                              T.C. Memo. 2015-39



                       UNITED STATES TAX COURT



BENJAMIN B. LECOMPTE III AND CATHLEEN B. LECOMPTE, Petitioners v.
       COMMISSIONER OF INTERNAL REVENUE, Respondent



    Docket No. 16657-12.                           Filed March 10, 2015.



            P-H's wholly owned corporate employer adopted a
    multiemployer welfare benefit plan (plan 1), which funded P-H's
    interest in the plan by acquiring a life insurance policy (policy) on
    P-H's life with a $7.8 million face value. Subsequently, P-H's
    employer terminated its participation in plan 1 and adopted a single-
    employer plan (plan 2) to which the policy was transferred. Ps treated
    both plans as tax exempt and reported no income from either the
    initial acquisition or the subsequent transfer of the policy. R issued a
    notice of deficiency (notice) determining that P-H was taxable on the
    value of his interest in the policy in the year of its transfer from plan 1
    to plan 2, which R alleges was in one of the years in issue (2004-07).
    R acknowledges that he does not consider plan 1 to be a qualified,
    tax-exempt welfare benefit plan. Ps ask, first, that we summarily
    determine that "the statute of limitations bars assessment" on the
    grounds that R's acknowledgment necessarily means that P-H's
    receipt of income equal to the value of his interest in the policy
    occurred when plan 1 acquired the policy, which, according to Ps,
    was in 1990, an admittedly closed year. Ps next ask that we
    summarily determine that "the duty of consistency is not applicable."
                                         -2-

[*2]          Held: The notice was timely issued, and Ps' period of
       limitations defense fails, as does any defense of judicial or equitable
       estoppel; moreover, there are disputed issues of material fact that bar
       summary judgment.

             Held, further, because Ps have not taken inconsistent positions,
       the doctrine of consistency is not applicable.



       Robert Richard Pluth and Robert Edward Kolek, for petitioner Benjamin B.

LeCompte III.

       Cathleen B. LeCompte, pro se.

       Angela B. Reynolds, Elke Esbjornson Franklin, and David Weiner, for

respondent.



                           MEMORANDUM OPINION


       HALPERN, Judge: Respondent issued a notice of deficiency (notice) to

petitioners in which he determined that petitioner Benjamin B. LeCompte III

(Dr. LeCompte) received unreported income arising out of the transfer of a life

insurance policy on his life (policy) to a nonexempt or nonqualified welfare

benefit plan in either 2004, 2005, 2006, or 2007 (years in issue). Petitioners

assign error to respondent's determination and move for summary adjudication in
                                         -3-

[*3] their favor (motion). They ask that we summarily determine (1) that "the

statute of limitations bars assessment" and (2) that "the duty of consistency is not

applicable." We will deny both requests.1

      Unless otherwise indicated, all section references are to the Internal

Revenue Code and all Rule references are to the Tax Court Rules of Practice and

Procedure. We round all dollar amounts to the nearest dollar.

                                     Background

      We draw the following facts from the pleadings, admissions, discovery

responses, and the parties' memoranda supporting and opposing the motion. We

believe the parties to be in substantial agreement as to the facts.

      Dr. LeCompte was the sole shareholder in Benjamin B. LeCompte III, M.D.,

S.C. (corporation). On December 31, 1990, the corporation adopted the

Professional Benefit Trust Multiple Employer Welfare Benefit Plan and Trust

(PBT plan or plan), a purported multiemployer plan alleged by its promoter to


      1
        Rule 54(b) prohibits the joinder of motions except in circumstances not
here pertinent. In the motion, petitioners move for summary judgment in their
favor based on an affirmative defense of the period of limitations and for partial
summary judgment in their favor that the duty of consistency is not applicable.
The two requests should have been separately made. We will, however, deal with
the motion as presented. As necessary for clarity, we will refer to the first request
as the summary judgment request and to the second request as the partial summary
judgment request.
                                         -4-

[*4] constitute a qualified welfare benefit fund or "10-or-more employer plan"

under section 419A(f)(6). The plan was to provide Dr. LeCompte with a death

benefit and a severance benefit. He was the only employee of the corporation

covered by the plan. In order to fund its obligation to provide the stated benefits

to Dr. LeCompte, the PBT plan acquired the policy, with a stated value of

approximately $7.8 million.2

      The plan (and, presumably, others like it) were promoted, organized, and

administered by Tracy L. Sunderlage, against whom the United States obtained a

permanent injunction in 2012, presumably enjoining him from promoting such

plans. Mr. Sunderlage operated through Professional Benefit Trust, Ltd. (PBT), of

which he was the chief executive officer.

      In either 2003, 2004, or 2005, the corporation terminated its participation in

the plan and, instead, adopted a single-employer plan, the Benjamin B. LeCompte,

M.D. Employee Welfare Benefit Plan and Trust (successor plan). In connection

with that change in plans, the PBT plan transferred the plan assets, i.e., the policy,

to the successor plan.




      2
        The premium notices mailed to the plan and successor plan trustee (PBT)
from 2001 to 2008 all show a policy anniversary date of February 21, and each
refers to the policy as "AmerUs Life Ins. policy 2252592 February 21, 1991."
                                         -5-

[*5] Petitioners have consistently taken the position that neither the acquisition

of the policy by the PBT plan, its transfer to the successor plan, nor the payment of

premiums by either plan caused Dr. LeCompte to realize income, presumably, on

the basis that both plans constituted qualified or tax-exempt welfare benefit plans.

      Respondent issued the notice on the grounds that Dr. LeCompte received

unreported income resulting from his participation in the PBT plan and successor

plan in excess of $2 million for each of the years in issue, amounts representing

the accumulated cash value of the policy on its yearly anniversary date plus the

cost of current life insurance protection. Respondent also determined accuracy-

related penalties under section 6662A or, alternatively, section 6662. Respondent

concedes, however, that each of the years in issue constitutes an alternative

position, and that petitioners are liable for tax relating to Dr. LeCompte's

participation in the PBT plan and successor plan for only one of the years in issue,

the year in which the policy was effectively transferred from the PBT plan to the

successor plan.

      In the petition, petitioners raise a first affirmative defense "based upon the

expiration of the statute of limitations". In support of that defense, they aver:

             (a) The United States of America asserted in its complaint for
      permanent injunction against Mr. Sunderlage that the Plan constituted
      an illegal tax shelter.
                                         -6-

[*6]         (b) Respondent also asserts that the Plan constituted an illegal
       tax shelter.

              (c) If such assertions are correct, then under IRC Section 61 the
       life insurance owned by the Plan should have been income to
       Petitioners in 1990, when the insurance was first acquired.

             (d) However, Respondent missed his chance to assess tax
       because the statute of limitations as to the 1990 taxable year has
       already expired. See, IRC Section 6511(a).

       In the answer, in response to petitioners' first affirmative defense,

respondent answers that (1) in failing to report income from the PBT plan on their

1990 tax return, petitioners represented that they participated in a valid welfare

benefit plan, (2) respondent relied on that representation to his detriment, (3)

petitioners now allege that any income received pursuant to the plan was received

in 1990, and (4) petitioners are bound by the duty of consistency, which bars them

from now claiming they received income from the plan in 1990.

       Respondent admits: "The * * * [PBT plan] was not a valid welfare benefit

fund. Therefore, it was an illegal tax shelter."

                                      Discussion

I.     Summary Judgment

       Pursuant to Rule 121(a), "[e]ither party may move, with or without

supporting affidavits or declarations, for a summary adjudication in the moving
                                         -7-

[*7] party's favor upon all or any part of the legal issues in controversy." A

summary judgment is appropriate "if the pleadings, answers to interrogatories,

depositions, admissions, and any other acceptable materials, together with the

affidavits or declarations, if any, show that there is no genuine dispute as to any

material fact and that a decision may be rendered as a matter of law." Rule 121(b).

A summary judgment may be made upon part of the legal issues in controversy.

See id. In response to a motion for summary judgment, an adverse party may not

rest upon mere allegations or denials of the moving party's pleading but "must set

forth specific facts showing that there is a genuine dispute for trial." Rule 121(d).

"The moving party bears the burden of proving that there is no genuine issue of

material fact, and the Court will draw any factual inferences in the light most

favorable to the nonmoving party." Anonymous v. Commissioner, 134 T.C. 13, 15

(2010).

II.   The Parties' Arguments

      A.     Petitioners

      Petitioners argue that we should grant summary judgment in their favor

"because the expiration of the statute of limitations bars assessment." They do

not, however, dispute that the limitations period for assessing tax liabilities for the

years in issue remained open when respondent mailed the notice. Their claim is
                                          -8-

[*8] that a deficiency, if there was one, arose in 1990, a closed year. Specifically,

petitioners argue that, for 1990, both the three-year limitations period under

section 6501(a) and the six-year limitations period under section 6501(e)(1)(A)

have expired. In support of their argument, petitioners point to respondent's

admissions that the PBT plan "was not a valid welfare benefit fund" and that it

"was an illegal tax shelter."3 Petitioners state that they dispute that the PBT plan

constituted an illegal tax shelter, but they argue that, "if [respondent] * * * is

correct, then under IRC Section 61 the life insurance policy owned by the Plan

should have been income to Petitioners in 1990, the year the life insurance was

first acquired" and the year in which the policy became effectively controlled by

Dr. LeCompte. They conclude: "Respondent missed * * * [his] chance to assess

tax because the statute of limitations as to the 1990 taxable year had already

expired before Respondent issued * * * [his] notice of deficiency."


      3
        Previously, on September 14, 2012, petitioners moved for summary
judgment, a motion that was virtually identical to the motion before us. At the
time of that motion, respondent had filed responses to petitioners' interrogatories
and request for admissions in which he refused to acknowledge that the PBT plan
constituted an illegal tax shelter. On February 8, 2013, we issued an order
denying petitioners' motion on the ground that "there exists a genuine issue of
material fact." Petitioners feel that respondent's amended responses, in which he
acknowledges that the PBT plan was an illegal tax shelter and did not constitute a
valid welfare benefit fund, have resolved all genuine issues of material fact, and
that the case is now ripe for summary judgment in their favor.
                                         -9-

[*9] Petitioners also argue, in response to respondent's argument to the contrary,

that their position regarding the expiration of the limitations period for assessment

does not violate the doctrine of the duty of consistency, which bars a taxpayer

from disavowing a position asserted for a closed taxable year in order to obtain a

tax benefit (or avoid or reduce a tax liability) for a later, open taxable year. In

support of that argument, petitioners note that courts apply the doctrine "only in

egregious cases of misrepresentation where the taxpayer attempts to game the

system", citing a number of cases in which the taxpayer takes a position

inconsistent with that taken for an earlier, closed year and affirmatively disavows

the prior position. Petitioners allege that, "[i]n contrast, * * * [they] have always

taken the position that the acquisition of the life insurance policy by the Plan and

payment of * * * premiums do not cause * * * [them] to realize income * * * [and

that they] have never changed and do not desire to change any prior

representation."

      Lastly, petitioners argue that the doctrine is inapplicable "because any

possible inconsistency of Petitioners * * * [involves] a question of law * * * [not]

a mistake of fact", and that only inconsistent representations of fact can trigger

application of the doctrine.
                                        - 10 -

[*10] Petitioners conclude:

      [B]ecause under Respondent's theory Dr. LeCompte is effectively the
      owner of the life insurance policy, it is immaterial that the Plan
      converted from a multiemployer plan to a single employer plan. It is
      Respondent's position that Dr. LeCompte always had control over the
      life insurance policy. Therefore, a conversation [sic] from a
      multiemployer plan to a single employer plan has no tax effect and
      does not trigger additional income to Dr. LeCompte.

      B.     Respondent

      Respondent argues (1) that, because of consents entered into by petitioners

extending the periods of limitations for 2004 through 2007, the only years of

petitioners for which deficiencies in tax are now before the Court, no affirmative

defense to the notice based on the period of limitations can succeed; (2) petitioners

provide no support for their position that any amount includible in gross income

was includible for 1990 and no other year; (3) the duty of consistency prevents

petitioners from arguing that any assessment of tax attributable to the receipt of

income from the corporation should have been made for 1990, a closed year; and

(4) events occurred during the years in issue that cause income to be recognized to

Dr. LeCompte for those years.
                                         - 11 -

[*11] III.   Discussion

      A.     Period of Limitations

             1.     Affirmative Defenses

      Since petitioners concede that the notice was timely mailed with respect to

the years at issue, we agree with respondent that any affirmative defense based on

the period of limitations must fail. Petitioners, however, appear in truth to be

raising a defense based not on the period of limitations but, rather, on estoppel;

i.e., that having conceded that the PBT plan was not a valid welfare benefit fund

and was, instead, an illegal tax shelter, respondent is estopped from determining

any deficiency in petitioners' 2004 through 2007 Federal income tax. If petitioners

are raising an estoppel defense, it is likely based on either judicial estoppel or

equitable estoppel. Grounds exist, however, for neither defense.

      Whatever implication may be drawn from respondent's admissions (i.e., that

he missed his chance to tax Dr. LeCompte for 1990), respondent has not in this

case or, as far as we know, in any other case, persuaded a court that Dr. LeCompte

realized gross income for 1990 on account of a contribution made by the

corporation to the PBT plan. "Judicial estoppel is an equitable doctrine that

prevents parties in subsequent judicial proceedings from asserting positions

contradictory to those they previously have affirmatively persuaded a court to
                                        - 12 -

[*12] accept." Huddleston v. Commissioner, 100 T.C. 17, 26 (1993); see also

Peking Inv. Fund, LLC v. Commissioner, T.C. Memo. 2013-288, at *28-*29. That

is not the case here.

      In McCorkle v. Commissioner, 124 T.C. 56, 68 (2005), we described the

doctrine of equitable estoppel as follows:

             Equitable estoppel is a judicial doctrine that precludes a party
      from denying that party's own acts or representations that induce
      another to act to his or her detriment. E.g., Graff v. Commissioner, 74
      T.C. 743, 761 (1980), affd. 673 F.2d 784 (5th Cir. 1982). It is to be
      applied against the Commissioner only with utmost caution and
      restraint. E.g., Hofstetter v. Commissioner, 98 T.C. 695, 700 (1992).
      The essential elements of estoppel are: (1) There must be a false
      representation or wrongful misleading silence; (2) the error must be in
      a statement of fact and not in an opinion or a statement of law; (3) the
      person claiming the benefits of estoppel must be ignorant of the true
      facts; and (4) he must be adversely affected by the acts or statements
      of the person against whom estoppel is claimed. E.g., Estate of
      Emerson v. Commissioner, 67 T.C. 612, 617-618 (1977); * * *

      Petitioners fail to show the elements necessary to invoke equitable estoppel.

If nothing else, we cannot make a false representation or a wrongful misleading

silence out of respondent's failure to charge Dr. LeCompte with additional income

for 1990 (if, indeed, he had additional income for that year).
                                        - 13 -

[*13]         2.    Genuine Dispute as to a Material Fact

        Affirmative defenses aside, petitioners may be arguing that there is no

genuine dispute as to any material fact and they are entitled to summary judgment

as a matter of law. See Rule 121(b).

        As noted supra, petitioners consider respondent's admissions that the PBT

plan "was not a valid welfare benefit fund" but was, instead, "an illegal tax

shelter" from its inception to constitute an admission that the policy's cash value

was properly includible in Dr. LeCompte's income for 1990, not for any of the

years in issue. But respondent's admission is arguably no more than an

acknowledgment that the PBT plan was "not exempt from tax under section

501(a)", the first requirement for inclusion in income under section 402(b)(1).4 It

is not an acknowledgment that the policy's cash value was required to be included

in Dr. LeCompte's gross income "in accordance with section 83", the second

requirement for inclusion under section 402(b)(1). One might reasonably assume

that respondent's acknowledgment that the PBT plan constituted "an illegal tax


        4
       The PBT plan's status as a nonexempt trust is also indicated by a note to the
financial statements contained in the annual independent auditor's reports with
respect to the PBT plan that were attached to the Forms 5500, Annual
Return/Report of Employee Benefit Plan, filed by the plan for 2003, 2005, and
2006. In each case the note states: "The Trust is a taxable trust and is not an
exempt trust under Section 501(c)(9)."
                                         - 14 -

[*14] shelter" indicates his agreement that the PBT plan must be disregarded and

that Dr. LeCompte was the true, fully vested owner of the policy. But that is an

assumption, not a fact. As noted supra, petitioners, as the moving party, bear the

burden of proving that there is no genuine dispute about whether and when

Dr. LeCompte's beneficial interest in the policy was substantially vested, within

the meaning of section 1.83-3(b), Income Tax Regs. Petitioners have not met that

burden. To begin with, the record to date does not contain a copy of the PBT plan,

so we have no way of ascertaining Dr. LeCompte's rights with respect to the policy

under that plan. Secondly, petitioners have not shown whether or when the plan

assets (i.e., the policy) were "set aside from the claims of creditors of the * * *

[corporation]", a provision that would have subjected the arrangement to section

83 inclusion in income. See sec. 1.83-3(e), Income Tax Regs. The lack of

certainty regarding the application of section 83 to Dr. LeCompte's interest in the

PBT plan creates a genuine issue of material fact precluding our granting of the

motion. Moreover, as noted supra note 2, the record indicates that the effective

date of the policy was February 21, 1991, so that, assuming petitioners' interest in

the policy was substantially vested upon PBT's acquisition thereof, its cash

surrender value was income to Dr. LeCompte for 1991, not 1990. Although the

possibility that 1991, unlike 1990, remains open for assessment is remote, there is
                                         - 15 -

[*15] nothing in the record that would conclusively negate that possibility. Thus,

uncertainty as to the year in which the PBT plan acquired the policy constitutes a

second genuine issue of material fact.

             3.     Conclusion

      We will deny the summary judgment request because there is a genuine

dispute as to material facts and, therefore, a decision may not be rendered as a

matter of law.

      B.     Duty of Consistency

      In the answer, in response to petitioners' first affirmative defense, based on

the period of limitations, respondent answers that he relied to his detriment on

petitioners' failure to report income from the PBT plan on their 1990 tax return,

that petitioners now allege that any income received pursuant to the plan was

received in 1990, and that petitioners are bound by the duty of consistency, which

bars them from now claiming they received income from the plan in 1990.

      In LeFever v. Commissioner, 103 T.C. 525, 541-542 (1994), aff'd, 100 F.3d

778 (10th Cir. 1996), after stating that "[t]he equitable doctrine of 'quasi-estoppel'

or 'the duty of consistency' applies in this Court", we described that doctrine as

follows:
                                         - 16 -

[*16] The "duty of consistency" is based on the theory that the taxpayer
      owes the Commissioner the duty to be consistent with his tax
      treatment of items and will not be permitted to benefit from his own
      prior error or omission. Southern Pac. Transp. Co. v. Commissioner,
      75 T.C. 497, 838-839 (1980). The duty of consistency doctrine
      prevents a taxpayer from taking one position one year and a contrary
      position in a later year after the limitations period has run on the first
      year. Herrington v. Commissioner, * * * [854, F.2d 755, 757 (5th
      Cir. 1988), aff'g 87 T.C. 1087 (1986)] and cases cited therein.

             A taxpayer gaining governmental benefits on the basis of a
      representation or asserted position is thereafter estopped from taking
      a contrary position in an effort to escape taxes. United States v.
      Matheson, 532 F.2d 809, 819 (2d Cir. 1976); Benitez Rexach v.
      United States, 390 F.2d 631, 632 (1st Cir. 1968); Kurz v. United
      States, 156 F. Supp. 99, 106 (S.D.N.Y. 1957), affd. 254 F.2d 811 (2d
      Cir. 1958).

Later in that Opinion, id. at 543, we cited with approval the three conditions for

application of the duty of consistency as set forth in Beltzer v. United States, 495

F.2d 211, 212 (8th Cir. 1974):

             (1) the taxpayer has made a representation or reported an item
      for tax purposes in one year,

             (2) the Commissioner has acquiesced in or relied on that fact
      for that year, and

            (3) the taxpayer desires to change the representation,
      previously made, in a later year after the statute of limitations on
      assessments bars adjustments for the initial year.

In Estate of Letts v. Commissioner, 109 T.C. 290, 297 (1997), we said: "The three

elements of the duty of consistency refer to conflicting representations that are
                                        - 17 -

[*17] made by a taxpayer * * * [w]hen these requirements are met, the

Commissioner may act as if the previous representation is true, even if it is not,

and the taxpayer may not assert the contrary." An exception exists, however, in

that the doctrine is not applicable to pure questions of law, as opposed to questions

of fact and mixed questions of fact and law. E.g., Herrington v. Commissioner,

854 F.2d 755, 758 (5th Cir. 1988), aff'g 87 T.C. 1087 (1986); Estate of Letts v.

Commissioner, 109 T.C. at 302; Arberg v. Commissioner, T.C. Memo. 2007-244,

2007 WL 2416230, at *12.

      Respondent is not quite correct where, in the answer, he avers that

petitioners now allege that any income received pursuant to the plan was received

in 1990. That is not their allegation. Petitioners aver that, if the plan constituted

an illegal tax shelter, as respondent now admits, "then under IRC Section 61 the

life insurance policy owned by the Plan should have been income to Petitioners in

1990, * * * [when the] insurance was first acquired." Petitioners, however,

dispute that the plan constituted an illegal tax shelter. They have constantly taken

the position that the acquisition of the life insurance policy by the plan and

payment of premiums did not cause them to realize income. Unless and until

petitioners contradict that position, there is no inconsistency that they may be

dutybound to forgo.
                                       - 18 -

[*18] Finally, as discussed supra, we have insufficient information about the plan

to determine whether, assuming petitioners should have reported plan-related

income for 1990, their failure to do so was a mistake of law or, maybe, a mistake

of fact or a mistake with respect to a mixed question of law and fact. See LeFever

v. Commissioner, 100 F.3d at 788 (whether property qualifies for special use

valuation is a question of law but actual use of the property involves a mixed

question of law and fact "to which the duty of consistency may be applied").

      We will deny the partial summary judgment request as not presenting an

issue ripe for decision.

IV.   Conclusion

      We will deny the motion.


                                                      An appropriate order will be

                                                issued denying petitioners' motion.
