Plaintiff-appellant Richard M. Nault appeals the district court’s decision denying his motion for summary judgment and granting summary judgment in favor of the United States. Nault argues that the district court erred in its interpretation of several agreed judgments entered by the Tax Court (“the Tax Court decisions”), embodying the terms of a settlement between the Internal Revenue Service (“IRS”) and Frederick H. Behrens, as Tax Matters Partner (“TMP”), regarding the proper tax treatment of several agriculture-related limited partnerships organized by American Agri-Corp., Inc. (“AMCOR”) 1 a California corporation (collectively the “AMCOR Partnerships” or “Partnerships”). For the reasons discussed below, we affirm.
I.
Nault allegedly invested approximately $1,230,000.00 in five AMCOR Partnerships between 1984 and 1986. In 1987, the IRS began scrutinizing the AMCOR Partnerships’ tax returns and issued Final Partnership Administrative Adjustment Notices disallowing certain deductions on the basis that the Partnerships’ activities constituted a series of sham transactions lacking economic substance. After years of litigation, the IRS and the TMP reached a settlement in which 72% of the Partnerships’ deductions were disallowed, the government agreed not to disallow investment tax credits claimed by the partners, and the partners agreed not to file amended returns modifying any reported income from the Partnerships on which the partners had paid income taxes. Upon motion of the IRS, the Tax Court entered decisions with respect to each Partnership reflecting the terms of the settlement agreement.
Based upon the Tax Court decisions, the IRS issued adjustments to Nault’s 1984, 1985, and 1986 income tax returns, and Nault paid the additional taxes resulting from the adjustments. Each of the Partnerships terminated during the lengthy Tax Court litigation, leaving Nault without any remaining basis in his partnership interests. In September 2002, Nault filed amended income tax returns for 1995, 1996, 1998, 1999, 2000, and 2001, asserting that his basis in the Partnerships should be “restored” to a level inversely proportionate to the Tax Court decisions’ disal-lowance of 72% of the Partnerships’ loss deductions. Nault claimed that he was entitled to an ordinary loss deduction for the taxable basis that was “restored” to his then-worthless partnership interests.
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On December 18, 2002, the IRS denied Nault’s request for a refund. Nault filed a complaint in federal district court on December 17, 2004, seeking to recover his purported overpayment of income tax pursuant to 26 U.S.C. § 7422 and 28 U.S.C. § 1346(a)(1). On February 9, 2007, the district court ruled on the parties’ cross motions for summary judgment, granting summary judgment in favor of the government and denying summary judgment to Nault.
See Nault v. United States,
Civil No. 04-cv-479,
II.
We review de novo a district court’s grant of summary judgment based on contract interpretation.
See John Hancock Life Ins. Co. v. Abbott Labs.,
The parties agree that tax deductions are not permitted for transactions that lack economic substance and that the inquiry at hand — whether the Partnerships or transactions relevant to this appeal lacked economic substance — is confined to interpretation of the Tax Court decisions implementing the settlement between the IRS and the TMP. Thus, a detailed recitation of the substantive law underlying the parties’ dispute is unnecessary.
See United States v. ITT Cont’l Baking Co.,
In construing a settlement subsequently adopted by a court, we apply the same basic rules that govern the interpretation of ordinary contracts.
See id.
at 235-37,
A contract is ambiguous where the disputed terms are facially inconsistent or reasonably susceptible to multiple, plausible interpretations.
See Smart,
Nault contends that the Tax Court decisions should not be interpreted to mean that the Partnerships or the underlying transactions lacked economic substance. In support, he asserts that the disputed language of the Tax Court decisions is ambiguous, that principles of construction favor his suggested interpretation, and that extrinsic evidence conclusively establishes that the parties intended to effectuate his interpretation. These arguments are not well-founded.
First, the plain language of the Tax Court decisions unambiguously favors the *5 government’s interpretation. Section II of each Tax Court decision states:
That the foregoing adjustments to partnership income and expense are attributable to transactions which lacked economic substance, as described in former I.R.C. § 6621(c)(3)(A)(v), so as to result in a substantial distortion of income and expense, as described in I.R.C. § 6621(c)(3)(A)(iv), when computed under the partnership’s cash receipts and disbursements method of accounting; and
That liabilities [in varying amounts] lack economic substance.
The district court held that this language unmistakably signaled that the adjustments of the loss deductions were made because the underlying transactions lacked economic substance, thus preventing Nault from now claiming tax deductions. 2
To escape this seemingly inexorable conclusion, Nault asserts that the presence of the phrase “so as to result in a substantial distortion of income and expenses” generates ambiguity. He argues that this phrase indicates that the underlying transactions may not have entirely lacked in economic substance, but merely distorted the Partnerships’ balance sheet. To buttress this conclusion, he points out that the very next sentence simply declares that “liabilities” in varying amounts lacked economic substance without any such qualifying language. Thus, Nault argues, the district court violated the time-honored maxim that variances in language should not be treated as superfluous.
Nault is mistaken. The reference to former 26 U.S.C. § 6621(c)(v) (1988), which helps to define “tax motivated transactions,” confirms that the transactions were “sham[s] or fraudulent transaction[s],” and therefore lacked economic substance.
See, e.g., Durrett v. Comm’r,
Nevertheless, the plain language of the Tax Court decisions still firmly establishes that the underlying transactions lacked economic substance. 3 Here, the greater *6 implies the lesser — because the underlying transactions lacked economic substance, they necessarily resulted in a substantial distortion of income. Thus, the government’s interpretation — that “[t]he decisions ... state that the transactions resulted in a substantial distortion of income and expense because they lacked economic substance” — is by far the most natural reading of the disputed language. At the very least, it is logically consistent; Nault’s proposed construction eviscerates the entire sentence. Under Nault’s interpretation, the “substantial distortion” language must be read to modify the “lacked economic substance” language. We decline the invitation to mangle the English language by adopting an approach that defies basic rules of syntax and diction; the Tax Court clearly stated that the lack of economic substance “result[ed] in” the distortion of income, not the other way around.
Nault seeks additional support from the fact that the distortion language was not used in the next paragraph, which concerned the Partnerships’ liabilities. The most obvious explanation for why this language was not used in reference to the Partnerships’ liabilities is simply that the first paragraph referred to the underlying transactions themselves, while the second paragraph referred to the liabilities claimed by the Partnerships. Naturally, the.erroneous liabilities themselves did not “result in a substantial distortion of income or expense.” They simply lacked economic substance. Moreover, we will not declare perfectly clear language ambiguous merely because the Tax Court did not reiterate it verbatim in the very next sentence in dealing with a related, but not identical, matter.
Next, Nault argues that because the settlement “did not treat the Partnerships as lacking economic substance,” the Tax Court decisions are ambiguous.
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Nault’s contention is based on a fundamentally erroneous conception of the Tax Court decisions, which approved a
settlement. See Miller Tabak Hirsch & Co. v. Comm’r,
Here, it was perfectly permissible for the IRS to insist upon language that declared the transactions to lack economic substance — perhaps anticipating claims plaintiffs such as Nault might make — while simultaneously making certain concessions to the taxpayers. It was incumbent upon the TMP to dispute any language that he did not wish included in the Tax Court decisions.
See Rodi,
Finally, Nault argues that, even if the plain language of the Tax Court decisions is unambiguous, the district court nevertheless erred by failing to consider extrinsic evidence. First, it is elementary that we do not ordinarily examine extrinsic evidence to alter or clarify the terms of an otherwise unambiguous contract.
See Smart,
This is not such a case. Nault’s proposed interpretation of the Tax Court decisions is not merely strained, but flatly contradictory to the plain meaning of its terms. In essence, he “argue[s] that the [disputed] language does not mean what it says.” Id. at 98. If the language of the Tax Court decisions does not comport with what the parties intended, then the TMP should have insisted upon different language.
Finally, we note that Nault dramatically overstates the persuasive force of the extrinsic evidence that he has proffered. It is by no means so conclusive as he suggests. 5 He directs our attention to a written summary regarding the settlement, prepared by the IRS, stating, inter alia, that each partner “may have a capital gain or loss upon his termination from the partnership” (emphasis added). This summary, however, was nonbinding, the specific section in question was designated as informational, the clause was permissive, and the provision referred only to the partner’s capital contribution. Nault also points to a letter he received from the IRS indicating that the Service had made “[a] determination ... that allow[ed] for capital treatment of these losses.” This statement is certainly peculiar — and inconsistent with the IRS’s current position. This letter, however, cannot serve as a definitive guide for our interpretation of Tax Court decisions executed more than a year previously. Additionally, the court notes *8 that the same letter notified Nault of the IRS’s rejection of his claims for a deduction for an ordinary loss related to his “restored” basis in the Partnerships.
In summary, Nault’s arguments obfuscate what is, in reality, a very simple case. The plain language of the Tax Court decisions indicates that the disallowed loss deductions were based on transactions that lacked economic substance. We have no jurisdiction to determine whether the relevant transactions actually did have economic substance — the sole matter within our purview is determining what the Tax Court meant by its decisions. The Tax Court’s determination, that the transactions lacked economic substance, is unambiguous.
III.
The judgment of the district court is affirmed.
Notes
. For a partial history of AMCOR and the related litigation,
see Crop Assocs.-1986 v. Comm'r,
. Nault argues that the government has waived the position that the underlying transactions lacked economic substance, in favor of the position that the Partnerships themselves lacked economic substance. This contention is irrelevant. The district court unequivocally held that "the disallowed deductions were attributable to
transactions
that lacked economic substance.”
Nault,
. Albeit in dicta, the Court of Federal Claims has reached a similar conclusion about these
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decisions. See
Keener
v.
United States,
. Nault cites the Eleventh Circuit’s decision in
Fielding v. United States,
. In addition to noting the limited probative value of Nault’s extrinsic evidence, we observe that the government likewise adduced extrinsic evidence — an affidavit from Margaret K. Hebert, an IRS attorney responsible for the AMCOR litigation — to buttress its own position. We need not discuss this evidence further, however, because it is unnecessary to our conclusion.