Roger W. and Kathleen Stoy - Page 4

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          stemming from various guaranteed payments and fail to allow                 
          petitioners the benefit of income-averaging.                                
               By Order dated April 16, 1996, the Court directed respondent           
          to address petitioners' above-referenced response.  On June 10,             
          1996, respondent filed her response.  Respondent principally                
          argues that petitioners are bound by the stipulation, and the               
          objections raised in petitioners' above-referenced response                 
          amount to new issues that are not now before the Court.                     
          Discussion                                                                  
               The general principles of contract law govern the compromise           
          and settlement of tax cases.  In essence, settlement stipulations           
          are contracts, and this Court is bound to enforce them.  Stamos             
          v. Commissioner, 87 T.C. 1451, 1454 (1986).  During the process             
          of negotiation, each party agrees to concede rights that may be             
          asserted against his or her adversary as consideration for those            
          secured in the agreement.  Saigh v. Commissioner, 26 T.C. 171,              
          177 (1956).  We enforce settlement stipulations unless justice              
          requires otherwise.  Adams v. Commissioner, 85 T.C. 359, 375                
          (1985); Saigh v. Commissioner, supra.  We also enforce                      
          stipulations where the parties agree to be bound by the outcome             
          of a test case.  Hillman v. Commissioner, T.C. Memo. 1982-468.              
          In determining the proper meaning of the terms of settlement, we            
          look to the language of the stipulation and the circumstances               
          surrounding its execution.  Robbins Tire & Rubber Co. v.                    
          Commissioner, 52 T.C. 420, 435-436 (1969).                                  




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