Opinion
14870-20 14875-20
04-16-2024
MICHAEL DAVIS & AMY L. DAVIS, ET AL., [1] Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Christian N. Weiler Judge
This case involves a charitable contribution deduction claimed by D&G Acquisition, LLC (D&G) for a conservation easement. On October 27, 2022, the parties filed a First Stipulation of Facts in this case.
On February 9, 2024, respondent filed a Motion for Partial Summary Judgment, and on March 8, 2024, petitioners filed their response. On April 3, 2024, respondent filed his reply to petitioners' response. In his Motion for Partial Summary Judgment respondent asks the Court to find that D&G held its 9.92-acre land in DeKalb County, Georgia, as inventory and therefore any charitable deduction which D&G may be entitled to under the Internal Revenue Code is limited to D&G's adjusted basis in the property. Petitioners object to respondent's Motion for Partial Summary Judgment.
Respondent's Motion for Partial Summary Judgment cites to Stipulation 12 from the parties' First Stipulation of Facts. Stipulation 12 states (in relevant part): "D&G Acquisition treats the Property as inventory." On March 6, 2024, petitioners filed a Motion to Strike the quoted sentence from the First Stipulation of Facts. On April 3, 2024, respondent filed his response to petitioners' Motion to Strike.
The preamble to the First Stipulation of Facts states that "[a]ll stipulated facts shall be conclusive." Rule 91(a)(1) states that parties have a requirement to stipulate to "all matters not privileged that are relevant to the pending case" including facts, opinions, and "application[s] of law to fact." Rule 91(e) discusses the binding effect of a stipulation. A stipulation is generally treated as a conclusive admission by the parties. However, the Court may allow a party to qualify, change, or contradict a stipulation if justice requires.
Unless otherwise indicated, all Rule references are to the Tax Court Rules of Practice and Procedure.
Prior to filing their Motion to Strike, petitioners' new counsel emailed respondent's counsel seeking to make five changes to the First Stipulation of Facts, including revisions to paragraphs 5, 10, 12, and 15. Regarding Stipulation 12, petitioners' new counsel requested that the second sentence of paragraph 12 be deleted. Respondent declined to make the requested revision to Stipulation 12. Then on March 6, 2024, petitioners filed a Motion to Strike, seeking the deletion of the second sentence to paragraph 12 from the First Stipulation of Facts.
Attorney Ross Sharkey enrolled as additional counsel in these cases on or about May 18, 2023.
Petitioners, in their Motion to Strike, contend the Court should exercise its broad discretion here. Petitioners further contend justice requires that they be relieved from the second sentence in Stipulation 12 because it is contrary to the evidence, an unsupported legal conclusion, and the product of inappropriate litigation tactics by respondent's counsel. Petitioners' original counsel acknowledges that the second sentence of Stipulation 12 is incorrect and that he did not intend to stipulate to petitioners' tax treatment of the property in question as inventory when he signed the First Stipulation of Facts.
Attorney Matthew Paolillo is petitioners original counsel in these consolidated cases.
We may disregard stipulations between parties where justice requires it and when the evidence is contrary to the stipulation. Cal-Maine Foods, Inc. v. Commissioner 93 T.C. 181, 195 (1989).
In Bokum v. Commissioner, the Eleventh Circuit, to whom this case is presumably appealable, affirmed our decision in Bokum v. Commissioner, 94 T.C. 126 (1990) and ruled that no injustice would flow from enforcing a stipulation when: (1) the stipulation had been negotiated in good faith by both parties' counsel, and (2) concessions on both sides had already resulted in a substantial reduction in the taxpayers' liability. 992 F.2d 1132, 1135. In enforcing the stipulation between the parties, the court emphasized "that the stipulation was the result of a long and technical process of arms-length negotiations." Id. at 1136.
In Mathia v. Commissioner, T.C. Memo. 2007-4 , this Court denied the Commissioner's motion for relief from stipulations when the parties had already submitted the case on the evidence and without a trial under Rule 122. This Court emphasized the importance of upholding a stipulation when it was created as part of negotiations during which both parties conceded to factual and legal issues. Id. at *3. Also, if a stipulation is the result of a negotiation process, we have said the parties may be bound to it as a matter of contract law. Id.; see also Stamos v. Commissioner, 85 T.C. 1451, 1455 (1986).
The cases cited and relied upon by respondent in opposition to petitioners' Motion to Strike are different and distinguishable from the case here. The parties have not resolved any material issues in this case, no settlement of stipulated issues have been filed or accepted by the Court to which one party now seeks relief from. See Clendenen v. Commissioner, T.C. Memo. 2003-32 (granting respondent's Motion for Entry of Decision based on a stipulation to be bound which was filed by the parties therein). Rather, and aside from the second sentence of Stipulation 12, the factual dispute of whether "D&G Acquisition treats the property [in question] as inventory" seems alive and well between the parties.
Based on the facts before us, we find the parties did not conduct extensive negotiations when entering into the Stipulation of Facts. Rather, we find the second sentence of Stipulation 12 was entered into by petitioners' original counsel based on admitted error and oversight.
This case is not set for trial, the First Stipulation of Facts has not been offered nor has it been accepted by the Court as evidence. Furthermore, this case has not been submitted to the Court under Rule 122. In any event, and notwithstanding the dispute arising from the second sentence of Stipulation 12, the parties remain free at trial to present evidence contrary to any stipulation. Accordingly, we find there is no prejudice to respondent by relieving petitioners of this disputed stipulation Therefore, we will grant petitioners' Motion to Strike and relieve petitioners of this stipulation under Rule 91(e).
Considering the foregoing, it is
ORDERED that petitioners' Motion to Strike is granted and the second sentence of Stipulation 12 is stricken from the parties First Stipulation of Facts. It is further
ORDERED that respondent's Motion for Partial Summary Judgment is taken under advisement. It is further
ORDERED that on or before May 30, 2024, respondent may file a supplement to his Motion for Partial Summary Judgment considering this Order. It is further
ORDERED that on or before June 20, 2024, petitioners may file a supplement to their response to respondent's Motion for Partial Summary Judgment, as may be supplemented.