Appellate Law

CA1: Tax Court stipulations are like contracts and are interpreted under Federal Common law

By S. COTUS

Nault v. US, No. 07-1455 affirms the decision of District Court which essentially interpreted stipulated decisions by the Tax Court in litigation involving a partnership which this plaintiff was involved in.  The plaintiff filed amended returns and essentially claimed that he was entitled to ?ordinary loss deduction for the taxable basis that was ?restored? [by the conclusion of the tax court litigation] to his then-worthless partnership interests.?  The claims were denied and he brought suit for a refund.  This would be an interesting tax discussion, but the First sees it purely as a matter of interpretation of the Tax Court?s decision.  Again, this plaintiff was not the Tax Matters Partner, so he wasn?t really in the drivers seat in the Tax Court litigation.

The First says that the stipulations are governed by contract principles, and the court applies whatever the federal common law of contracts is.  The First looks at the stipulations and concludes that they are not ambagious, and concludes that the Tax Court parties had stipulated that some transactions lacked economic substance.  Moreover, since these stipulations are like contracts (while they are interpreted as contracts, I am not sure that they really *are* contracts), the First says that only in extreme cases should the District Court consider extrinsic evidence.

Full post as published by Appellate Law and Practice on February 15, 2008 (boomark / email).