Thomas E. Charlton Judith C. Charlton v. Commissioner of Internal Revenue Service

Thomas E. and Judith C. Charlton (taxpayers) appeal from an order of the United States Tax Court denying their motion to vacate or revise the tax court’s earlier decision in favor of the Commissioner. We have jurisdiction pursuant to 26 U.S.C. § 7482 (a) (1988), and we affirm.

I.

Taxpayer Thomas E. Charlton was a limited partner in Diabetics CME Associates (Diabetics). Diabetics was a losing proposition, and taxpayers claimed deductions on their 1981 and 1982 joint federal income tax returns based on Mr. Charlton’s distributive share of Diabetics’ losses.

In connection with an audit of their 1981 and 1982 returns, taxpayers consented to an extension of the time to assess tax for those two tax years. In 1986, the IRS disallowed the losses attributable to the Diabetics investment, and assessed a deficiency against taxpayers, together with interest and penalties based on that disallowance.

Taxpayers petitioned the United States Tax Court for a redetermination of the deficiency. After the tax court sustained the imposition of the deficiency, taxpayers moved the court to vacate or revise its decision. This motion was based in part upon taxpayers’ new claim that assessment of the…