                        T.C. Memo. 1997-451



                      UNITED STATES TAX COURT



             ROBERT D. GROSSMAN, JR., Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent*


     Docket Nos.   20526-90, 14364-91.        Filed October 1, 1997.


          Petitioner (P) claims that two of the concessions
     that the Commissioner made in P's wife's (W's) dockets
     are applicable to P's dockets for purposes of the Rule
     155 computations in his dockets.

          Held: The concessions that the Commissioner made
     in W's dockets are not applicable to P's dockets.


     Robert D. Grossman, Jr., pro se.

    Stephen L. Braga, Eric F. Horvitz, and Miriam L. Fisher,1

*
     This opinion supplements our previously filed Memorandum
Findings of Fact and Opinion in Grossman v. Commissioner, T.C.
Memo. 1996-452, filed Oct. 7, 1996.
     1
          Miriam L. Fisher was given leave to withdraw as counsel
in these dockets after petitioner’s first memorandum of law was
filed and did not have any responsibility for petitioner’s final
                                                   (continued...)
                                - 2 -


 for petitioner.

     John C. McDougal, for respondent.



                   SUPPLEMENTAL MEMORANDUM OPINION

     CHABOT, Judge:    This matter is before us on the parties’

dispute as to entry of decision pursuant to Rule 155,2 regarding

the additions to tax under section 66613 (substantial

understatement of income tax) for 1985 and section 6653(b)(1)(A)

(fraud) for 1986.

     Our opinion in these cases, Grossman v. Commissioner, T.C.

Memo. 1996-452, primarily concerned whether petitioner, a tax

attorney, committed fraud by failing to report constructive

dividends after causing a group of closely held corporations to

pay for his family's vacation trips.    In that opinion, we held

petitioner liable for fraud additions to tax for 1985 and 1986;

also we concluded that petitioner conceded the section 6661

addition to tax for 1985.




     1
      (...continued)
memorandum of law.
     2
          Unless indicated otherwise, all Rule references are to
the Tax Court Rules of Practice and Procedure.
     3
          Unless indicated otherwise, all section references are
to sections of the Internal Revenue Code of 1954, or the Internal
Revenue Code of 1986, as in effect for the respective years in
issue.
                                  - 3 -


Background

     Petitioner and his then-wife, Betsy Grossman (hereinafter

sometimes referred to as Betsy), filed joint tax returns for 1985

and 1986.    Respondent issued a joint notice of deficiency to

petitioner and Betsy for 1985 and several other years, and

another joint notice of deficiency for 1986.          Petitioner and

Betsy filed separate petitions with respect to these notices of

deficiency.   Petitioner’s and Betsy’s dockets were consolidated

and set for trial.    Shortly before the scheduled trial, the

Commissioner and Betsy reached settlement agreements.          These

agreements were filed as stipulations of settled issues.

Petitioner’s dockets were then reset for trial at a later date;

they were tried and briefed; and T.C. Memo. 1996-452 was issued.

     Betsy is the only petitioner in docket No. 19143-90.          The

stipulation of settled issues in that docket includes the

following:

          With respect to all adjustments in the [Commissioner’s]
     notice of deficiency for 1986, the parties stipulate to the
     following terms of settlement:

          1. [Betsy] agrees not to further contest [the
     Commissioner’s] determination that, during taxable year
     1986, [Betsy] and her husband, Robert D. Grossman, Jr.,
     received additional taxable income in the form of personal
     travel expenses paid by Markette Corporation in the amount
     of $11,660.00 which was not reported on the joint income tax
     return filed by [Betsy] and her husband for that year.

                      *   *   *    *      *   *   *

          3. In the event it is established or agreed by the
     parties in Robert D. Grossman, Jr.’s, Tax Court case, Docket
                               - 4 -


     No. 20526-90, that any of the travel expenses referred to in
     paragraph 1, above, were incurred primarily for the benefit
     of Markette Corporation and did not constitute income
     reportable on their joint return, [the Commissioner] agrees
     to reduce the deficiency and additions to tax herein agreed
     to by [Betsy] by corresponding amounts.

          4. [Betsy] agrees to the imposition of the additions to
     tax under I.R.C. §§ 6653(b)(1)(A) and 6653(b)(1)(B) for 1986
     in the respective amounts of 65 percent of the amount
     calculated under that section on the deficiency as
     determined under paragraphs 1 through 3, above, * * * [The
     Commissioner] concedes the balance of the addition to tax
     under I.R.C. §6653(b)(1)(A).[4]

          5. When the decision in Docket No. 20526-90 becomes
     final, [Betsy] and [the Commissioner] will submit to the
     Court a stipulated decision giving effect to the above-
     described settlement.

     Betsy is the only petitioner in docket No. 14208-91.   The

stipulation of settled issues in that docket includes the

following:

          With respect to all adjustments in the [Commissioner’s]
     notice of deficiencies for 1983, 1984, 1985, 1987 and 1988,
     the parties stipulate to the following terms of settlement:

          1. [Betsy] agrees not to further contest [the
     Commissioner’s] determination that, during taxable years
     1983, 1984, and 1985, [Betsy] and her husband, Robert D.
     Grossman, Jr., received additional taxable income in the
     form of personal travel expenses and medical expense
     reimbursements paid by Markette Corporation in the
     respective total amounts of $19,119.70, $13,452.26 and
     $23,069.34 which was not reported on the joint income tax
     returns filed by [Betsy] and her husband for those years.

                 *    *    *    *      *   *   *


     4
          We do not express any view in the instant opinion as to
whether the parties’ agreement in Betsy’s docket, regarding the
partial concessions of the fraud addition to tax, can be given
effect in precisely the form in which the agreement was made.
                               - 5 -


          4. In the event it is determined or agreed by the
     parties in Robert D. Grossman, Jr.’s, Tax Court case, Docket
     No. 14364-91, that any of the travel expenses referred to in
     paragraph 1, above, were incurred primarily for the benefit
     of Markette Corporation and did not constitute income
     reportable on their joint return, [the Commissioner] agrees
     to reduce the deficiencies and additions to tax herein
     agreed to by [Betsy] by corresponding amounts.

          5. * * * The parties agree to settle the income tax
     case for said years [1983, 1984, and 1985] for an assessment
     against [Betsy] of 65 percent of the deficiencies determined
     under paragraphs 1 through 4, above.

                 *    *    *    *      *   *   *

          7. [The Commissioner] agrees to concede the addition to
     tax under I.R.C. §6661 for taxable year 1985.

                 *    *    *    *      *   *   *

          10. When the decision in Docket No. 14364-91 becomes
     final, [Betsy] and [the Commissioner] will submit to the
     Court a stipulated decision giving effect to the above-
     described settlement.


Discussion

     Petitioner contends that he is entitled to the benefit of

two of the concessions that the Commissioner made in the

stipulations of settled issues in Betsy’s dockets, as follows:

          (1) Thirty-five percent of the 1986 addition to tax
     under section 6653(b)(1)(A), stipulation 4 in Betsy’s docket
     19143-90; and

          (2) All of the 1985 addition to tax under section 6661,
     stipulation 7 in Betsy’s docket 14208-91.


These two concessions are hereinafter sometimes collectively

referred to as the claimed concessions.
                              - 6 -


     Petitioner maintains that (1) in light of the preambles of

the stipulations of settled issues of Betsy’s dockets, the

literal language of the claimed concessions applies to him, and

(2) respondent should be held to the claimed concessions.

Respondent contends that the concessions that the Commissioner

made in the stipulations of settled issues in Betsy’s dockets do

not have any bearing on the disposition of the issues in

petitioner’s dockets.

     We agree with respondent.5

     The compromise and settlement of tax cases is governed by

general principles of contract law.   Dorchester Indus. Inc. v.

Commissioner, 108 T.C. 320, 330 (1997).   In Robbins Tire & Rubber

Co. v. Commissioner, 52 T.C. 420, 435-436 (1969), we stated

that:

     a compromise is a contract and thus is a proper subject of
     judicial interpretation as to its meaning, in the light of
     the language used and the circumstances surrounding its
     execution. [Citations omitted]




     5
          Where petitioner and Betsy are liable for the same
item, a payment by one in effect extinguishes the obligation of
the other to make the same payment. Thus, Betsy’s agreements
with the Commissioner may ultimately affect how much petitioner
may be called on to pay. However, this consequence of payment of
liability by one of the jointly liable taxpayers does not affect
the deficiency redeterminations that we enter in the case of the
other jointly liable taxpayer. Kroh v. Commissioner, 98 T.C.
383, 391-394 (1992). In the instant cases, we deal only with the
decisions to be entered in petitioner’s dockets, and not with the
amounts that petitioner may be called on to pay.
                               - 7 -


     In Dorchester Indus. Inc. v. Commissioner, 108 T.C. at 330,

we stated, quoting Manko v. Commissioner, T.C. Memo. 1995-10,

that:

          For almost a century, it has been settled that
     voluntary settlement of civil controversies is in high
     judicial favor. Williams v. First Natl. Bank, 216 U.S. 582,
     595 (1910); St. Louis Mining & Milling Co. v. Montana Mining
     Co., 171 U.S. 650, 656 (1898). A valid settlement, once
     reached, cannot be repudiated by either party, and after the
     parties have entered into a binding settlement agreement,
     the actual merits of the settled controversy are without
     consequence. This Court has declined to set aside a
     settlement duly executed by the parties and filed with the
     Court in the absence of fraud or mutual mistake. Stamm
     Intl. Corp. v. Commissioner, 90 T.C. 315 (1988); Spector v.
     Commissioner, 42 T.C. 110 (1964). However, a court will not
     force a settlement on parties where no settlement was
     intended. Autera v. Robinson, 419 F.2d 1197 (D.C. Cir.
     1969).

     When we examine the language used and the surrounding

circumstances, we see that the stipulations of settled issues in

Betsy’s dockets are styled “Betsy S. Grossman, Petitioner” and

show the docket numbers of Betsy’s dockets in the headings; they

do not show petitioner’s name or the docket numbers of his cases

in their headings.   Although Betsy’s petitions result from joint

notices of deficiency, Betsy’s dockets deal only with Betsy’s

deficiencies and not with petitioner’s deficiencies.   The

stipulations of settled issues in Betsy’s dockets purport to be

agreements between the parties in those dockets; petitioner is

not and never was a party in those dockets.

     In the context of the foregoing, the simplest and most

direct interpretation of Betsy’s and the Commissioner’s
                              - 8 -


stipulations as to the section 6653(b) addition for 1986 and the

section 6661 addition for 1985 is that the stipulations establish

and limit Betsy’s liabilities and not petitioner’s liabilities.

See supra note 5.

     In Quinones v. Commissioner, T.C. Memo. 1988-269, an opinion

to which petitioner has drawn our attention, we dealt with a

situation in which the taxpayer and the Commissioner agreed to a

settlement of the case before the Court.   A condition of that

settlement was that the Commissioner act in a specified manner

with regard to a related dispute with another taxpayer.   The

Commissioner’s counsel apparently decided that he had made a bad

bargain for his client and moved to vacate the stipulated

decision in the case before the Court.   We denied the motion.

     Thus, it is clear that a settlement in a case before the

Court can have, as part of the contract, an agreement as to

treatment of a different taxpayer in a different dispute.

However, in Quinones it was plain from the exchange of letters

that constituted the parties’ agreement, that resolution of the

other dispute was part of the quid pro quo of the agreement.     In

contrast, we search in vain through the claimed concessions for

any reference to petitioner or the instant cases.   Indeed, the

only references to petitioner or the instant cases that appear in

the stipulations of settled issues in Betsy’s dockets are those

that relate to Betsy’s entitlement to the benefit of certain
                                - 9 -


matters if these matters are resolved in petitioner’s favor in

petitioner’s dockets.

     The clear textual presence of an agreement to give Betsy the

benefit of certain possible successes by petitioner and the clear

textual absence of an agreement to give petitioner any benefit of

any successes by Betsy bolsters our conclusion that the text of

the stipulations in Betsy’s dockets does not contain any hidden

or implied benefits for petitioner.

     Petitioner maintains that:


     Here, Respondent, with full knowledge that Petitioner was
     covered by the same notices of deficiency, entered into the
     agreements with Betty Grossman which, by their plain and
     unambiguous terms and without limitation, conceded certain
     adjustments ‘with respect to’ Petitioner’s deficiency
     notice.

We read the stipulations of settled issues in Betsy’s dockets as

dealing with, or providing rules for resolution of, only Betsy’s

liabilities with respect to the notices of deficiency, with

petitioner’s liabilities being referred to only insofar as Betsy

and the Commissioner agreed was appropriate in determining

Betsy’s liabilities.    Thus, we do not read the stipulations of

settled issues in Betsy’s dockets as providing any concessions

with regard to petitioner’s liabilities for the section 6653(b)

addition for 1986 or the section 6661 addition for 1985.

     Petitioner contends that we should prevent respondent from

taking inconsistent positions in his and Betsy’s cases;
                               - 10 -


petitioner relies on our analysis in Cluck v. Commissioner, 105

T.C. 324 (1995).    In focusing on our determination in Cluck to

hold a taxpayer to the stipulation that the taxpayer’s husband

had entered into in an earlier proceeding, petitioner overlooks

the setting of Cluck.    In the earlier Cluck proceeding the

taxpayer’s husband, as executor of his mother’s estate, had

stipulated to a $1,420,000 date-of-death fair market value of

property included in the estate; decision was entered in that

estate tax case on the basis of this settlement stipulation; and

the taxpayer’s husband’s inherited portion of that property

amounted to $355,000.    Cluck v. Commissioner, 105 T.C. at 329,

331.    The taxpayer’s husband then sold the property.   Id. at 331.

The taxpayer and her husband filed separate tax returns for the

year of the sale, but filed a joint tax return for a year to

which a claimed net operating loss was carried.     Id. at 326-327.

For purposes of determining the amount of the claimed net

operating loss carryover to the joint tax return year it became

important to determine the taxpayer’s husband’s gain or loss on

the sale of the inherited property.     In Cluck the taxpayer

contended that her husband’s basis in the inherited property was

really $625,000, and not the $355,000 that would have resulted

from the settlement of the estate tax case.     Id. at 331.

       The duty of consistency stops a party from unfairly

benefiting from that party’s own error or omission under certain
                               - 11 -


circumstances.   In Cluck we held that the taxpayer’s husband

would be precluded, by the duty of consistency, from contending

that he had a basis in the inherited property of more than the

$355,000 amount used in settling the estate tax litigation.       Id.

at 333.   We then went on to hold that the taxpayer should be

bound by her husband’s stipulation in the circumstances of that

case.   In the instant cases we do not find, and petitioner does

not contend, that respondent has benefited, fairly or unfairly,

by the stipulations in Betsy’s dockets as to the claimed

concessions.

     As a result, Cluck is irrelevant to the instant cases,

except by way of contrast.

     Finally, petitioner contends that our recent Court-reviewed

opinion in Dorchester Indus. Inc. v. Commissioner, 108 T.C. 320

(1997), supports his contention that respondent’s counsel--

     must live with the words he drafted in Stipulations filed
     with the Court, regardless of his intention unless
     [respondent’s counsel] can show extreme facts, which would
     entitle him to avoid a judgment.

     Respondent does not seek in these proceedings to repudiate

the stipulations of settled issues in Betsy’s dockets; we do not,

in our determination herein, relieve respondent of any of those

stipulations.    We merely conclude that, under the language of

those stipulations petitioner is not entitled to the claimed

concessions.
                             - 12 -


    We so hold.6



                                      Decisions will be entered

                             in accordance with respondent’s

                             Rule 155 computations.




    6
          The foregoing resolves the dispute as to both of the
claimed concessions. In addition, sec. 6653(b) provides that the
fraud addition to tax does not apply to a spouse on a joint tax
return unless some part of the underpayment is due to that
spouse’s fraud. Thus, a determination of one spouse’s fraud
liability may well be different from a determination as to the
other spouses’s fraud liability. E.g., Stone v. Commissioner, 56
T.C. 213, 226-228 (1971).
