                         T.C. Memo. 2003-84



                       UNITED STATES TAX COURT



                 ESTATE OF DORA HALDER, DECEASED,
        ANITA HALDER MACDOUGALL, EXECUTRIX, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5018-01.               Filed March 25, 2003.


     Robert D. Whoriskey, for petitioner.

     Monica E. Koch, for respondent.



                         MEMORANDUM OPINION

     VASQUEZ, Judge:    This case is before the Court on the

estate’s motion for entry of decision.    The issue for decision is

whether the parties reached a basis of settlement with regard to

the value of decedent’s interest in the Halder MacDougall

Investment Co. (the limited partnership) as of the date of death.
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Background

     Dora Halder (decedent) died on April 21, 1997, in New York,

New York.    Decedent’s daughter, Anita Halder MacDougall, resided

in Oyster Bay, New York, when the petition was filed in this

case.

     The petition disputed, among other adjustments, respondent’s

determination in the notice of deficiency that the fair market

value of decedent’s interest in the limited partnership was

$1,627,960 on the date of death.    On October 17, 2001, the Court

set the trial date for March 18, 2002.

     On December 14, 2001, the parties met with Appeals Officer

Howard H. Lindenbaum (Mr. Lindenbaum) to discuss the case.    Mr.

Lindenbaum, respondent’s counsel Monica E. Koch (Ms. Koch), the

estate’s counsel Robert D. Whoriskey (Mr. Whoriskey) and co-

counsel Charles R. Goulding (Mr. Goulding), and the estate’s

accountant Gordon S. Sherland (Mr. Sherland) were present at this

meeting.    The parties discussed the value of the limited

partnership.    The estate’s representatives indicated that they

would make an offer of settlement following this meeting.

     On January 10, 2002, Mr. Sherland sent Mr. Lindenbaum a

settlement proposal in which Mr. Sherland proposed that, as a

starting point for the calculation, the limited partnership be

valued at $869,000 in 1987, when the estate claims the limited

partnership was formed.
                               - 3 -

     On January 14, 2002, Mr. Lindenbaum notified Mr. Sherland by

telephone that the value in the proposal was not acceptable (the

January 14, 2002, telephone conversation).   In this conversation,

Mr. Lindenbaum explained that he calculated a value of $1,124,410

for the limited partnership on the date of death, based upon its

value of $1 million in 1987.   Mr. Lindenbaum offered to fax Mr.

Sherland his “chicken scratchings” to show how the $1,124,410

value was calculated.

     On that day, Mr. Lindenbaum faxed Mr. Sherland his

calculations which mistakenly valued “decedent’s partnership

interest” at $1 million on the date of death (the January 14,

2002, fax).   Mr. Sherland realized upon receipt of the fax that

the $1 million figure was less than the value Mr. Lindenbaum

proposed earlier that day.   Mr. Sherland did not contact Mr.

Lindenbaum regarding the discrepancy.    Mr. Sherland contacted Mr.

Whoriskey, Mr. Goulding, and Ms. MacDougall regarding Mr.

Lindenbaum’s proposal of a $1,124,410 value and informed them of

the discrepancy in the faxed document.   Mr. Goulding advised Mr.

Sherland not to contact Mr. Lindenbaum regarding the discrepancy.

The estate’s representatives also advised Mr. Sherland to agree

to the $1 million figure in the January 14, 2002, fax.

     On January 16, 2002, Mr. Sherland sent a fax to Mr.

Lindenbaum in which Mr. Sherland agreed to Mr. Lindenbaum’s $1

million figure contained in the January 14, 2002 fax.    On the
                                - 4 -

next day, Mr. Lindenbaum left a telephone message for Mr.

Sherland that an error was made in the January 14, 2002, fax, and

Mr. Sherland would receive the corrected figures by fax.     On that

day, Mr. Lindenbaum sent a fax to Mr. Sherland (the January 17,

2002, fax).   The fax stated:

     Unfortunately my fax to you was incorrect. I had left
     off page six and in the rush to get it out to you used
     the value of property in 1987 as the final value and
     not the value of decedents [sic] interest at the time
     of death of $1,124,410. I told you this was the amount
     over the phone and discussed that I was following the
     method that you used on the tax return but using the
     starting value for the real estate of $1,000,000 and
     while I felt their [sic] was an argument for no
     discount I would allow a 15% discount for settlement.
     We did discuss the final value of $1,124,410.

     On January 22, 2002, Mr. Sherland sent a fax to Mr.

Lindenbaum which stated:

          Everyone now realizes that the first figures you
     discussed with me on the phone and your settlement fax
     offer are substantially different. We believe that you
     made an honest mistake. However, for our part we
     believe, after deliberating with our counsel and our
     client, that we had accepted a basis of settlement that
     made sense if you took into account both the expenses
     and uncertainties of litigation.

Mr. Sherland further informed Mr. Lindenbaum that a basis of

settlement had been reached.    In a telephone conversation soon

after, Mr. Lindenbaum told Mr. Sherland that Mr. Lindenbaum would

only discuss the figures in the January 17, 2002, fax and

discussed in the January 14, 2002, telephone conversation (i.e.,

the value of $1,124,410).   Mr. Lindenbaum did not feel an

agreement had been reached with the estate and, therefore, did
                               - 5 -

not seek authorization from his supervisor, Harold J.

Finkelstein, Lead Appeals Team Manager, on the discussed values.

     On February 22, 2002, Ms. Koch met with the estate’s

representatives, during which Mr. Whoriskey again raised the

issue that an enforceable basis of settlement had been reached by

Mr. Lindenbaum and Mr. Sherland.   Prior to the filing of the

instant motion, the parties did not execute any documents or file

any documents with the Court regarding these discussions, nor did

the parties make any representations to the Court that a basis of

settlement had been reached.

     On March 7, 2002, the estate filed a motion for entry of

decision based upon an agreed basis of settlement.   On March 18,

2002, respondent filed a notice of objection wherein he objected

to the granting of the estate’s motion.   The Court scheduled the

evidentiary hearing on March 25, 2002.    Additionally, the Court

granted the estate’s motion for continuance of the trial because

the estate’s expert could not testify on the scheduled date due

to health concerns.

Discussion

     The Court applies general principles of contract law to

compromises and settlements of Federal tax cases.    We stated in

Robbins Tire & Rubber Co. v. Commissioner, 52 T.C. 420, 435-436

(1969), that “a compromise is a contract and thus is a proper
                                 - 6 -

subject of judicial interpretation as to its meaning, in light of

the language used and the circumstances surrounding its

execution.”     See also Brink v. Commissioner, 39 T.C. 602, 606

(1962), affd. 328 F.2d 622 (6th Cir. 1964); Saigh v.

Commissioner, 26 T.C. 171, 177 (1956); Davis v. Commissioner, 46

B.T.A. 663, 671 (1942); Himmelwright v. Commissioner, T.C. Memo.

1988-114.   In a tax case, settlement agreements may be reached

through correspondence, in the absence of a formal document.

Manko v. Commissioner, T.C. Memo. 1995-10.

     A prerequisite to the formation of an agreement is an

objective manifestation of mutual assent to its essential terms,

also known as a “meeting of the minds”.     U.S. Titan, Inc. v.

Guangzhou Zhen Hua Shipping Co., 241 F.3d 135, 146 (2d Cir.

2001); Am. Merch. Marine Ins. Co. v. Letton, 9 F.2d 799, 801 (2d

Cir. 1926); Kronish v. Commissioner, 90 T.C. 684, 693 (1988);

Manko v. Commissioner, supra.     The determination of whether there

was a meeting of minds sufficient to constitute a contract is one

of fact.    U.S. Titan Inc. v. Guangzhou Zhen Hua Shipping Co.,

supra at 145.

     We are asked to decide whether the parties entered into a

contract to settle the case.    Based on the evidence, we conclude

that there was not a meeting of the minds, and, therefore, no

basis of settlement was ever reached by the parties.    Mr.
                               - 7 -

Lindenbaum and Mr. Sherland discussed the values in the January

14, 2002, telephone conversation.   The calculations faxed to Mr.

Sherland on that day were to support Mr. Lindenbaum’s proposed

value of $1,124,410.   Upon receipt, Mr. Sherland knew that the

value of $1 million was different from the $1,124,410 value

discussed in the telephone conversation held just before.

Instead of requesting clarification, the estate’s representatives

tried to agree to the lower value because it was to their

advantage.   Mr. Lindenbaum immediately contacted the estate’s

representative, Mr. Sherland, to clarify the error.   As apparent

from the faxes afterwards, both parties acknowledged that Mr.

Lindenbaum made an “honest mistake”.   Holding that a settlement

basis had been reached would allow the estate to take an unfair

advantage of a simple, honest error that was immediately

corrected.

     The estate argues that our holdings in Stamm Intl. Corp. v.

Commissioner, 90 T.C. 315 (1988), and Dorchester Indus., Inc. v.

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

2000), are “unusually clear and precise” in supporting its

argument that the Court should not vacate the alleged settlement

agreement based upon respondent’s unilateral mistake.   In Adams

v. Commissioner, 85 T.C. 359, 375 (1985), we set forth criteria

to be used when determining whether we should exercise our

discretion to modify or set aside a settlement stipulation:
                               - 8 -

     The party seeking modification, however, must show that
     the failure to allow the modification might prejudice
     him. * * * Discretion should be exercised to allow
     modification where no substantial injury will be
     occasioned to the opposing party; refusal to allow
     modification might result in injustice to the moving
     party; and the inconvenience to the Court is slight.
     [Citations omitted.]

In Stamm and Dorchester Indus., we applied “stringent eve-of-

trial standards” rather than criteria applied in Adams v.

Commissioner, supra, in deciding whether to vacate a settlement

agreement because the agreements led to the cancellation of

imminent trial dates.1   Dorchester Indus., Inc. v. Commissioner,

supra at 336.   Further, in each case, the parties had either

filed a stipulation of settled issues with the Court or notified

the Court that an agreement had been reached.   Id. at 327; Stamm

Intl. Corp. v. Commissioner, supra at 317; Adams v. Commissioner,

supra at 367.

     We find those cases distinguishable from the instant case

because:   (1) The parties did not reach a meeting of minds,

execute any settlement agreement, notify the Court that a

settlement had been reached, or file a stipulation of settled

issues with the Court; (2) the Court did not cancel or delay the



     1
        The “stringent standards” were that the moving party must
satisfy standards similar to those applicable in vacating a
judgment entered into by consent; i.e., the judgment will be
upheld unless there is a showing of a lack of formal consent,
fraud, mistake, or some similar ground. Dorchester Indus., Inc.
v. Commissioner, 108 T.C. 320, 335 (1997), affd. 208 F.3d 205 (3d
Cir. 2000).
                                 - 9 -

trial date because of any settlement between the parties (i.e.,

the Court granted a continuance in this case because the estate’s

expert was ill); and (3) Mr. Lindenbaum contacted Mr. Sherland

with regard to the error the next day.

     We do not believe that the estate should reap an undue

advantage from the error.    See Sergy v. Commissioner, T.C. Memo.

1990-442.   We believe that an injustice would occur if we were to

require respondent to adhere to the $1 million value reflected in

the January 14, 2002, fax.   We find that there was no meeting of

the minds between the parties, and we shall deny the estate’s

motion for entry of decision.2

     In reaching our holding herein, we have considered all

arguments made, and, to the extent not mentioned above, we

conclude them to be moot, irrelevant, or without merit.

     To reflect the foregoing,

                                               An appropriate order

                                          will be issued.




     2
        Even if we held there was a meeting of minds, we would
deny the estate’s motion because the “settlement” was never
signed or approved by, or even submitted to, any IRS official
authorized to approve it. Gardner v. Commissioner, 75 T.C. 475,
479 (1980).
