This section provides:

§7122. Compromises

(a) Authorization. --The Secretary may compromise any civil or criminal case arising under the internal revenue laws prior to reference to the Department of Justice for prosecution or defense; and the Attorney General or his delegate may compromise any such case after reference to the Department of Justice for prosecution or defense.

IRC §7122(a) (2002).

⁵ 11 U.S.C.A. §525(a) (West Supp. 2003).

⁶ [ 2003-2 USTC ¶50,537], 2003 WL 21541281 (Bankr. W.D. Va., May 29, 2003) (Stone, J.).

⁷ [ 2000-1 USTC ¶50,103], 240 B.R. 689 (Bankr. S.D. W. Va. 1999) (Pearson, J.). See also Chapman v. United States (In re Chapman) [ 99-2 USTC ¶50,690], 1999 WL 550793 (Bankr. S.D. W.VA., June 23, 1999) (Pearson, J.).

⁸ 11 U.S.C.A. §105(a) (West 1993).

⁹ [ 96-2 USTC ¶50,469], 92 F.3d 1539 (11th Cir. 1996).

¹⁰ 136 B.R. 815 (B.A.P. 9th Cir. 1992), aff'd [ 94-1 USTC ¶50,074], 10 F.3d 1478 (9th Cir. 1993).

¹¹ Unless Respondent agrees to a different treatment, its priority claim would have to be paid over a period not exceeding six years. 11 U.S.C.A. §1129(a)(9)(c) (West 1993).

[2000-2 USTC ¶50,724] Gerald J. Buesing, Plaintiff v. United States , Defendant

U.S. Court of Federal Claims, 96-70T, 9/7/2000, 2000 U.S. Claims LEXIS 179. Prior decision by the Court of Federal Claims in this same case, 99-1 USTC ¶50,246

[Code Secs. 6325 and 7122 ]

Settlement agreements: Release of lien: Existence of contract: Acceptance of offer: Bankruptcy: Authority: Material misrepresentation: Unilateral mistake.--An individual failed to prove that he entered into a contract with the IRS to release a federal tax lien on his real property. Since an IRS agent lacked statutory authority to release the lien prior to the taxpayer's discharge in bankruptcy, he could not accept the taxpayer's offer to release the lien for payment and, thus, there was no mutual assent to a settlement agreement. Moreover, even if a contract had been formed, the existence of a material misrepresentation on the part of the taxpayer would have made the contract voidable. The taxpayer's communicated intention not to sell the property affected the method by which the IRS agent valued it and the circumstances under which the IRS would release the lien; thus, the misrepresentation was deemed material.

[Code Sec. 7122 ]

Settlement agreements: Release of lien: Existence of contract: Collateral estoppel.--The doctrine of equitable estoppel did not prevent the government from denying the existence of a contract to purportedly release a lien on an individual's real property in exchange for payment of his tax liability. Due to the taxpayer's misrepresentation regarding his intention not to sell the property, the IRS used the property's estimated value rather than its true sale value to calculate its worth. Moreover, the taxpayer suffered no detriment as a result of the alleged agreement since he failed to show that it affected the terms of his divorce settlement, and there was no evidence of misconduct on the part of any IRS agent. BACK REFERENCES: ¶41,605.016 and 41,130.0254

Jeffrey A. McKee, Davis , McKee & Forshey, P.C., Phoenix , Ariz. , for plaintiff. Mildred L. Seidman, Chief, Steven I. Frahm, Assistant Chief, Elizabeth Diane Seward, Department of Justice, Washington, D.C. 20530, for defendant.

OPINION

HORN, Judge:

The above-captioned case is before the court after a trial on the merits. Plaintiff, Gerald J. Buesing, alleges that he entered into a contract with the defendant, the United States, under which a federal tax lien on his home would be released if (1) he converted his bankruptcy to a Chapter 7 proceeding, (2) he received a discharge from his bankruptcy, and (3) he paid $30,000.00 to the Internal Revenue Service. The United States argues that no contract was ever formed, and, if a contract had been formed, it would be voidable because of a material misrepresentation by the plaintiff and/or a unilateral mistake on the part of the defendant. Defendant's allegations of a material misrepresentation and a unilateral mistake both stem from plaintiff's conduct in leading defendant to believe that plaintiff would keep his home, which purportedly caused defendant to underestimate the value of plaintiff's home, and, hence, the value of plaintiff's equity interest in the home. Plaintiff, in turn, counters that defendant would be equitably estopped from denying the existence of a contract.

After the trial on these issues and the submittal of post-trial briefs, the court concludes that no contract was formed. Had a contract been formed, the court agrees with defendant that any agreement would have been voidable due to both a material misrepresentation on the plaintiff's part and a unilateral mistake on the defendant's part. In addition, the court holds that the government would not be estopped by its actions from denying the existence of the contract.

FINDINGS OF FACT

Plaintiff, Gerald J. Buesing, founded a trucking company with his brother in 1965. The trucking company evolved into a construction company called Buesing Corporation, of which plaintiff is the sole owner and president. In 1986, plaintiff decided to move the company to Phoenix , Arizona , from its previous place of business in Minnesota .

On March 10, 1990 , Gerald Buesing married Laura Michael. ¹ At the time of their marriage, the market value of plaintiff's assets exceeded $4.3 million, while Ms. Michael's assets were worth about $30,000.00. On the day before the marriage, plaintiff and Ms. Michael entered into an Antenuptial Agreement. Paragraph 3 of the Antenuptial Agreement stated:

Termination of Marriage by Dissolution. . . . In consideration of the sum of $25,000 to be paid by Mr. Buesing to Ms. Michael at the time either party would initiate an action for divorce or separate maintenance, Ms. Michael hereby waives and relinquishes all statutory rights to temporary or permanent alimony, support, or maintenance, allowance for costs of an action for divorce or separate maintenance, property settlement and all other allowances from one another's assets in any such action.

Initially, the Buesings lived in Ahwatukee , Arizona , in a house which plaintiff had purchased in 1989 with his own funds, and which was titled solely in his name. In March 1993, plaintiff and Ms. Michael purchased, as husband and wife, a residence at 1917 East Clubhouse Drive in Phoenix , Arizona (the Clubhouse Drive property) for $321,562.00. The parties agree that the couple took title to the property as joint tenants with right of survivorship and not as a community property estate or as tenants in common. Plaintiff made the down payment with $100,000.00 of the net proceeds from the sale of the Ahwatukee home, and he also made the monthly mortgage payments.

In May of 1993, soon after purchasing the Clubhouse Drive property, the Buesings' marriage began to dissolve. They separated on or about July 17, 1993 , when Laura Michael moved to Chicago , Illinois . On that same day, plaintiff wrote to Ms. Michael and asked that she sign and have notarized three documents: (1) a quit claim deed relinquishing to plaintiff all of her right, title and interest in and to the Clubhouse Drive residence, (2) a power of attorney, and (3) a waiver of any conflict that might arise from the representation of plaintiff in any divorce proceedings by the law firm of Mariscal, Weeks. ² On July 26, 1993 , Ms. Michael signed the power of attorney and the waiver, but she did not sign the quit claim deed.

On August 24, 1993 , using the power of attorney which his wife had executed, plaintiff signed and recorded in Maricopa County, Arizona, a quit claim deed for himself and on behalf of Ms. Michael, which was identical in substance to the quit claim deed which she had declined to sign. ³ Plaintiff did not inform Laura of the purported conveyance. Later, Plaintiff was advised by counsel that the quit claim deed was probably not enforceable, and that Laura held an undivided one-half community property interest in the Clubhouse Drive residence.

Ms. Michael filed a divorce petition in Maricopa County , Arizona on September 21, 1993 . In a letter of the same date to plaintiff's attorney, Ms. Michael demanded immediate payment of the $25,000.00 provided for in the Antenuptial Agreement, or at least a portion of that sum along with monthly payments to enable Ms. Michael to meet her living expenses.

Meanwhile, on October 19, 1993 , the Internal Revenue Service ( IRS ) recorded a Notice of Federal Tax Lien in Maricopa County , Arizona respecting assessed and unpaid income taxes, penalties and interest totaling $105,369.00 that plaintiff owed for taxable years 1987 through 1989. The federal tax lien attached to all of plaintiff's real and personal property. The taxes had originally been assessed on July 21, 1992 following an IRS audit, and notice and demand for payment had been made by the IRS a total of five times over the course of the following year.

During the following months, the Buesings continued to exchange correspondence through their attorneys as they attempted to reach a divorce settlement. Each of plaintiff's proposals, among other terms, would have resulted in plaintiff receiving the Clubhouse Drive property as his separate property. During the negotiations, Mr. Buesing consistently maintained to his divorce attorney, Cindra White, that Ms. Michael had no interest in the residence, and that it was his separate property.

During the course of the divorce negotiations, on January 18, 1994 , plaintiff filed a petition under Chapter 11 of the United States Bankruptcy Code seeking protection from his creditors. In March 1994, plaintiff's bankruptcy case was assigned to Revenue Officer William Unger of the IRS for resolution of plaintiff's unpaid income taxes for 1987 through 1989. Mr. Unger met with plaintiff and his attorney on March 22, 1994 to discuss the unpaid taxes and plaintiff's options for repayment, which depended on whether the income tax liability was dischargeable. ⁴ Mr. Unger explained that, if the liability was determined to be dischargeable, the federal tax lien then would be satisfied by the equity in plaintiff's real and personal property after his discharge from bankruptcy. Unger explained that plaintiff could make an offer in settlement of his tax liabilities under a Chapter 11 bankruptcy or, alternatively, he could convert to a Chapter 7 bankruptcy liquidation proceeding, obtain a discharge, and then satisfy the still-attached tax lien.

With respect to the divorce, plaintiff contacted his divorce attorney, Cindra White, on August 3, 1994 , and informed her that his wife wanted to finalize the divorce. He instructed the attorney to draft a decree of dissolution under which the Clubhouse Drive residence would have been listed as his separate property, Ms. Michael would have received the Antenuptial Agreement payment of $25,000.00, and various items of community property would have been identified as the separate property of either plaintiff or of his wife. The next day, Ms. White prepared a draft Consent Judgment with these terms, but the settlement was not resolved at that time because Mr. Buesing did not have $25,000.00 available to make the payment to Ms. Michael. He told Ms. Michael that he would be able to pay her when the house was sold.

Meanwhile, for several months, Revenue Officer Unger had focused his work with respect to plaintiff's case on the question of whether the income tax liability was dischargeable. Revenue Officer Unger notified plaintiff's counsel, Jeff McKee, by letter dated January 23, 1995 , that plaintiff's income taxable years 1987 through 1989 met the requirements for discharge from personal liability in his Chapter 11 proceeding. Revenue Officer Unger stated that after the Bankruptcy Court issued an order discharging the taxes, and collection was made from plaintiff's equity in his real and personal property to which the federal tax lien attached, any remaining tax debt would be abated.

Plaintiff initiated discussions with the IRS to determine the extent and value of the real and personal property to which the federal tax lien respecting his 1987 through 1989 tax liabilities could attach. Upon Revenue Officer Unger's request, plaintiff provided to the IRS information and documentation regarding the value of his business, automobile, and residence. With regard to the value of the Clubhouse Drive residence, plaintiff provided comparable sales information to the IRS showing that similarly situated residential property had a market value of $300,000.00. During the negotiations, plaintiff represented to the IRS that his wife had a one-half interest in the Clubhouse Drive property, pursuant to Arizona community property law. Plaintiff also represented to Revenue Officer Unger that he wanted to keep his home. Based on the comparable sales figures and plaintiff's representation that Ms. Michael held a one-half interest in the Clubhouse Drive property, Revenue Officer Unger believed that the value of plaintiff's real and personal property to which the federal tax lien could attach was $30,000.00. Mr. Unger assigned no value to plaintiff's household furnishings, based on a bankruptcy schedule on which plaintiff had listed the fair market value of the furnishings at the exemption amount of $2500.00.

Plaintiff, by letter dated March 8, 1995 , made alternative offers to the IRS to secure the release of the federal tax lien in dispute. The offer at issue in the instant case provided that plaintiff would pay the IRS $30,000.00 within 90 days of IRS acceptance of plaintiff's offer to buy out the federal tax lien on his property. The letter, written by plaintiff's counsel, Mr. McKee, states:

This correspondence is to confirm that the Internal Revenue Service has determined and agreed that Mr. Buesing is entitled to a discharge regarding, and is relieved of personal liability for, personal income tax liabilities for the tax years 1987, 1988 and 1989, subject to obtaining an Order Granting Discharge from the Bankruptcy Court. For ease of reference and your acknowledgment and understanding, I have enclosed your letter dated January 23, 1995 stating and acknowledging that the IRS will not contest the dischargeability of Mr. Buesing's Form 1040 tax liabilities for the years 1987, 1988 and 1989.

This shall also constitute an offer in compromise of all Federal Tax Levies and Liens on Mr. Buesing's real and personal property, including (but limited to) his equity in his personal residence and the value of his stock in Buesing Corporation. As you know, these Federal Tax Levies and Liens encumber Mr. Buesing's real and personal property to the extent of the above-referenced 1987, 1988 and 1989 tax liabilities.

In full satisfaction, extinguishment, and release of these Federal Tax Levies and Liens, Mr. Buesing makes the following alternative offer:

1. At Mr. Buesing's behest, Buesing Corporation will immediately relinquish to the IRS $100,000.00 of Net Operating Losses (NOLs) which it presently retains, and cooperate in reasonable measures to insure that Buesing Corporation does not attempt to utilize said NOLs; or (if, and only if, Option One is not accepted by the IRS )

2. $30,000.00 in cash within 90 days of IRS acceptance, which amount is comprised of $28,600.00 for Mr. Buesing's equity in his home and $1,400.00 representing Mr. Buesing's ownership interest in Buesing Corporation.

We respectfully request an expeditious response to this alternative offer by the IRS . Thank you for your professional courtesies and manner in this proceeding.

On March 15, 1995 , prior to receiving any response to his offer and without notice to the IRS , plaintiff signed an agreement with a real estate agent to list the Clubhouse Drive property for sale at $339,900.00. The residence was listed for sale in a Century 21 advertisement run by plaintiff's friends, Alan and Barbara Levanson, which appeared in the Ahwatukee Foothills News on March 22, 1995 , and every two weeks thereafter through June 14, 1995 .

Two days later, on March 17, 1995 , plaintiff informed his divorce attorney, Ms. White, that he and Ms. Michael had reached a basis for settlement. Mr. Buesing asked Ms. White to prepare two different draft Consent Judgments, with both versions increasing the cash payment to his wife to $30,000.00, with $5,000.00 payable on or before March 31, 1995 . In both versions, the Clubhouse Drive residence was confirmed as plaintiff's sole and separate property. Plaintiff also told Ms. White that he had reached an agreement with the IRS concerning his unpaid taxes, and he advised her that he would need to sell the Clubhouse Drive property. For the rest of that month, while agreeing in principal on the sum to be paid to Ms. Michael, plaintiff and his wife continued to negotiate the payment's timing.

While plaintiff was finalizing his divorce settlement, plaintiff's attorney McKee continued to discuss plaintiff's outstanding tax debt with Revenue Office Unger. The two held discussions several times between March 8, 1995 and March 28, 1995 . Mr. Unger restated that, in order to secure a release of the federal tax liens, plaintiff first had to obtain a discharge from his Chapter 7 bankruptcy, and then pay the $30,000.00 amount estimated as the value of the IRS 's lien interest. On March 15, 1995 , Mr. Unger discussed plaintiff's case with his Section Chief, Ed Perry. Based on the information then available to Mr. Unger, including plaintiff's intent to keep his residence, Mr. Perry approved Mr. Unger's recommendation that plaintiff be allowed to buy out the tax lien for $30,000.00.

As of March 28, 1995 , Mr. Unger was unaware that Ms. Michael had tentatively agreed to the divorce settlement amount, and he was also unaware that plaintiff had listed the Clubhouse Drive residence for sale. On that day, Revenue Officer Unger formally responded to plaintiff's tax settlement offer by letter, wherein Mr. Unger agreed that the value of the real and personal property to which the federal tax lien attached was $30,000.00. He stated that following plaintiff's discharge from a Chapter 7 proceeding and plaintiff's payment of $30,000.00, plaintiff's remaining tax liabilities for 1987 through 1989 would be abated and the lien released. The letter from the IRS , signed by Revenue Officer Unger, stated:

The Internal Revenue Service agrees that the value of the real and personal property to which our Notice of Federal Tax Liens attach is $30,000.00. Following Chapter 7 discharge by the court and receipt of $30,000.00, the 1987, 1988, and 1989 income tax liabilities of the debtor will be discharged and the Notice of Federal Tax Liens will be released.

This is a procedure that has several steps involving several people, so the actual release will not appear at the county recorders office for about 4 weeks after the discharge and money are received. Payment should be made directly to this office to minimize delay.

The letter did not refer to plaintiff's March 8, 1995 letter, nor did it refer to the 90-day period in which plaintiff offered to make a lump sum payment of $30,000.00 to satisfy the lien interest of the IRS in his real and personal property.

On April 12, 1995 , the Maricopa County Superior Court entered a consent judgment and decree of dissolution of the marriage of Gerald Buesing and Laura Michael. The consent judgment stated that the Clubhouse Drive property was plaintiff's sole and separate property and was confirmed to him. The consent judgment provided further that plaintiff was to pay Ms. Michael $5,000 on or before March 31, 1995 , and $25,000.00 upon the sale of the Clubhouse Drive property. In March 1995, at the time of the exchange of letters between plaintiff and the IRS respecting the buy-out of the IRS lien on plaintiff's property, plaintiff's bankruptcy proceeding was still in Chapter 11.

Plaintiff interpreted Revenue Officer Unger's March 28, 1995 letter as an acceptance of plaintiff's offer contained in his March 8, 1995 letter, with the additional requirement, developed in interim conversations between Mr. Unger and Mr. McKee, that plaintiff first had to obtain a Chapter 7 discharge. Revenue Officer Unger, however, considered his March 28, 1995 letter to be a separate proposal or counteroffer which stated an additional, material term.

On April 26, 1995 , the bankruptcy court entered an order converting plaintiff's case to a Chapter 7 proceeding. The reason stated for the conversion was that the plaintiff had failed to file a disclosure statement and plan of reorganization by January 31, 1995 , the date stipulated to by the plaintiff and the United States Trustee. On May 17, 1995 , plaintiff received an offer of $340,000.00 for the Clubhouse Drive property, including its furnishings. Mr. Buesing accepted the offer on May 20, 1995 ; closing was scheduled for June 16, 1995 .

Mr. Unger first learned of the property's sale on June 13, 1995 . On June 15, 1995 , one day before plaintiff was to close on the sale, plaintiff's attorney McKee called the IRS to inform them. In order for the sale to close, plaintiff asked the IRS to release its lien on the property and to accept $30,000.00 cash from the sale proceeds. ⁵

On June 16, 1995 , plaintiff attempted to tender to the IRS a cashier's check for $30,000.00 to secure a release of the lien on the Clubhouse Drive property. The IRS refused to accept the check. Revenue Officer Unger, by letter dated June 19, 1995 , notified plaintiff's counsel that he was withdrawing his March 28, 1995 proposal to release the lien on plaintiff's property if plaintiff obtained a discharge from his Chapter 7 bankruptcy proceeding and paid $30,000.00. Revenue Officer Unger stated:

Some of the information provided during our discussions is now known to be incorrect. Mr. Buesing indicated that his wife held a 50% interest in the real property. The recent review of sale documents shows that her interest is limited to $25,000. This significantly increases your client[']s interest and our lien interest in the property. The estimated value was based on comparables you provided. This recent offer to purchase at $330,000 indicates that those values were too low. The net effect of these two factors changes our lien interest from $30,000.00 to $83,000.00.

There are two entirely different actions being discussed here. They cannot be combined. In the event Mr. Buesing receives a discharge one set of laws apply. If he still [owns] his home, then a negotiated value is a reasonable means to determine our secured interest in the exempt property without forcing its sale. That discharge is key. Without it, the actual sale of the home determines the value of our lien . . . .

The sale of plaintiff's home closed on June 30, 1995 . Sale proceeds of $25,000.00 were paid to Laura pursuant to the Antenuptial Agreement and Consent Judgment. Net sale proceeds of $77,943.05 were deposited in escrow with United Title Company pursuant to 26 U.S.C. §6325(b)(3) (1994). ⁶ On October 16, 1995 , United Title remitted to the IRS a check in the amount of $78.543.91, including $600.86 in accrued interest. On the same day, plaintiff's income tax liabilities for 1987 through 1989 were credited as follows: $11,124.06 for 1987; $46,215.50 for 1988; and $21,204.35 for 1989. The credits to 1987 and 1989 satisfied plaintiff's tax liability for those years, but about $31,000.00 of plaintiff's tax liability for 1988 remained unpaid. On October 27, 1995 , the IRS issued a Certificate of Discharge, discharging the Clubhouse Drive residence from the federal tax lien.

On January 10, 1996 , the bankruptcy court released plaintiff from all dischargeable debts, including his remaining unpaid income tax liability for 1988, and discharged him from his Chapter 7 proceeding. On September 16, 1996 , plaintiff's remaining liability for 1988 income taxes was abated.

The complaint in the instant action was filed in the United States Court of Federal Claims on February 7, 1996 . Plaintiff contends that he had a contractual agreement with the IRS by which the federal tax lien on his real and personal property would be removed upon his payment to the IRS of $30,000.00. Mr. Buesing is seeking to recover the net proceeds in excess of $30,000.00 from the sale of the Clubhouse Drive property. Alternatively, plaintiff seeks damages of $30,000.00, which is the alleged value of his exempt furniture and furnishings which were sold with the Clubhouse Drive residence, plus interest. ⁷

After the case was filed, the defendant filed a motion to dismiss arguing that a contract had not been formed between Buesing and the IRS regarding the tax lien, and alleging that plaintiff improperly sought a remedy not available in this court, specifically, declaratory relief or specific performance. In the alternative, the defendant filed a motion for summary judgment, arguing that any contract entered into by the parties was voidable on the grounds that material misrepresentation or unilateral mistake occurred.

The plaintiff responded to the motion to dismiss, and filed a cross-motion for summary judgment asserting that the parties had entered into a contract arising out of a settlement agreement and contending that the plaintiff sought money damages stemming from a failure to perform that contract. Moreover, the plaintiff argued that in the event the court determined there was a contract, but found the government's argument regarding material misrepresentation and unilateral mistake worthy of consideration, that summary judgment was not appropriate as facts material to the formation of a contract were genuinely in dispute.

In a decision issued on January 13, 1999 , the court granted in part and denied in part defendant's motion to dismiss. Buesing v. United States [99-1 USTC ¶50,246], 42 Fed.Cl. 679, 698 (1999). The court granted the motion to dismiss Mr. Buesing's claims for specific performance and declaratory judgment, because those claims fell outside of the court's jurisdiction. Id. at 692. The court, however, denied defendant's motion to dismiss plaintiff's other claims. Id. at 691. The court also denied the parties' motions for summary judgment because they were premature due to an underdeveloped record with material issues of fact in dispute. The court stated:

A number of issues of fact have been raised by the parties in papers presented to the court that weigh against resolution of the instant case upon summary judgment pleadings. It appears that there are questions of fact surrounding the impact upon Revenue Agent Unger's understanding of the equity value of the property owned by the plaintiff, Unger's interpretation of plaintiff's intent to retain or sell the house, and how these issues impacted Unger's determinations for settlement negotiation purposes. In addition, there is an issue as to the plaintiff's intent, or stated intent, to reside in or sell the Clubhouse Drive property.

The issues of materiality, mistake and "reason to know" need further examination by a trier of fact. Moreover, insufficient information is available to the court at this time to resolve the issues raised regarding the authority of Revenue Agent Unger to enter into a settlement agreement and the doctrine of equitable estoppel raised by the plaintiff.

Id. at 697. Plaintiff's case subsequently went to trial in December, 1999.

DISCUSSION

The court must address several issues raised by the parties both at trial and in their post-trial briefs. The court must examine whether a contract was formed between the parties through their exchange of letters regarding a possible settlement, or through defendant's letter and the plaintiff's subsequent conduct taken allegedly in reliance on that letter. If a contract was formed, the court also must decide whether the contract is voidable by the government because of alleged material misrepresentations by the plaintiff, or because of unilateral mistake on the part of the government. Last, the court must decide if the defendant is equitably estopped from denying the existence of a contract.

I. The existence of a contract

The court first examines the question of whether a settlement contract was formed between Mr. Buesing and the IRS . Plaintiff argues that "this is a breach of contract case. A contract was formed when Gerald Buesing offered to settle the value of the tax liens on his property for $30,000 and the IRS accepted that offer." As the basis of an agreement, plaintiff points to (1) the combination of his March 8, 1995 offer letter and the March 28, 1995 letter response from the IRS , and/or (2) the combination of that March 28, 1995 IRS response and subsequent actions which plaintiff allegedly performed, such as converting his bankruptcy proceeding to Chapter 7 and settling his divorce, in reliance on the IRS response. According to defendant, however, no contract was ever formed:

There never was a meeting of the minds between plaintiff and Unger regarding the material terms of a contract to compromise plaintiff's tax liability. Mr. Unger did not agree to release the lien upon a payment of $30,000 within 90 days, and plaintiff never agreed to Unger's counterproposal to release the lien upon a payment of $30,000 after plaintiff converted to a Chapter 7 bankruptcy and received a discharge. Indeed, no one at the IRS had authority to release the lien before a discharge in bankruptcy. There was no contract between plaintiff and the IRS .

As the court noted in its prior opinion in this case, although not addressed directly by this circuit, the law regarding tax settlement agreements has been clearly articulated:

A settlement agreement is a contract; mutual forbearance supplies the consideration. As such, we interpret its terms using general contract law principles. Treaty Pines Invs. Partnership v. Commissioner [92-2 USTC ¶50,418], 967 F.2d 206, 211 (5th Cir. 1992). If the language of the agreement is unambiguous, we will not consider any extrinsic evidence: the meaning will be determined from the terms encompassed within the proverbial four corners of the agreement. Goldman [94-2 USTC ¶50,577], 39 F.3d at 406. Where the language is not so clear, however, we will examine the language within the context of the circumstances surrounding the execution of the agreement. Robbins Tire & Rubber Co. v. Commissioner [ CCH Dec. 29,612], 52 T.C. 420, 435-436, 1969 WL 1677 (1969).

Estate of Kokernot v. Commissioner [97-1 USTC ¶60,276], 112 F.3d 1290, 1294 (5th Cir. 1997); see also Goldman v. Commissioner [94-2 USTC ¶50,577], 39 F.3d 402, 405-06 (2d Cir. 1994) ("As the settlement agreement constituted a contract, general principles of contract law must govern its interpretation."); Slovacek v. United States [96-2 USTC ¶50,467], 36 Fed.Cl. 250, 256 (1996) (citing Goldman v. Commissioner [94-2 USTC ¶50,577], 39 F.3d at 405). This same legal framework has also been applied in the United States Tax Court:

The settlement of tax cases is governed by general principles of contract law. A settlement agreement is in essence a contract. Each party agrees to concede some rights which he or she may assert against his or her adversary as consideration for those secured in the settlement agreement. Saigh v. Commissioner [ CCH Dec. 21,694], 26 T.C. 171, 177 (1956). In determining the proper meaning of the terms of the agreement, we look to the language of the agreement and the circumstances surrounding its execution. Robbins Tire Co. v. Commissioner [ CCH Dec. 29,612], 52 T.C. 420, 435-436 (1969). Generally, extrinsic evidence will not be admitted to expand, vary, or explain the terms of a written agreement unless the agreement is ambiguous. Rink v. Commissioner [ CCH Dec. 48,969], 100 T.C. 319, (1993), aff'd [95-1 USTC ¶50,092], 47 F.3d 168 (6th Cir. 1995); Woods v. Commissioner [ CCH Dec. 45,602], 92 T.C. 776, 780-781 (1989). Petitioner bears the burden of proving that his interpretation of any ambiguous contract language is correct. Rule 142(a); Rink v. Commissioner [ CCH Dec. 48,969], supra at 326.

Washoe Ranches #1, Ltd. v. Commissioner [ CCH Dec. 51,634(M)], 1996 Tax Ct. Memo LEXIS 511, 72 T.C.M. ( CCH ) 1176, T.C. Memo. 1996-495 (1996). This court is persuaded of the rectitude of this approach and will analyze the above-captioned case using the principles of contract law.