                        T.C. Memo. 1996-211



                      UNITED STATES TAX COURT



          HARRIS LEVIN AND GAYLE LEVIN, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 43572-85.                       Filed May 1, 1996.



     Bruce I. Hochman and Martin N. Gelfand, for petitioners.

     Mark Bernsley, for petitioner Gayle Levin.

     Jason M. Silver, for respondent.



                        MEMORANDUM OPINION

     COHEN, Judge:   This case is now before the Court as a result

of the motion of petitioner Gayle Levin (Ms. Levin) for leave to

file out of time a motion to vacate a stipulated decision entered

August 10, 1989.   Ms. Levin contends that her former husband,

petitioner Harris Levin (Mr. Levin), conducted this proceeding
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and signed her name to the stipulation for decision without

authority and that his conduct constituted a fraud on the Court.

     Unless otherwise indicated, all section references are to

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

Ms. Levin resided in California at the time the petition was

filed.

                            Background

     Petitioners were married in 1963, shortly after Ms. Levin

graduated from the University of California at Los Angeles with a

bachelor of arts in general elementary education.     During the

course of their marriage, Mr. Levin was in the construction

business and Ms. Levin was employed as a teacher with the

Los Angeles Unified School District.     They had two children.

Petitioners separated during 1975 and reconciled during 1976.

Their marriage was ultimately dissolved December 28, 1994.

     During the course of their marriage, the parties maintained

joint checking accounts.   Ms. Levin wrote checks on joint

accounts to pay the mortgage and other household bills.

Mr. Levin, however, maintained control over the financial affairs

of the couple.

     In 1980, petitioners, along with other members of their

tennis club, invested in certain tax shelter partnerships

promoted by Gerald Schulman.   Petitioners' contact with the

Schulman partnerships was through Alan Letterman.     Ms. Levin
                               - 3 -


signed the investment documents at the direction of Mr. Levin.

Petitioners filed a joint Federal income tax return for 1980,

claiming losses of $128,968 arising out of their Schulman

partnerships.   They also claimed a net operating loss carryback

to 1979.

     In entering into the Schulman partnerships, investors,

including petitioners, had been assured that they would receive

legal representation if the Internal Revenue Service (IRS)

challenged their deductions.   Schulman employed Bruce I. Hochman

(Hochman) and Martin N. Gelfand (Gelfand) to represent the

investors.   After they were audited, investors sent their

statutory notices of deficiency to Schulman.    Schulman's office

prepared petitions to this Court from forms provided by Gelfand.

The petitions were sent to Gelfand for signature and were

returned to Schulman's office for filing.    Gelfand's office sent

communications concerning the partnerships to Schulman's office

for dissemination to the investors.    Few, if any, of the

investors ever met with Gelfand.   Ms. Levin never met Gelfand,

and Gelfand had no personal familiarity with petitioners'

situation.

     Sometime prior to March 1982, an audit of petitioners' 1980

tax return was commenced by the IRS.    In March 1982, Mr. Levin

executed a Form 2848, Power of Attorney, authorizing Ronald I.

Anson (Anson), C.P.A., to act with respect to petitioners' 1980
                                - 4 -


tax return.   Mr. Levin signed his name and Ms. Levin's name to

the Form 2848.   In August 1982, Anson and the IRS executed a

Form 872-A, extending indefinitely the period of limitations for

assessment of petitioners' taxes for 1980.

     On September 17, 1985, the IRS sent to petitioners a

statutory notice of deficiency, determining deficiencies of

$41,609 for 1979 and $129,895 for 1980 in petitioners' Federal

income taxes.    On December 5, 1985, a petition was filed in this

case by Hochman and Gelfand as attorneys of record.   This case

was associated with numerous cases involving Schulman tax

shelters.   On August 10, 1989, the decision was entered pursuant

to a stipulation bearing the original signature of Gelfand.     The

stipulation also bore a machine copy of signatures appearing to

be those of petitioners.   The decision determined that there was

no deficiency for 1979 and that there was a deficiency in

petitioners' Federal income tax for 1980 in the amount of

$129,895.   The decision became final 90 days thereafter.   Secs.

7481(a)(1), 7483.

     On December 4, 1991, petitioners delivered an Offer in

Compromise to the IRS, seeking an agreement to reduce their

liability for 1980 income taxes.   That offer was rejected on

February 16, 1992.   On May 13, 1992, petitioners filed a petition

in bankruptcy.   An order of discharge was dated September 11,

1992.   On July 16, 1993, a Notice of Levy on Wages, Salary, and
                                - 5 -


Other Income was issued by the IRS to the Los Angeles Unified

School District.   The notice stated, in part:   "This levy is

attached to the taxpayer's retirement pension only.    It should

not be attached to the taxpayer's wages."

     In 1993, Ms. Levin consulted new counsel in relation to

attempts by the IRS to collect petitioners' tax liabilities from

Ms. Levin's interest in the teachers' retirement fund.    Counsel

attempted unsuccessfully to secure administratively "innocent

spouse" relief for Ms. Levin from the IRS.   In 1995, counsel

decided that Ms. Levin also had a statute of limitations defense

to the tax liability because she had not signed the Form 2848,

Power of Attorney, or otherwise agreed to the extension of the

period of limitations.   On September 28, 1995, Ms. Levin's Motion

for Leave to File Motion to Vacate Decision Out of Time was filed

and an accompanying Motion to Vacate Decision was lodged.    The

motion to vacate is made on the grounds that the decision was

entered as a result of a fraud upon the Court and without

personal jurisdiction over Ms. Levin.    Ms. Levin seeks to vacate

the decision only as to 1980.

                            Discussion

     Because the decision entered in this case has long been

final, to be successful in her pending motion, Ms. Levin must

establish that the decision was secured either by a fraud on the

Court or that the Court lacked jurisdiction over her.    See,
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generally, Billingsley v. Commissioner, 868 F.2d 1081, 1084 (9th

Cir. 1989), revg. an unpublished order; Toscano v. Commissioner,

441 F.2d 930, 934 (9th Cir. 1971), vacating and remanding 52 T.C.

295 (1969); Brannon's of Shawnee, Inc. v. Commissioner, 69 T.C.

999, 1002 (1978).

     Ms. Levin contends and testified that she did not authorize

Mr. Levin to execute the power of attorney in favor of Anson, did

not authorize Anson to extend the period of limitations, did not

authorize Gelfand or anyone to file a petition on her behalf, and

did not agree to the settlement of this case or authorize anyone

to do so on her behalf.   She recounts a series of grievances

against Mr. Levin over most of their 30-year marriage.

     Mr. Levin testified pursuant to subpoena served by

respondent and denied many of Ms. Levin's accusations.    He

testified that he showed her or told her about all material

correspondence involving the Schulman matter and that she

authorized him to sign her name to the power of attorney and

stipulation.   Ms. Levin attacks Mr. Levin's credibility.   She

disputes his claimed lack of recollection of 1975 divorce

proceedings.   She argues that his apparent simulation of her

signature refutes his claim of authority, asserting that, if he

were truly authorized, he would not have found it necessary to

make the signature look like hers.
                               - 7 -


     Respondent asserts Mr. Levin's credibility and lack of

motive to testify falsely.   Respondent contends that Ms. Levin's

denial of Mr. Levin's authority is an afterthought.   Respondent

contends that Ms. Levin's conduct after the decision was entered,

particularly her participation in an Offer in Compromise and in

the bankruptcy proceedings, shows that she authorized or ratified

the petition in this case.

     The issue here is not relative fault during the unhappy

marriage of petitioners.   The issue is whether Mr. Levin acted

within the scope of authority granted by Ms. Levin when he

authorized Schulman and Gelfand to file a petition and to settle

this case on behalf of petitioners.    The execution of the power

of attorney and the subsequent extension of the period of

limitations are not material unless the decision is vacated

either for lack of jurisdiction or because there was a fraud on

the Court.

     The testimony of petitioners is conflicting.   The testimony

of the other witnesses, Anson, Gelfand, and an expert handwriting

analyst, does not address directly the question of Mr. Levin's

authority.   There is no objective evidence from which we can find

that one or the other petitioner is testifying falsely.   We

believe, however, that the passage of time, the emotional

entanglements of the parties, and the conflicting interests of

petitioners in this proceeding render the assertions of each of
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them as to actual knowledge and authority or lack of actual

knowledge or authority unreliable.      We have said that "the

distillation of truth from falsehood * * * is the daily grist of

judicial life."   Diaz v. Commissioner, 58 T.C. 560, 564 (1972).

In these circumstances, we must look to the objective conduct of

petitioners and to their specific testimony, especially that of

Ms. Levin, to determine whether it is consistent or inconsistent

with her having placed authority in Mr. Levin to act on her

behalf.   If Mr. Levin had such authority, we have jurisdiction.

Moreover, if he had such authority, there was no fraud on the

Court.

     Ms. Levin argues that she did not learn about her innocent

spouse claim until 1993 or her statute of limitations defense

until 1995 and, therefore, her failure to challenge the tax

deficiency earlier is not an indication that she authorized or

ratified the petition.   Ms. Levin's argument is misplaced that

her conduct only after she was aware of all of her legal options

can be considered.   She essentially is saying:     "If I knew then

what I know now, I would have done things differently."      The

relevant course of conduct is what she did then.      In this regard,

we believe that the specific statements made during her testimony

are more revealing than her generalized denials of actual

knowledge of or authorization of the steps being taken with

respect to her tax liability.
                                - 9 -


     Ms. Levin acknowledged that she was aware of and signed

documents relating to the Schulman partnerships.     She reduced the

withholding tax on her wages when Mr. Levin told her that the

deductions would reduce the amounts owed to the Government.    She

also knew that Mr. Levin had, on some occasions, signed tax

documents on her behalf, although she denied authorizing him to

do so.   On direct examination by her counsel, Ms. Levin testified

that petitioners had many arguments about Mr. Levin's signing tax

documents on her behalf.    Specific questions and answers during

her testimony included the following:

          Q [by respondent's counsel] You signed your
     married filing joint tax returns in 1979 and 1980?

          A I don't know. I -- sometimes I was given them
     to sign. Sometimes I was not. They were already sent
     in.

            *     *     *      *        *   *    *

          Q [by Ms. Levin's counsel] When did you first
     hear that the IRS was examining your tax liability
     regarding the Schulman Partnerships?

          A * * * I first heard about it when Harris told
     me that there was a problem. But I assumed that was
     taken care of. And then there was a meeting at the
     Hilton Hotel with all -- with a bunch of people who had
     been involved in this and some attorney was coming
     from, I believe, another state.

          And he wanted to, I guess, sue Schulman for having
     these illegal -- these -- this illegal tax, I guess it
     was a scheme. I guess, and I wanted Harris to go with
     me and he said, no, he wasn't going and --

            *     *     *      *        *   *    *
                               - 10 -


          THE WITNESS [Ms. Levin]: And I went to this
     meeting by myself and I was surprised at all the people
     who were there. * * *

          And I found out that they all had different names
     on them. And this woman was sitting next to me and she
     asked me how much money I owed and I said, "Well," you
     know, I said, "it's still -- it's being taken care of."
     And she said, "Oh, no. This has been finalized a long
     time ago." And she said she owed $20,000 and she paid
     it. And I didn't know anything about this.

          I went home and I asked Harris about it. And he
     said nope, that it was still being worked on and that
     Alan Letterman was taking care of it.

(Litigation by Schulman investors was commenced in 1987 and 1988.

See Marine v. Commissioner, 92 T.C. 958, 970 (1989), affd.

without published opinion 921 F.2d 280 (9th Cir. 1991).)



          Q [by Ms. Levin's counsel] Okay. Did you ever
     participate in the tax audit regarding the Schulman
     investment?

          A    No.

          Q Did Harris ever volunteer information
     concerning that examination?

          A No, only when I would ask. If I asked what was
     happening, it was being taken care of.

          Q And what did that mean to you, that "it was
     being taken care of"?

          A He would say that Alan Letterman was taking
     care of it.

          Q Did that have any significance to you?     What
     did that mean to you?

          A    It meant that it would be taken care of.

              *      *    *     *       *   *     *
                              - 11 -


          Q   How did you think your tax liability arose?

          A I was told that the first year of this post
     office deal was not going to be allowed but that
     Schulman was working it out and it would be taken care
     of. * * *

          Q And then later you learned that in fact some
     liability had been determined?

          A   Yes.

          Q Do you have any idea how it got from a maybe to
     a this is it?

          A   No.

     Thus, Ms. Levin's testimony indicates that she relied on

Mr. Levin's assurance that the tax dispute arising out of

petitioners' Schulman investment "was being taken care of."     Our

interpretation of her testimony is that she implicitly authorized

him to take appropriate steps, which included, through

professional agents, the petition in this case.

     In support of her motion, Ms. Levin relies on Abeles v.

Commissioner, 90 T.C. 103 (1988); Levitt v. Commissioner, 97 T.C.

437 (1991) (Levitt I); and Levitt v. Commissioner, T.C. Memo.

1993-294 (Levitt II).   In Abeles, however, the taxpayers were in

the process of divorce around the time that the notice of

deficiency was mailed and the petition and amended petition were

filed.   Mrs. Abeles was unaware of the tax dispute until her bank

accounts were levied and a lien was placed on her residence.

     In Levitt I, no decision had been entered at the time that

Mrs. Levitt asserted her husband's lack of authority to file a
                               - 12 -


petition or settle a case on her behalf.    She denied signing a

joint tax return, and respondent asserted that the Court did not

have jurisdiction because she neither filed nor ratified the

petition filed by her husband.    All parties agreed that

Mrs. Levitt did not authorize Mr. Levitt to file the petition in

the case on her behalf.    In Levitt II, a motion to vacate a

decision for lack of jurisdiction was granted.    The Court

concluded that the facts shown may have vested implied authority

in Mr. Levitt to file Federal income tax returns on behalf of

Mrs. Levitt but that "the nexus between that authority and the

authority to file a petition on her behalf in this Court is

simply not there."

     In this case, however, the nexus missing in Levitt II is

present.   That is, Ms. Levin was aware that a dispute over their

taxes had arisen and was repeatedly assured by Mr. Levin that it

was being taken care of.    She thus implicitly authorized those

steps that reasonably followed the tax dispute through this

Court.   We believe that the cases relied on by respondent,

although each factually specific, are analogous.    See, e.g.,

Kraasch v. Commissioner, 70 T.C. 623, 626-628 (1978); Takamoto v.

Commissioner, T.C. Memo. 1996-94; Stillman v. Commissioner, T.C.

Memo. 1995-591; DiSanza v. Commissioner, T.C. Memo. 1993-142,

affd. without published opinion 9 F.3d 1538 (2d Cir. 1993); John

Arnold Executrak Sys., Inc. v. Commissioner, T.C. Memo. 1990-6.
                                - 13 -


Whether Ms. Levin's failure to ask for more details concerning

how the matter was being "taken care of" was due to indifference

or, as she suggests, to avoid angering Mr. Levin, she left to him

decisions to be made concerning handling of the tax dispute.

Ms. Levin has not suggested that she had any reason not to file a

petition.   None of the steps that he took was beyond the scope of

his implied authority.

     Upon consideration of the entire record, we conclude that

the steps taken by Mr. Levin to prosecute and resolve this case

were authorized by Ms. Levin.    She has not established any ground

for vacating the decision entered in 1989.

                                          Petitioner Gayle Levin's

                                     Motion for Leave to File

                                     Motion to Vacate Decision Out

                                     of Time will be denied.
