Malachinski v. Commissioner of Internal Revenue
| Decision Date | 04 October 2001 |
| Docket Number | No. 99-3323,99-3323 |
| Citation | 268 F.3d 497 |
| Parties | (7th Cir. 2001) Leon S. MALACHINSKI, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee |
| Court | U.S. Court of Appeals — Seventh Circuit |
Appeal from the United States Tax Court. No. 13501-94--Joseph H. Gale, Judge. [Copyrighted Material Omitted]
Before POSNER, COFFEY and RIPPLE, Circuit Judges.
The Internal Revenue Service determined that Leon Malachinski was deficient in the payment of his federal income taxes for the year 1980. Dr. Malachinski contested the assessment in the United States Tax Court. He contended (1) that his signature on a consent form to extend the statute of limitations on assessment had been forged and (2) that if any deficiency were assessed, he was entitled to credit against it the $20,400 he previously had remitted to the IRS in 1984. The tax court ruled in favor of the IRS; it found that Dr. Malachinski's signature on the consent form was genuine. It further concluded that it lacked jurisdiction to determine whether Dr. Malachinski was entitled to a credit for the $20,400 remittance. For the reasons set forth in the following opinion, we affirm the decision of the tax court.
Dr. Malachinski and his now ex-wife Wynne Superson were married in May 1980. The couple filed a joint federal income tax return for the year 1980 on April 15, 1981. In late 1982 or early 1983, the IRS contacted the Malachinskis regarding the 1980 tax return, and Dr. Malachinski sought the advice of Vincent Arnone, his tax return preparer. The Malachinskis granted power of attorney to Arnone and to attorney Eugene LaPorte in March 1983.
Superson filed for divorce in March 1983 but did not tell Dr. Malachinski until a month later. On May 23, 1983, IRS agent Alan Neubauer sent a letter addressed to the Malachinskis that asked them to sign and return Form 872-A, "Special Consent to Extend the Time to Assess Tax," with respect to their 1980 income taxes. The form permitted the IRS to extend the time period in which it had to assess any deficiencies. On or about June 8, 1983, the IRS received the form, which had been dated June 1, 1983, and bore what purported to be the signatures of both Dr. Malachinski and Superson. An IRS official countersigned the form on June 8, 1983.
Three days later, on June 11, 1983, Dr. Malachinski and Superson granted another power of attorney to John Ostrand and Stephen Mack, certified public accountants. The power of attorney was originally prepared on May 23, 1983. Superson, however, issued a separate power of attorney on September 1, 1983, naming as her representatives two attorneys, Anthony Scariano and Justino Petrarca, and a certified public accountant, Michael Moxley.
The Malachinskis were divorced in March 1984. Also in March 1984, Dr. Malachinski filed a separate tax return for his taxable year 1982. In April, acting on advice from one of his advisors, he sent to the IRS a $20,400 remittance to reduce any potential tax obligations for 1980. The IRS received the funds and prepared a voucher; the voucher contained a handwritten entry that described the payment as a "cash bond." Further, a section of the voucher was checked, indicating that the amount was an "Advance payment on deficiency." The voucher did not have a separate section to indicate that the remittance was in the nature of a cash bond or deposit.
Mack, Dr. Malachinski's representative, met with Neubauer on June 29, 1984. The IRS subsequently issued an examination report to Dr. Malachinski and Superson that indicated, in relevant part, that the two had a deficiency in income tax of $91,086 for the year 1980. Dr. Malachinski then executed a third power of attorney, naming Glenn Acquino, a certified public accountant, as his representative. Acquino duly filed a protest with the IRS on the Malachinskis' behalf.
In April 1988, the IRS transferred the $20,400 remittance from the 1980 joint account of Dr. Malachinski and Superson to Dr. Malachinski's 1982 individual tax account. In October 1988, for reasons not indicated in the record, the IRS refunded the $20,400 plus $902 in interest; Dr. Malachinski claims, however, that he never received the money. The IRS does not have a copy of the refund check nor does it have any supporting documentation. It is the IRS' policy to destroy such records after six years.
Dr. Malachinski executed a fourth power of attorney in December 1988, authorizing attorney Michael Boylan to represent him before the IRS. Boylan wrote to the IRS in August 1999, informing the agency that Dr. Malachinski had not been able to secure Superson's approval of a proposed settlement.
In late 1989, Superson began to complain bitterly about Dr. Malachinski to a friend and co-worker, Claudine Mellerke.1 Mellerke became concerned that Superson might carry out the various threats she had made against her ex- husband's life. These concerns came to the attention of local police, and Superson ultimately was convicted of violating 18 U.S.C. sec. 1958, use of interstate commerce facilities in the commission of murder for hire. (Dr. Malachinski was the intended victim of Superson's scheme.) At the time of trial in this tax matter, Superson was incarcerated in Chicago and awaiting sentencing.
On May 3, 1994, the IRS issued a notice of deficiency to Dr. Malachinski and Superson regarding their 1980 taxes, and Dr. Malachinski timely filed a petition in the tax court. He later filed an amended petition that asserted that the statute of limitations on assessment had expired before the notice of deficiency was mailed. He maintained that his signature on the form that purported to extend the limitations period had been forged, presumably by Superson. Dr. Malachinski's counsel deposed Superson in this case, but she refused to answer any questions, citing her privilege against self-incrimination.
At trial, Dr. Malachinski testified that he had not signed the consent form nor had he seen the form until 1995. He believed that Superson either had signed it or had someone else sign his name to it, but he never had authorized her to do so nor had he given her a power of attorney to act for him. To bolster these arguments, Dr. Malachinski offered the testimony of Superson's former friend and co-worker, Mellerke, who testified that Superson had told her that "she had done something to get even" with Dr. Malachinski; she had "contacted the IRS and had reported Dr. Malachinski for several things that he had not done, and also she provided a document to the IRS shortly before they were divorced that he was not aware of." R.48 at 116. According to Mellerke, Superson claimed that the document was so damaging that Dr. Malachinski would be "feeling the effects of it for the rest of his life." Id. at 116-17. Although the Commissioner objected to Mellerke's testimony as hearsay, the court reserved ruling on its admissibility.
Dr. Malachinski also introduced the expert report of Diana Marsh, a board- certified forensic document examiner. After examining twenty exemplars of Dr. Malachinski's signature, Marsh made the following conclusion in a written report:
After an examination of all the documents submitted, it is my opinion that Dr. Malachinski did not write the name "L.S. Malachinski" on the document at issue, the IRS Consent Form dated June 1, 1983. In addition, it is my opinion that the same individual wrote both dates of "6/1/83."
Dr. Malachinski attempted at trial to elicit from Marsh the factual basis for her conclusion that he had not signed the form, but the IRS objected that the questions solicited information beyond the scope of the report. The court sustained the IRS' objection and restricted Marsh's testimony to the material contained in the written documentation. The court explained that Tax Court Rule 143(f) provides that the facts, data, and analysis that form the basis for an expert's conclusion are admissible only to the extent that they are set forth in a written report.
The court nonetheless permitted Dr. Malachinski to proffer additional testimony from Marsh regarding the basis and reasons for her conclusion. In the proffer, Marsh related her concerns about the letter formations in the questioned signature. Specifically, she noted characteristics of the loop on the "L" of Dr. Malachinski's first name, the angle of the bottom of the "S" in his middle name, and the absence of a loop at the end of his signature.
In response, the IRS offered the report and testimony of James Davidson, also a board-certified forensic document examiner and chief of the Questioned- Document Section of the IRS Criminal Investigation Division's National Forensic Laboratory in Chicago. Davidson compared the signature on the consent form to 26 known exemplars of Dr. Malachinski's signature. He noted that the exemplars fell into categories: 13 exemplars were "quickly written abbreviated last names;" 10 were "formally written with distinct letter definition;" and three were "shortened, quickly written signatures." Ex.AA at 2- 3. Davidson found that the exemplars from the first two categories were of "minimal value" in making the comparison and that the signature on the consent form was most similar to the third category. Id. at 3. He was, however, unable to determine whether the signature on the form was genuine; in his opinion, the three signatures in the third category were "not enough of a representative sample of the writer for [him] to make any determinations." Id.
Regarding the $20,400 remittance, Dr. Malachinski testified that he had never requested the payment to be transferred to his account for 1982 or refunded. He also denied having received a refund of that payment in 1988. On cross- examination, he indicated that he had never checked his bank records to determine whether he had deposited a similar amount at the time...
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