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the Thompson, Cravens, and Rina cases.24 Citing Hazel Atlas Glass
Co. v. Hartford-Empire Co., 322 U.S. 238, 247 (1944), overruled
on other grounds Standard Oil v. United States, 429 U.S. 17, 18
(1976), the Court of Appeals held that “There can be no question
but that the actions of McWade and Sims amounted to a fraud on
both the taxpayers and the Tax Court.” Id. at 1046. The Court
of Appeals held that “fraud on the court” occurs regardless of
whether the opposing party is prejudiced. Id.25 Rather than
ordering a new trial or entering decisions eliminating all tax
liabilities of the taxpayers, the Court of Appeals directed that
“terms equivalent to those provided in the settlement agreement
with Thompson and the IRS” be extended to “appellants and all
other taxpayers properly before this Court.” Id. at 1047.26 The
Court of Appeals left to the Tax Court’s discretion “the
fashioning of such judgments which, to the extent possible and
practicable, should put these taxpayers in the same position as
24See supra note 16.
25In Dixon v. Commissioner, 316 F.3d at 1046 n.9, the Court
of Appeals expressed disagreement with the contrary decision by
the Court of Appeals for the Seventh Circuit in Drobny v.
Commissioner, 113 F.3d 670, 678-679 (7th Cir. 1997), affg. T.C.
Memo. 1995-209. In Drobny, the Court of Appeals for the Seventh
Circuit held that proof of fraud on the court requires a showing
that the alleged misconduct actually affected the outcome of the
case to the taxpayer’s detriment.
26In setting forth the factual background and procedural
history of the Kersting project, the Court of Appeals noted
without comment that several hundred taxpayers had settled their
cases. Dixon v. Commissioner, 316 F.3d at 1043.
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