2. Standards for Vacating a Final Decision

Notwithstanding the authority to act on such a motion, the authority of the Tax Court to vacate a decision that has become final is limited. In Taub v. Commissioner, 64 T.C. 741 (1975), affd. without published opinion 538 F.2d 314 (2d Cir. 1976), the taxpayer in a deficiency case sought to vacate a decision that had become final. We noted that as a general rule the finality of a decision is absolute. Id. at 750; see also Lasky v. Commissioner, 235 F.2d 97 (9th Cir. 1956), affd. per curiam 352 U.S. 1027 (1957); Abatti v. Commissioner, 86 T.C. 1319, 1323 (1986), affd. 859 F.2d 115 (9th Cir. 1988). We also noted that “we have jurisdiction to set aside a decision which would otherwise be final where there is 'fraud on the court.' Taub v. Commissioner, supra at 751 (citing Toscano v. Commissioner, 441 F.2d 930 (9th Cir. 1971)); Kenner v. Commissioner, 387 F.2d 689 (7th Cir. 1968); see also Drobny v. Commissioner, 113 F.3d 670 (7th Cir. 1997), affg. T.C. Memo. 1995-209; Senate Realty Corp. v. Commissioner, 511 F.2d 929 (2d Cir. 1975).

In Abeles v. Commissioner, 90 T.C. 103 (1988), this Court held that it had the authority to vacate an otherwise final decision in a situation where the Court never acquired jurisdiction over the taxpayer. Accord Billingsley v. Commissioner, 868 F.2d 1081 (9th Cir. 1989); Brannon's of Shawnee, Inc. v. Commissioner, 69 T.C. 999 (1978).

This Court has also vacated a final decision in the situation where there was a clerical error in the decision document that was not discovered until after the decision had become final. See Michaels v. Commissioner, 144 F.3d 495 (7th Cir. 1998), affg. T.C. Memo. 1995-294.4

The Court of Appeals for the Sixth Circuit held that a final decision of the Tax Court could be vacated in situations involving a mutual mistake. Reo Motors, Inc. v. Commissioner, 219 F.2d 610 (6th Cir. 1955). However, in a more recent case, Harbold v. Commissioner, 51 F.3d 618, 622 (6th Cir. 1995), the Court of Appeals for the Sixth Circuit held that Reo Motors, Inc. was overruled by the Supreme Court in Lasky v. Commissioner, 352 U.S. 1027 (1957), and that the

4 The Court of Appeals for the Eighth Circuit has held that the Tax Court lacks jurisdiction to vacate a final decision in the absence of “extraordinary circumstances." See Ark. Oil & Gas, Inc. v. Commissioner, 114 F.3d 795, 798 (8th Cir. 1997).

Court of Appeals for the Sixth Circuit would no longer follow the rationale of Reo Motors, Inc.

3. Movant's Grounds for Vacating the Decision

Irrespective of which standard of the cases discussed above is used, movant's allegations fall far short for purposes of vacating our decision in this case. He alleges that the named tax matters partner (TMP), Richard M. Greenberg, was in bankruptcy and was disqualified as the TMP. This is correct. Movant then asserts that either the Tax Court or respondent should have appointed a new TMP. This ignores the fact that, since 1995, the Court has attempted in vain to find a limited partner who would be willing to serve as the TMP. Finally, movant alleges that the Court's affirmance of respondent's determinations created a whipsaw that "is patently unreasonable, unfair, unjust and inequitable." We are willing to assume that this is also correct. But the fact is that none of these allegations, standing alone or together, constitute a fraud on the Court or other valid reason for vacating a final decision of this Court.5

In concluding, we note that the decided cases regarding vacating a final decision of the Court involve so-called deficiency cases rather than TEFRA partnership cases. The current section 7481(a) is derived from section 1005(a) of the Revenue Act of 1926, ch. 27, tit. X, 44 Stat. 10. The legislative history states:

Inasmuch as the statute of limitations upon assessments and suits for collection, both of which are suspended during review of the Commissioner's determination, commences to run upon the day upon which the Board's [of Tax Appeals] decision becomes final, it is of utmost importance that this time be specified as accurately as possible. In some instances in order to achieve this result the usual rules of law applicable in court procedure must be changed. *** [S. Rept. 52, 69th Cong., 1st Sess. (1926), 1939-1 C.B. (Part 2) 332, 360.]

The legislative history of the TEFRA proceeding specifies that "The principles of section 7481(a) shall govern in determining the date on which a court decision becomes final." H. Conf. Rept. 97-760, at 608 (1982), 1982-2 C.B. 600, 666.

5 Indeed, we note that, putting aside the problem with the finality of the decision, movant offers no explanation as to the reason for his failure to timely move to participate in this proceed

As the Court of Appeals for the Ninth Circuit observed, Congress in enacting section 7481 "was conscious of the need that 'finality' be clearly defined, so that the process of collection can proceed unimpeded." Toscano v. Commissioner, supra at 932. While this concern is apparent in deficiency cases, its force is at least as great in TEFRA partnership cases. The liability of not just one taxpayer is at stake; rather, it is the liabilities of potentially all of the partners in the partnership. Thus, if we were to vacate a final decision in a TEFRA case, the result clearly would impede the collection process. We believe, therefore, that the reasoning underlying the cases restricting the vacating of final decisions of this Court applies, perhaps even more strongly, to partnership cases.

There are no viable grounds for vacating the final decision in this case. Accordingly, granting movant's motion for leave would be nothing more than an act of futility, and the motion will be denied.

An order denying the motion for leave to file notice of election to participate out of time will be issued.

VICTOR & JUDITH A. GRIGORACI, PETITIONERS v.
COMMISSIONER OF INTERNAL REVENUE,

RESPONDENT

Docket No. 8784-01.

Filed March 25, 2004.

Ps sought redetermination under sec. 6213, I.R.C., of a deficiency for tax on self-employment income from a partnership in which H was an indirect partner. Following Grigoraci v. Commissioner, T.C. Memo. 2002-202 (Grigoraci I), which involved a similar issue for Ps' earlier tax year, this Court dismissed the instant case for lack of jurisdiction. Ps seek reasonable litigation and administrative costs allegedly incurred in Grigoraci I as well as in the instant proceeding. Ps also seek punitive damages against R. Held, pursuant to sec. 7430, I.R.C., we cannot in this proceeding award Ps litigation and administrative costs incurred in connection with the proceedings in Grigoraci I. Held, further, Ps have failed to establish that they incurred litigation and administrative costs in this proceeding apart from a $60 filing fee. Held, fur

ther, this Court lacks jurisdiction to award punitive damages
against R.

Victor and Judith A. Grigoraci, pro sese.

Mary Ann Waters, for respondent.

OPINION

THORNTON, Judge: This case is before us on petitioners' motion for reasonable litigation and administrative costs pursuant to section 7430 and Rule 231.1

Background

Mr. Grigoraci is a certified public accountant and the chief executive officer (C.E.O.) of an accounting partnership, Grigoraci, Trainer, Wright & Paterno (GTWP). On December 1, 1995, Mr. Grigoraci formed Victor Grigoraci CPA Accounting Corp. as an S corporation (the S corporation) for the purpose of acting as a partner (with two other corporations) in GTWP. On their 1997 and 1998 joint Federal income tax returns, petitioners reported certain distributions from the S corporation, essentially representing passthroughs to Mr. Grigoraci of the S corporation's distributive shares of GTWP's income.

By notice of deficiency dated April 13, 2001, respondent determined that the amounts petitioners had reported as the S corporation's distributions actually represented Mr. Grigoraci's personal service income and were subject to selfemployment tax. Petitioners duly petitioned this Court to redetermine the determined deficiencies in their 1997 and 1998 income taxes.

Before the scheduled trial in the instant case, this Court issued its decision in Grigoraci v. Commissioner, T.C. Memo. 2002-202 (Grigoraci I), involving similar issues relating to petitioners' 1996 taxable year.2 In Grigoraci I, this Court concluded, among other things, that the self-employment tax determined by respondent, insofar as it was attributable to self-employment tax on the S corporation's distributive share

1 Unless otherwise indicated, all section references are to the Internal Revenue Code as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure. All references to sec. 7430 are to that section as in effect when the petition was filed.

2 The trial in Grigoraci I took place in April 2001 before petitioners filed their petition in the instant case, which apparently explains why the instant case was not consolidated with the three dockets that were consolidated in Grigoraci I.

of GTWP's income, was an "affected item" requiring a "partner-level determination" pursuant to section 6230(a)(2). Because the notice of deficiency in Grigoraci I was issued before the close of the partnership proceedings, this Court dismissed for lack of jurisdiction so much of petitioners' case as related to that affected item.3 Id.

On January 16, 2003, petitioners filed a motion for entry of decision in this case on the basis of this Court's holding in Grigoraci I. In their motion, petitioners asserted that in this case, as in Grigoraci I, the related partnership-level proceeding had not been completed. In his response, filed February 7, 2003, respondent stated that he had no objection to petitioners' motion for entry of decision. On March 26, 2003, this Court entered an order of dismissal for lack of jurisdiction, denying petitioners' motion for entry of decision and dismissing this case for lack of jurisdiction, consistent with this Court's jurisdictional holding in Grigoraci I.4

On May 9, 2003, petitioners filed a motion for reasonable litigation and administrative costs, with supporting affidavits. On August 1, 2003, respondent filed his response. Pursuant to this Court's order dated September 22, 2003, on November 6, 2003, petitioners filed additional supporting affidavits and a reply to respondent's response. On December 15, 2003, respondent filed a response to petitioners' last-mentioned filing.

The parties agree that an evidentiary hearing is not required. We base our decision on the pleadings, petitioners' motion for litigation and administrative costs, petitioners' supporting affidavits, and the various responses and counterresponses filed by the parties.

3 In Grigoraci I, unlike the instant case, the deficiency determined by respondent was also partly attributable to self-employment tax on wages that the S corporation had reported paying to Mr. Grigoraci. In Grigoraci I, this Court held that this discrete portion of the deficiency was not attributable to an "affected item" and that consequently this Court had jurisdiction to review it pursuant to sec. 6213. This Court held in Grigoraci I that the Grigoracis properly reported this income as wages from the S corporation and owed no self-employment tax on it.

4 By order dated May 9, 2003, we vacated our order of dismissal for lack of jurisdiction entered Mar. 26, 2003, pending resolution of petitioners' motion for reasonable litigation and administrative costs.