Opinion
13856-20
10-06-2022
NAJEEB SHIHADEH & MARY C. SHIHADEH, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Albert G. Lauber Judge
With respect to petitioners' 2016 tax year, the Internal Revenue Service (IRS or respondent) determined a deficiency of $36,080 and an accuracy-related penalty of $7,216 under section 6662(a). The deficiency results from respondent's determination that petitioners had underreported their distributive share of ordinary income from Cal Murphy LLC and failed to substantiate net operating losses for which they claimed a deduction.
Petitioners timely petitioned this Court, and the case was originally calendared on the Court's November 29, 2021, San Francisco, California, trial session. On September 23, 2021, the case was continued with jurisdiction retained by the undersigned. On February 4, 2022, respondent filed a motion to compel production of documents and a motion to compel responses to interrogatories. By Order served February 10, 2022, we directed petitioners, on or before March 9, 2022, to respond to these discovery requests. Petitioners did not comply with our Order.
On April 13, 2022, respondent filed a Motion to Impose Sanctions. On May 19, 2022, after warning petitioners and affording them additional time to comply with our Order, we granted respondent's Motion and imposed the following sanctions: (1) all documents that petitioners should have made available, but did not make available, to respondent's counsel are excluded from evidence in this case; and (2) petitioners' distributive share of ordinary income from Cal Murphy LLC for the taxable year 2016 is deemed adjusted upward by $471,105, as set forth in the notice of deficiency upon which this case is based.
On July 22, 2022, respondent's counsel filed a status report stating that he had sent petitioners' counsel a letter on June 27, 2022, enclosing a proposed stipulated decision that would resolve the remaining issues in the case, i.e., the claimed net operating loss deduction and the accuracy-related penalty. Having received no response to that letter, respondent's counsel on July 21, 2022, spoke by phone to petitioners' counsel, who represented that he may have a conflict of interest that would preclude him from continuing to represent both petitioners.
On September 26, 2022, respondent's counsel filed a Motion to Dismiss for Failure to Properly Prosecute, representing that petitioners had supplied no information to him or their counsel regarding the remaining issues in the case. Respondent does not know whether petitioners are seeking new counsel or taking any steps to resolve any conflicts of interest. Respondent did represent that petitioners object to the granting of the Motion.
On September 26, 2022, petitioners' counsel filed a status report requesting that the Court, before ruling on the Motion to Dismiss, give petitioners an opportunity to resolve any conflicts of interest or secure new counsel. Petitioners' counsel also requested that he be given until October 18, 2022, to file either a Motion to Withdraw or a further status report.
We will give petitioners 45 days to respond to the Motion. We remind petitioners of their obligation, as stated in the standing pre-trial order, to cooperate with respondent in preparing this case for trial or other disposition. Failure to respond to this Order will likely lead to dismissal of this case. See Tax Court Rule 123(b).
In consideration of the foregoing, it is
ORDERED that petitioners shall file, on or before November 17, 2022, a response to respondent's Motion to Dismiss for Failure to Properly Prosecute. It is further
ORDERED that petitioners' counsel shall file, on or before October 18, 2022, either a motion to withdraw as counsel or a further status report. It is further
ORDERED that in addition to regular service, the Clerk of the Court shall serve a copy of this order on petitioners at 2370 Bourbon Court, South San Francisco, CA 94080-5366, their address as stated in the petition.