Harvey M. Pert, Transferee - Page 10

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               Section 7121(b)(2) provides that "in any suit, action or               
          proceeding" the closing agreement shall not be "annulled,                   
          modified, set aside or disregarded."  If petitioner can contest             
          the deficiencies and fraud additions established by Timothy                 
          Riffe's and Kathleen Pert's closing agreements, we are then                 
          "disregarding" the agreements to that extent.  To allow                     
          petitioner to contest Timothy Riffe's and Kathleen Pert's tax               
          liabilities for tax years 1986, 1988, and 1989 would conflict               
          with section 7121, and undermine its purpose.                               
               Cases holding that res judicata applies between a transferor           
          and a transferee are analogous.  Under the doctrine of res                  
          judicata, parties and their privies to a prior action that                  
          concluded with a final decision on the merits, are bound as to              
          all issues that were or might have been decided in the prior                
          action.  Commissioner v. Sunnen, 333 U.S. 591, 597 (1948).  Res             
          judicata applies in tax cases.  United States v. International              
          Building Co., 345 U.S. 502, 506 (1953).                                     
               If res judicata applies to a taxpayer who was a party to a             
          prior case, it also applies to persons in privity with the                  
          taxpayer.  It is well settled that a transferee is in privity               
          with the transferor for purposes of the Internal Revenue Code.              
          Baptiste v. Commissioner, 29 F.3d 1533, 1539 (11th Cir. 1994);              
          affg. 100 T.C. 252 (1993), affd. and revd. on other grounds 29              
          F.3d 433 (8th Cir. 1994); First Natl. Bank v. Commissioner, 112             
          F.2d 260 (7th Cir. 1940); Krueger v. Commissioner, 48 T.C. 824,             



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