Bob Hamric Chevrolet, Inc. v. USIRS
| Decision Date | 18 March 1994 |
| Docket Number | No. A-92-CA-194-SHC.,A-92-CA-194-SHC. |
| Citation | 849 F. Supp. 500 |
| Parties | BOB HAMRIC CHEVROLET, INC., Plaintiff, v. USA, INTERNAL REVENUE SERVICE, Defendant. |
| Court | U.S. District Court — Western District of Texas |
COPYRIGHT MATERIAL OMITTED
Alan L. Tinsley, Redding, Coselli, Tinsley & Allie, LLP, Houston, TX, for plaintiff.
Dinah L. Bundy, Atty., Tax Div., Dept. of Justice, Dallas, TX, for defendant.
The Court held a hearing on October 19, 1993, in the above styled and numbered case on the Plaintiff Bob Hamric Chevrolet, Inc.'s Motion for Summary Judgment filed on August 30, 1993 (# 24) (hereinafter "Hamric") and on the United States of America's Motion to Dismiss or for Summary Judgment filed on August 30, 1993 (# 22) (hereinafter "United States"). The parties consented under 28 U.S.C. § 636(c) to this Court's jurisdiction.
Hamric asserts that the United States failed to follow the deficiency procedures set forth in 26 U.S.C. § 6211 prior to making an assessment against Hamric relative to Hamric's 1983 federal income tax liability. At the time of making the assessment against Hamric, Hamric asserts that the statute of limitations set forth in 26 U.S.C. § 6501 relative to his 1983 tax year had expired. Hamric asserts that the United States illegally and erroneously assessed Hamric $39,646 in taxes, $33,935.55 in interest and a failure to pay penalty in the amount of $594.34 for its 1983 tax year. Hamric filed a claim for refund on or about June 1, 1991, of these amounts related to calendar year 1983 with the Director of the Austin Internal Revenue Service Center at Austin, Texas, and on or about August 12, 1991, said Director mailed to Hamric a notice of disallowance of its claim for refund. On or about August 15, 1991, Hamric filed a Request for Reconsideration of the disallowance based upon an expired statute of limitations, and the Director mailed a second notice of disallowance to Hamric on or about November 12, 1993.
The United States asserts that this Court lacks subject matter jurisdiction over this refund suit because Hamric failed to satisfy the prerequisites for a waiver of sovereign immunity; i.e., Hamric failed to timely file a claim for refund under the governing provisions of the law. Further, the United States asserts that it properly assessed the deficiency for the 1983 Form 1120 by using computational adjustment procedures; thus, the Internal Revenue Service ("IRS") was not required to issue a statutory notice of deficiency with respect to the 1983 deficiency. Finally, the United States asserts that the additional tax liability for the 1983 Form 1120 was timely assessed before the statute of limitations expired.
The parties agree that there are no genuine issues of material facts, and that the claims between the parties should be disposed of by summary judgment. The following are the Stipulations of the parties filed on August 25, 1993 (# 21) in this case (referred to as "Parties' Stipulations"), and the Court has added findings of facts which it has determined from a review of all the pleadings and exhibits (referred to as "Findings of Fact"). The exhibits referred to are attached to the Parties' Stipulations. The Declaration of Linda Lopez, TEFRA Coordinator for the Austin Compliance Center, Internal Revenue Service, Austin, Texas, is attached to the United States' Motion to Dismiss.
1. Unix, Ltd. ("Unix") filed its Form 1065, U.S. Partnership Return of Income, for its taxable year ending December 31, 1982 ("1982 Unix Return"), with the Internal Revenue Service, Austin, Texas, on or about February 22, 1983. Unix reported ordinary loss of $1,199,000.00 on the 1982 Unix Return. A copy of the 1982 Unix Return (Pages 1-4 of 20 without the Schedule K-1s) is attached as Ex. 1.
2. Plaintiff Bob Hamric Chevrolet, Inc. ("Hamric") was a partner in Unix. A copy of Hamric's Schedule K-1, Partner's Share of Income, Credits, Deductions, etc. — 1982 for Unix ("the 1982 K-1") is attached as Ex. 2.
3. Hamric filed its form 1120, U.S. corporation Income Tax Return, for its taxable year ending December 31, 1982 (1982 Form 1120"), with the Internal Revenue Service, Austin, Texas, on or about June 14, 1983. On its 1982 Form 1120, Hamric reported partnership loss of $199,813.35 from its interest in Unix, and that $99,813.35 was the amount of its Unix loss in excess of at risk amount in Unix. Therefore, Hamric used $100,000 of the Unix loss on its 1982 Form 1120. A copy of the 1982 Form 1120 is attached as Ex. 3; see the ninth page of Ex. 3, Statement 1.
4. Unix filed its Form 1065, U.S. Partnership Return of Income, for its taxable year ending December 31, 1983 ("1982 Unix Return"), with the Internal Revenue Service, Austin, Texas, on or about April 13, 1984. Unix reported ordinary income of $524,414.00 on the 1982 Unix Return. A copy of the 1983 Unix Return (pages 1-4 of 20 without the Schedule K-1s) is attached as Ex. 4.
5. A copy of Hamric's Schedule K-1, Partner's Share of Income, Credits, Deductions, et. — 1983 for Unix (the "1983 K-1") is attached as Ex. 5. Hamric's Schedule K-1 for Unix for 1983 (the "1983 K-1") shows that Hamric's share of Unix partnership ordinary income for 1983 was 16.498% or $86,518.00. The 1983 K-1 states at the bottom that the "Amount of 1982 loss not deductible sic in 1982 due to at-risk limitation now deductible sic is $98,823.00." Ex. 5.
6. Hamric filed its Form 1120, U.S. corporation Income Tax Return, for its taxable year ending December 31, 1983 ("1983 Form 1120") with the Internal Revenue Service, Austin, Texas, on or about April 13, 1984. Hamric reported a loss of $12,596.00 entitled "Partnership Loss — Unix, Ltd." on its 1983 Form 1120. A copy of the 1983 Form 1120 is attached as Ex. 6; see the eighth page of Ex. 6, Schedule # 1.
7. Unix was subject to the partnership audit and litigation procedures set forth in 26 U.S.C. § 6221, et seq. (the "TEFRA Procedures"). Unix is referred to as the TEFRA partnership.
8. The tax matters partner of Unix executed several Forms 872-P, Consent to Extend the Time to Assess Tax Attributable to Items of a Partnership, which were agreed to by the IRS. Copies of these Forms 872-P are attached as Ex. 7 through 11; Lopez Declaration, ¶ 6.
9. The IRS examined the 1982 Unix Return and the 1983 Unix Return. Lopez Declaration, ¶ 5.
10. The first Form 872-P for the 1982 Unix Return which extended the time to assess tax until December 31, 1986, was signed by the tax matters partner on December 12, 1985, and was signed on behalf of the Internal Revenue Service on January 6, 1986. Ex. 7. The second form 872-P for Unix relating to both the 1982 Unix Return and the 1983 Unix Return extended the time to assess tax until June 30, 1988, and was signed by the tax matters partner on September 19, 1986, and on behalf of the Internal Revenue Service on September 29, 1986. Ex. 8. The third form 872-P for Unix relating to both the 1982 Unix Return and the 1983 Unix Return extended the time to assess tax until December 31, 1988, and was signed by the tax matters partner on April 14, 1988, and on behalf of the Internal Revenue Service on April 19, 1988. Ex. 9. The fourth Form 872-P for Unix relating to both the 1982 Unix Return and the 1983 Unix Return extended the time to assess tax until June 30, 1989, and was signed by the tax matters partner on October 21, 1988, and on behalf of the Internal Revenue Service on November 1, 1988. Ex. 10. The fifth form 872-P for Unix relating to both the 1982 Unix Return and the 1983 Unix Return extended the time to assess tax until December 31, 1989, and was signed by the tax matters partner on May 19, 1989, and on behalf of the Internal Revenue Service on May 24, 1989. Ex. 11.
11. Hamric and the Internal Revenue Service entered into a settlement agreement for partnership adjustments for the 1982 and 1982 Unix Returns. This agreement, set forth on Form 870-P(AD), Settlement Agreement for Partnership Adjustments, was signed on behalf of Hamric and dated March 24, 1989, and accepted on behalf of the Commissioner of Internal Revenue on August 2, 1989. As a result of this settlement agreement, Hamric agreed to adjustments to partnership items originally reported on the 1982 and 1983 Unix Returns. Specifically, under the settlement agreement, only $419,650 of the $1,199,000 loss originally claimed on the 1982 Unix Return was allowed, and no change was made to the 1983 Unix Return (hereinafter referred to as the "Unix Settlement"). A copy of Hamric's Form 870-P(AD) is attached as Ex. 12.
12. Under the Unix Settlement, Hamric's distributive share of the $419,650 loss was allowed for Unix in 1982 was $69,934.67 (determined by multiplying the allowed Unix partnership loss by Hamric's interest in losses as shown on the 1982 D-1, 16.665%), not $199,813.35 as shown on the 1982 K-1. (Ex. 2) Accordingly, under the Unix Settlement, $129,878.68 of the 1982 Unix loss originally reported by Hamric on its 1982 Form 1120 was disallowed.
13. The 1982 Form 1120 and the 1983 Form 1120 were referred to the TEFRA unit of the Internal Revenue Service for a determination of changes to Hamric's tax liabilities for its 1982 and 1983 years as a result of the Unix Settlement. Lopez Declaration ¶ 7.
14. All information necessary for computing the adjustments to the 1982 Form 1120 and the 1983 Form 1120 to reflect Hamric's tax liability as a result of the Unix Settlement was available from the Unix Settlement, the 1982 and 1983 Unix Returns, the 1982 and 1983 K-1s, and the 1982 and 1983 Forms 1120. The Internal Revenue Service was able to compute the changes to the Hamric tax liabilities as a result of the Unix Settlement mathematically without further actual determinations at the partner level. Lopez Declaration ¶ 8.
15. The...
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