I'd like it established how much of this work has to do with the Fifth Amendment and other impermissible concerns, and how much of it has to do with the Washington, D.C., hearing. If I pay for the Washington, D.C., hearing, that's 4-, $5,000. If I'm at fault for that, I'll pay that. I mean, that's the position that I'm taking.

* ** I think I have made a mistake, based on what you have said, and I always believe somebody should own up and pay for their mistakes, whatever they are, whether it's paying interest or whatever.

Although respondent's counsel conceded amounts of fees incurred on dates prior to October 25, 1999, the parties were unable to reach agreement as to the amount of fees to be ordered.

Discussion

Petitioners never fully complied with the outstanding discovery orders and were not prepared for trial, and Johnson indicated through Izen that she wanted to withdraw her petition. The petitions cannot be "withdrawn" without decisions against petitioners. See sec. 7459(d); Estate of Ming v. Commissioner, 62 T.C. 519 (1974). Dismissal for failure to prosecute, as sought by respondent's motions, is appropriate. See Rules 104(c)(3), 123(b), 149. Respondent's motion with respect to Johnson seeks determination of deficiencies in amounts that have been adjusted downward from the notice of deficiency due to concessions by respondent. Respondent has agreed that, inasmuch as the deficiencies determined against the NJSJ Trust are in the alternative as a means of protecting respondent against whipsaw, entry of a decision that there are no deficiencies against the NJSJ Trust may await either an appeal by Johnson or finality of the decision in Johnson's case without an appeal.

We have no doubt that dismissal of the petitions and entry of decisions against petitioners is not an unjust result in these cases. The record supports the inference that petitioners never intended to try these cases on the merits. Petitioners have brought into the record indications of criminal investigations of trusts similar to the one involved here, and petitioners' counsel has, in effect, represented that these cases are indistinguishable from Muhich v. Commissioner, T.C. Memo. 1999-192, affd. 238 F.3d 860 (7th Cir. 2001). In

that case, the Court held, among other things, that certain trusts should be disregarded for tax purposes because they lacked economic substance and that the taxpayers were liable for accuracy-related penalties under section 6662(a). This Court declined to impose a penalty under section 6673(a), stating:

We decline to impose a penalty under section 6673. Although the Muhichs' position that the trusts had economic substance was frivolous, we have rejected respondent's position [that] the "consulting fees" were dividends, holding instead the "fees" were compensation. The Muhichs' position in this proceeding was somewhat meritorious to the extent they were defending against respondent's determination of constructive dividends. We admonish the Muhichs that we shall not be inclined to exercise our discretion under section 6673 so favorably in the future if presented with similar arguments by them, and we may impose a penalty.

Also in the record in these cases is a transcript and a copy of a stipulated decision in Crockett v. Commissioner, docket No. 20759-97, which also involved a sham or abusive trust. In that case, the decision entered pursuant to stipulation of the parties included a penalty under section 6673 against Izen's client.

In these cases, in view of Izen's express admissions that he was responsible for the failure to comply with discovery orders, we believe that the penalty should be imposed on him. Although he conceded at the time of hearing that he was wrong and that he would pay, he has argued in written documents that "mere negligence" was not enough to justify a sanction. There may be some question as to whether, before we impose costs, we must find that Izen acted in bad faith. See Nis Family Trust v. Commissioner, 115 T.C. 523 (2000). We have no trouble finding that, in these cases, he did.

Izen has a long history of involvement with sham trusts, both as counsel of record and as counsel rendering an opinion on which taxpayers unfortunately relied. See, e.g., United States v. Buttorff, 761 F.2d 1056 (5th Cir. 1985), affg. 563 F. Supp. 450 (N.D. Tex. 1983); Watson v. Commissioner, 690 F.2d 429 (5th Cir. 1982); Lund v. Commissioner, T.C. Memo. 2000-334; Para Techs. Trust v. Commissioner, T.C. Memo. 1994-366, affd. without published opinion sub nom. Anderson v. Commissioner, 106 F.3d 406 (9th Cir. 1997); Ripley v. Commissioner, T.C. Memo. 1987-114. In Trenerry v. Commis

sioner, T.C. Memo. 1994-500, the taxpayer appeared pro se in a case in which the Court held that a trust was to be disregarded for tax purposes. The Court stated:

Petitioner relies on two legal opinion letters of Joe Alfred Izen, Jr. (hereinafter sometimes referred to as Izen) which she had obtained from Century. Izen's opinion letters, addressed to Century, dated September 25, 1986, discuss the legal status and tax status of contractual trust companies. Although Izen's opinion letters are dated almost 4 years after our published opinion in Zmuda [v. Commissioner, 79 T.C. 714 (1982), affd. 731 F.2d 1417 (9th Cir. 1984)] (and more than 2 years after the published Court of Appeals affirmance), neither of his opinion letters refers to Zmuda. We note the August 15, 1984, changes to the Trenerry Trust, in which petitioner (as grantor) warned herself (as trustee) "to beware of attorneys and to avoid them whenever at all possible." Perhaps this was one instance in which petitioner should have followed her own advice. The Izen opinion letters do not help petitioner on the evidence in the instant case. [Fn. ref. omitted.]

See also Para Techs. Trust v. Commissioner, T.C. Memo. 1992-575.

Cases in which Izen was counsel also reflect chronic failure to comply with discovery orders or Court Rules. In Oelze v. Commissioner, 723 F.2d 1162 (5th Cir. 1983), the Court of Appeals affirmed dismissal of petitions where, in response to the Tax Court's repeated orders to comply with the Commissioner's discovery requests and admonishments that failure to comply would result in dismissal, the taxpayer only partially complied with the orders. The Court of Appeals stated:

Numerous delays caused by the Oelzes, including their repeated failure to provide the requested information based on their unsupported fifth amendment claim, required the tax court to issue at different times three more discovery orders. None of these ever resulted in the Commissioner's obtaining the information he needed. [Id. at 1163.]

In response to a petition for rehearing filed by Izen in Oelze, the Court of Appeals stated:

The taxpayer's continued failure to cooperate with the Commissioner, the necessity for four orders to comply with the Commissioner's discovery requests, the taxpayer's continuous reliance on a baseless fifth amendment claim, and the taxpayer's last-minute attempt to comply with the discovery order all demonstrate that Oelze acted wilfully. Additionally, the Tax Court issued four separate discovery orders, some explicitly warning the taxpayer that failure to comply would result in dismissal of the case. Though the taxpayer finally did partially comply with one of the orders, he did so only after repeated and total failure to supply the Commissioner

with the information he requested. Such partial compliance under these circumstances cannot serve to exonerate the taxpayer from willful failure to comply with the orders of the Court. [Oelze v. Commissioner, 726 F.2d 165, 166 (5th Cir. 1983).]

Similarly, see Watson v. Commissioner, supra; Ripley v. Commissioner, supra.

Izen's persistence in unproductive tactics sometimes has the unfortunate effect of reducing the quality of practice before this Court on both sides. In Tumlinson v. Commissioner, T.C. Memo. 1983-92, the Court faced various procedural questions as a result of the taxpayers' failure to respond to requests for admissions or to comply with other Rules. The Court stated:

We have not found this case to be particularly satisfying. The record before us is sketchy. The case appears to revolve around a family trust but we have been told very little about it. In addition, the various returns filed by petitioners are confusing because of the inconsistent treatment of the items reported therein. All of this is compounded by the seemingly contradictory positions taken by petitioners before this Court and by respondent's failure to be more precise in his requests for admissions. Be this as it may, we have tried our best to reach a just result.

See also Ripley v. Commissioner, T.C. Memo. 1985-555. Izen's tactics demean the process and those involved in it and accomplish nothing. In the language of section 6673(a)(2), it appears to the Court that Izen "has multiplied the proceedings in *** [these cases] unreasonably and vexatiously". He has persisted in these tactics despite warnings and sanctions imposed on his clients in similar cases. He has pursued claims that have been rejected so frequently that they are "entirely without colorable pretext or basis and are taken for reasons of harassment or delay or for other improper purposes." Nis Family Trust v. Commissioner, supra at 548; see Harper v. Commissioner, 99 T.C. 533, 546549 (1992). An award under section 6673 is fully justified.

Although the Court rejected Johnson's Fifth Amendment claims, we exclude from the award the fees that are attributable to those and to the first round of discovery motions. Our calculations begin with March 15, 2000, when respondent's counsel was required to draft motions to compel responses to the second sets of interrogatories and requests for production of documents, and after the Court had engaged in several attempts to secure Johnson's cooperation

in informal discovery. Izen has conceded that he would pay the expenses relating to respondent's counsel's trip to Washington, D.C., for the sanctions hearing in May 2000. He has not challenged respondent's submitted time records nor the $150 hourly rate requested. In addition, respondent should be compensated for time spent subsequent to the May 3, 2000, hearing as a consequence of petitioners' continued failure to comply with the Court's order issued at the conclusion of that hearing. In that regard, the records reflect a total of 31.5 hours by Christina D. Moss and 25.75 hours by Elizabeth Girafalco Chirich. We believe that the fees requested for these services are reasonable. The amount to be awarded is, therefore, a total of 57.25 hours at $150 per hour, or $8,587.50, plus $807.06 in travel expenses for respondent's counsels' trip to Washington.

To reflect the foregoing,

Appropriate orders of dismissal and decision will be entered.

ESTATE OF W.W. JONES II, DECEASED, A.C. JONES IV,
INDEPENDENT EXECUTOR, PETITIONER V.

COMMISSIONER OF INTERNAL

REVENUE, RESPONDENT

Docket No. 13926-98.

Filed March 6, 2001.

D formed a family limited partnership (JBLP) with his son and transferred assets including real property to JBLP in exchange for a 95.5389-percent limited partnership interest. D also formed a family limited partnership (AVLP) with his four daughters and transferred real property to AVLP in exchange for an 88.178-percent limited partnership interest. D's son contributed real property in exchange for general and limited partnership interests in JBLP, and the daughters contributed real property in exchange for general and limited partnership interests in AVLP. All of the contributions were properly reflected in the capital accounts of the contributing partners. Immediately after formation of the partnerships, D transferred by gift an 83.08-percent limited partnership interest in JBLP to his son and a 16.915-percent limited partnership interest in AVLP to each of his daughters. Held, the transfers of property to the partnerships were not taxable gifts. See Estate of Strangi v. Commissioner, 115 T.C. 478 (2000). Held,