supported by the

chronology and facts and circumstances of this case.


                                         Decision will be entered

                                    for respondent.
