Moser v. United States (In re Ames), CASE NO. 10-43401
| Decision Date | 30 July 2014 |
| Docket Number | ADVERSARY NO. 13-04011,CASE NO. 11-40386,CASE NO. 11-40023,ADVERSARY NO. 13-04024,CASE NO. 10-43401,ADVERSARY NO. 13-04025 |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Eastern District of Texas |
| Parties | IN RE: CHARLES DALE AMES, DANIEL A. MAGEE, GLENROY KEVIN PAYNE, ET UX., Debtors. CHRISTOPHER J. MOSER, TRUSTEE, Plaintiff, v. UNITED STATES OF AMERICA, Defendant. |
The plaintiff and defendant filed competing motions for summary judgment pursuant to Federal Rule of Civil Procedure 56, as adopted and applied to bankruptcy cases and proceedings by Federal Rule of Bankruptcy Procedure 7056. The parties filed their motions in three different adversary proceedings. While each adversary proceeding relates to a different chapter 7 case, each proceeding involves identical causes of action brought by Christopher J. Moser, as the chapter 7 bankruptcy trustee, against the United States for federal income tax refunds from the Internal Revenue Service ("IRS").
The Court heard arguments regarding the motions on May 5, 2014. At the conclusion of the hearing, the Court took the motions under advisement in order to prepare a detailed written ruling. The Court also invited the parties to file supplemental briefs. Having considered the motions, the responses, the arguments at the hearing, the supplemental briefs, and the applicable law, the Court makes the following findings of fact and conclusions of law.1
This is the second set of adversary complaints filed by the chapter 7 trustee against the United States in connection with these bankruptcy cases. In his first set of adversary complaints, the chapter 7 trustee sought to avoid as fraudulent transfers, pursuant to 11 U.S.C. § 548(a), each respective debtor's election to forego net operating loss carrybacks in accordance with 26 U.S.C. § 172(b)(3). The parties entered into agreed judgments in each adversary proceeding.
In the present adversary proceedings, the trustee seeks to collect the value of the avoided transfers from the United States pursuant to 11 U.S.C. § 550(a). The United States and the chapter 7 trustee disagree about the value of the avoided transfers. This Court has jurisdiction over these matters pursuant to the provisions of 28 U.S.C. §§1334 and 157 and 1346(a)(1). Further, these matters constitute "core" proceedings within the meaning of 28 U.S.C. §157(b)(2).
Motions for summary judgment are authorized by Civil Rule 56. The entry of a summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting FED. R. CIV. P. 56(c)). If a summary judgment motion is properly supported, a party opposing the motion may not merely rest upon the contents of its pleadings, but must demonstrate the existence of specific facts constituting a genuine issue of material fact for which a trial is necessary. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986) (citing FED. R. CIV. P. 56(e)).
In this case, the parties have stipulated in their motions and arguments that there is no factual dispute in need of resolution. They have presented opposing motions for summary judgment based upon the application of appropriate law. For cases in which the unresolved issues are primarily legal rather than factual, summary judgment is particularly appropriate. Mansker v. TMG Life Ins. Co., 54 F.3d 1322, 1326 (8th Cir. 1995); Thompson Everett, Inc. v. National Cable Advertising, L.P., 57 F.3d 1317, 1323 (4th Cir. 1995). The parties' competing motions for summary judgment set forth the following body of uncontested facts.
Before initiating the present adversary proceedings, the chapter 7 trustee filed adversary proceedings against the United States in connection with each of theunderlying bankruptcy cases. The Court assigned those prior adversary proceedings numbers 11-04018 (Ames), 11-04060 (Magee), and 11-04115 (Payne). In each instance, within two years of filing bankruptcy, the debtor had filed a federal income tax return for 2008 and/or 2009. Although each of the debtors had incurred a net operating loss ("NOL"), the debtors affirmatively elected not to apply those losses as a credit to offset their gains, if any, in the prior two years. Such elections are normally irrevocable once made. The trustee asked this Court to set aside each of the debtor's elections to waive the carryback of the NOLs as a fraudulent transfer under 11 U.S.C. §§ 548 and 550.2
The United States initially disputed whether an irrevocable election to waive the carryback of an NOL is a fraudulent transfer. However, at a hearing on June 23, 2011, the United States explained that it would enter into agreed judgments as to this issue based upon the opinions of the courts in In re Russell, 927 F.2d 413 (8th Cir. 1991), In re Feiler, 218 F.3d 948 (9th Cir. 2000), and United States v. Kapilla, 402 B.R. 56 (S.D. Fla. 2008). The United States and the trustee agreed that the NOLs were property of the estate, the affirmative elections by the debtors to waive the carryback of the NOLs were transfers of property of the estate, and the elections made by the debtors were void.
In the original adversary complaints, the trustee alleged that the NOLs could be carried back to 2004, which would result in a substantial recovery or receivable for the bankruptcy estates. The United States disputed this allegation. The agreed judgments did not resolve the question of what recovery, if any, the estates would receive. The agreed judgments found that "[p]ursuant to 11 U.S.C. §550(a)(1) the Trustee is entitled to amend the tax returns ... to carry the NOLs backwards to prior years to potentially create a tax refund for the benefit of the bankruptcy estate." (Emphasis added.) The agreed judgments contained the following order:
The Trustee is hereby authorized and empowered with the full right, power and authority to file the appropriate tax forms for the Debtor, to carry the NOLs for the tax years 2008 and/or 2009 backwards to prior years, as allowed by statute, and to obtain any and all related refunds which may arise therefrom. Any such refunds shall be property of the estates and payable to Christopher J. Moser, Trustee.
(Emphasis added.)
Subsequently, the trustee filed amended tax returns and claims for refunds for each debtor. In the amended returns, the trustee requested that the NOLs be carried back to years that were four or five years prior to the year in which the NOL was incurred under a special provision of the Internal Revenue Code ("IRC"). This special provision, see 26 U.S.C. § 172(b)(1)(H), is in contrast to the usual rule that carries back NOLs to the two years prior to the loss year, see 26 U.S.C. § 172(b)(1)(A). The IRS denied the trustee's refund claims on the grounds that the affirmative election for taking a three-, four-, or five-year carryback had not been timely, or validly, made.
Charles Dale Ames filed a federal income tax return on Form 1040 for the taxable and calendar year 2009 (the "2009 Return") on or about October 10, 2010. The 2009 Return established the existence of a regular NOL. Ames affirmatively waived the carryback of the NOL in his 2009 Return. Ames did not have gains in the two years prior to bankruptcy to which a standard, two-year carryback could have been applied.
Ames filed for bankruptcy on October 1, 2010. After obtaining the agreed judgment, the chapter 7 trustee filed an amended 2009 Return on July 3, 2012. In the amended 2009 Return, the chapter 7 trustee asserts that he is electing under IRC § 172(b)(1)(H) to carryback the NOL to 2004. The statutory deadline for making an election under § 172(b)(1)(H) was October 15, 2010 - a few days after Ames filed for bankruptcy and before the chapter 7 trustee filed the prior adversary proceeding. Nonetheless, based on the agreed judgment in the prior adversary proceeding, the chapter 7 trustee seeks a refund in the amount of $38,463.
Daniel A. Magee filed a federal income tax return on Form 1040 for the taxable and calendar year 2008 (the "2008 Return") on or about April 15, 2009. The 2008 Return established the existence of a regular NOL. Magee waived the carryback of the NOL in his 2008 Return. Magee did not have gains in the two years prior to bankruptcy to which a standard, two-year carryback could have been applied.
Magee filed for bankruptcy on January 3, 2011. After obtaining the agreed judgment, the chapter 7 trustee filed an amended 2008 Return on June 27, 2012. In the amended 2008 Return, the chapter 7 trustee asserts that he is electing under IRC § 172(b)(1)(H) to carryback the NOL to 2004. The statutory deadline for making an election under § 172(b)(1)(H) was October 15, 2010 - before Magee filed for bankruptcy and before the chapter 7 trustee initiated the prior adversary proceeding. Nonetheless, based on the agreed judgment in the prior adversary proceeding, the chapter 7 trustee seeks a refund in the amount of $21,206.
Glenroy Kevin Payne filed a federal income tax return on Form 1040 for the taxable and calendar year 2008 (the "2008 Return") on or about April 15, 2009. The 2008 Return established the existence of a regular NOL. Payne waived the carryback of the NOL in the 2008 Return. Payne did not have gains in the two years prior to bankruptcy to which a standard, two-year carryback could have been applied.
Payne filed for bankruptcy on February 3, 2011. After obtaining the agreed judgment, the chapter 7 trustee filed an amended 2008 Return on June 27, 2012. In the amended 2008 Return, the chapter 7 trus...
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