Juanita and Emmanuel Kendricks - Page 14

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          dispute the liability, as contemplated by Congress in section               
               In the bankruptcy case, petitioners did in fact file an                
          objection to the IRS’s proof of claim, as well as a motion to               
          determine the secured status of the IRS’s claim.  They were                 
          accorded discovery against the IRS for a period of approximately            
          11 months.  Before the hearing scheduled to hear the objection              
          was held, however, petitioners stipulated to the dismissal                  
          without prejudice of the objection to the IRS’s proof of claim              
          and the motion to determine secured status of the IRS’s claim.              
          Clearly, petitioners had the opportunity to dispute the                     
          underlying liabilities.5  Petitioners’ argument that they did not           

               5  Since the bankruptcy court did not allow the IRS’s proof            
          of claim, the doctrine of res judicata does not apply to the                
          underlying liabilities.  Where a bankruptcy court has allowed a             
          tax claim, the doctrine of res judicata bars relitigation of the            
          underlying tax liability in this court.  Fla. Peach Corp. v.                
          Commissioner, 90 T.C. 678 (1988) (dismissal of bankruptcy                   
          proceeding did not vacate judgment allowing tax claims; effect of           
          judgment was res judicata); Strong v. Commissioner, T.C. Memo.              
          2001-103 (allowance of tax claim by bankruptcy court was res                
          judicata).  Sec. 6330(c)(2)(B), while overlapping the doctrine of           
          res judicata, see Wooten v. Commissioner, T.C. Memo. 2003-113, is           
          a broader prohibition because, for one thing, it prohibits a                
          taxpayer from raising in a collection due process hearing (and in           
          any resulting court review under sec. 6330(d)(1)) her underlying            
          tax liability if she failed to file a deficiency suit in response           
          to a timely received notice of deficiency.  A taxpayer who so               
          defaults is no more prevented by res judicata from suing for a              
          tax refund than are petitioners on account of the bankruptcy                
          case’s being dismissed without any adjudication of the IRS proof            
          of claim.  It may well be that the policy behind sec.                       
          6330(c)(2)(B) is to consign to a refund suit a taxpayer who                 
          forgoes a prepayment forum, be it the Tax Court (in a deficiency            

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Last modified: May 25, 2011