Popovich v. Ind. Dep't of State Revenue

• Decision Date: 14 April 2016
• Docket Number: No. 49T10–1010–TA–00053.,49T10–1010–TA–00053.
• Citation: 52 N.E.3d 73
• Parties: Nick POPOVICH, Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.
• Court: Indiana Tax Court

52 N.E.3d 73

Nick POPOVICH, Petitioner

v.INDIANA DEPARTMENT OF STATE REVENUE, Respondent.

No. 49T10–1010–TA–00053.

Tax Court of Indiana.

April 14, 2016.

James K. Gilday, Gilday & Associates, P.C., Indianapolis, IN, Attorney for Petitioner.

Gregory F. Zoeller, Indiana Attorney General, John P. Lowrey, Deputy Attorney General, Indianapolis, IN, Attorneys for Respondent.

ORDER ON RESPONDENT'S MOTION FOR SUMMARY JUDGMENT

WENTWORTH

, J.

Nick Popovich claims that he is a professional gambler and, as such, reported income and deductions associated with his trade. The Indiana Department of State Revenue disagreed that gambling was his occupation and issued adjusted gross income tax (AGIT) assessments for the 2003, 2004, and 2005 tax years (“years at issue”). The matter, currently before the Court on the Department's Motion for Summary Judgment, presents the following issues for the Court to decide: whether the Department's 2003 AGIT assessment was timely; and whether Popovich was a professional gambler eligible for certain deductions from his adjusted gross income. Upon review, the Court finds in favor of Popovich in part and denies the Department's Motion.¹

FACTS AND PROCEDURAL HISTORY

The following facts are not in dispute. On December 29, 2007, the Department issued an Investigation Summary to Popovich rejecting his contention that he was engaged in the trade or business of gambling in 2003 and 2004. (See Resp't Confd'l Des'g Evid., Vol. VI at 1213–31, May 11, 2012.) Consequently, on January 28, 2008, the Department issued Proposed Assessments to Popovich in the amount of $403,762.72 for additional AGIT due, as well as interest and penalties. (See Resp't Confd'l Des'g Evid., Vol. VI at 1232–41.) Popovich protested, but the Department upheld the Proposed Assessments in their entirety. (See Resp't Confd'l Des'g Evid., Vol. I at 1252–63; Resp't Des'g Evid., Vol. I at 1203–12.)

On October 4, 2010, Popovich initiated an original tax appeal challenging the Department's imposition of additional AGIT and interest for the 2003 and 2004 tax years and its imposition of negligence penalties for all of the years at issue. (See Pet'r Br. Supp. Resp. Opp'n Resp't Mot. Summ. J. (“Pet'r Br.”) at 2–3 (citing generally Pet'r Pet.), Aug. 15, 2014.) On February 9, 2012, the Department moved for summary judgment and designated, among other things, the Proposed Assessments as evidence. On February 27, 2015, the Court held a hearing on the Department's Motion. Additional facts will be supplied as necessary.

STANDARD OF REVIEW

Summary judgment is proper when the designated evidence demonstrates that no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C)

. A genuine issue of material fact exists when a fact concerning an issue that would dispose of the case is in dispute or when the undisputed facts support conflicting inferences as to the resolution of an issue. Miller Pipeline Corp. v. Indiana Dep't of State Revenue, 995 N.E.2d 733, 734 n. 1 (Ind.Tax Ct.2013).

ANALYSIS

When, as here, the Department has moved for summary judgment and properly designated its Proposed Assessments as evidence, it has made a prima facie case that there is no genuine issue of material fact regarding the validity of the assessed tax. See Indiana Dep't of State Revenue v. Rent–A–Center E., Inc. (RAC II ), 963 N.E.2d 463, 466–67 (Ind.2012)

. Consequently, the burden to produce evidence that demonstrates that there is, in actuality, a genuine issue of material fact with respect to the assessed tax has shifted to Popovich. See

id. at 467.

Popovich designated evidence to demonstrate whether genuine issues of material fact exist regarding the timeliness of the Department's 2003 Proposed Assessment and whether Popovich was engaged in the trade or business of gambling in 2003 and 2004. (See Pet'r Br. at 39–68.) Nevertheless, the Court must first address the Department's arguments that a portion of Popovich's designated evidence, i.e., Popovich's Affidavit and Preston Boskett's Expert Witness Report, is inadmissible. (See generally Resp't Reply Supp. Resp't Mot. Summ. J. (“Resp't Reply Br.”) at 4–7 (referring to Pet'r Des'g Evid., Exs. A–B, Aug. 15, 2014), Jan. 20, 2015.) See also Miller Pipeline, 995 N.E.2d at 736

(providing that “when ruling on a motion for summary judgment, this Court will only consider properly designated evidence that would be admissible at trial” (citations omitted)).

I. Popovich's designated evidence

Popovich's Affidavit

The Department asserts that the Court should disregard Popovich's Affidavit because it “contradicts other statements made by Popovich during discovery[,]” is internally inconsistent, contains conclusory statements, puts Popovich's credibility at issue, and improperly attempts to create genuine issues of material fact where there are none. (See Resp't Reply Br. at 4–5; Hr'g Tr. at 98–99.) The Department, however, has not supported these assertions by identifying a single instance where statements in Popovich's Affidavit contradicted his discovery statements, were internally inconsistent, were improperly conclusory, put his credibility at issue, or improperly attempted to create a genuine issue of material fact. Instead, the Department merely identified instances where Popovich's characterization of the evidence differed from the Department's. (Compare, e.g., Resp't Reply Br. at 4 and Resp't Br. Supp. Mot. Summ. J. (“Resp't Br.”) at 20–22, Feb. 9, 2012 with Pet'r Des'g Evid., Ex. A ¶¶ 62–66 (where the Department alleged that Popovich was an employee of Sage–Popovich, Inc. during the years at issue and Popovich averred that he was not).) Accordingly, the Court will not find Popovich's Affidavit inadmissible as designated evidence.

Boskett's Report

The Department also maintains that the Court should disregard Boskett's Report because it merely shows that Boskett is an expert on opening and managing casinos, not on gambling or professional gambling. (See Resp't Reply Br. at 5–7.) Expert opinion testimony “must be preceded by a foundation of evidence establishing the witness's credentials as an expert and the reliability of any scientific methods utilized by the witness to reach the opinion.” Noblesville Casting Div. of TRW, Inc. v. Prince, 438 N.E.2d 722, 727 (Ind.1982)

. Thus, Popovich needed to do more than contend that Boskett's work in casinos for nearly 30 years made him an expert on gambling and professional gamblers to establish Boskett's familiarity with blackjack and professional blackjack players. (See Pet'r Sur–Reply Opp'n Resp't Mot. Summ. J. at 8–10 (referring to Pet'r Des'g Evid., Ex. B at 32–35), Feb. 17, 2015; Hr'g Tr. at 88–91.) Because Popovich did not lay a proper foundation to show Boskett's expertise regarding professional gambling, the Court will not consider Boskett's Report in resolving the Department's Motion.

II. The 2003 Proposed Assessment

In moving for summary judgment and designating its 2003 Proposed Assessment as evidence, the Department has made a prima facie case that there is no genuine issue of material fact. Nonetheless, Popovich contends that there is a genuine issue of material fact whether the Department's 2003 Proposed Assessment was timely issued. (See Pet'r Br. at 12–13, 39–42 (referring the Court to the arguments and evidence he presented in litigating his earlier motion for Trial Rule 37

sanctions).) In response, the Department explains that Popovich's certified mail transmittal envelope demonstrates his 2003 income tax return was mailed to the Department on February 1, 2005, and thus, when it issued the Proposed Assessment on January 28, 2008, it was well within the three year limit required under Indiana Code § 6–8.1–5–2(a). (See Resp't Br. at 15 (citing Resp't Des'g Evid., Vol. I at 1137).) See also Ind.Code § 6–8.1–5–2(a) (2003) (providing that the Department “may not issue a proposed assessment ... more than three (3) years after ... the date [a] return is filed”). The Department further supports its claim by stating that Popovich has failed to rebut the accuracy of the Proposed Assessment because he did not indicate when his 2003 income tax return was actually mailed. (See Resp't Reply Br. at 9–10 (citing Pet'r Mot. Trial Rule 37 Sanctions, Including J. & Fees (“Pet'r Mot. Sanctions”), Ex. A ¶¶ 8–9, Feb. 22, 2012); Hr'g Tr. at 39 –42, 99.) In the alternative, the Department asserts that no statute of limitations governs here because Popovich's 2003 certified mail transmittal envelope proves his return was mailed well after its 2004 due date, making Popovich's “late” return “the legal equivalent of no return at all.” (See Resp't Br. at 14–15.) See also I.C. § 6–8.1–5–2(e) (providing that “if a person does not file a return, there is no time limit within which the department must issue its proposed assessment”).

When this Court ruled on Popovich's motion for Trial Rule 37

sanctions, it found that the 2003 certified mail transmittal envelope the Department attributed to Popovich actually belonged to Popovich's former wife. Popovich v. Indiana Dep't of State Revenue (Popovich IV ), 17 N.E.3d 405, 413 (Ind.Tax Ct.2014). Thus, that envelope does not demonstrate that Popovich mailed his 2003 income tax return to the Department in February of 2005. Also contrary to the Department's claim, Popovich submitted an affidavit during the course of the Trial Rule 37 proceedings that established the date his 2003 income tax return was mailed to the Department was January 10, 2005. (See Resp't Reply Br. at 9–10 (citing Pet'r Mot. Sanctions, Ex. A ¶ 9 (providing that a temporary employee “mailed [Popovich's 2003 Indiana income tax return] to the [Department] on January 10, 2005 ” (emphasis added))).) See also Popovich IV, 17 N.E.3d at 407

(finding that Popovich also signed his income tax return on January 10, 2005). Finally, even if Popovich's 2003 income tax return were untimely,² the Department is incorrect that a late return is tantamount...