Stine v. United States
| Decision Date | 23 October 2012 |
| Docket Number | No. 10-445 T,10-445 T |
| Parties | MARGARET V. STINE, Plaintiff, v. THE UNITED STATES, Defendant. |
| Court | U.S. Claims Court |
Tax; Refund Suit; 26 U.S.C.
§ 6651(a) (2006); Illness Did
Not Provide Reasonable Cause
to Excuse Failure to Timely File
Gift Tax Return and Payment.
Michael A. Schwartz, Philadelphia, PA, for plaintiff. Eli Segal, Philadelphia, PA, of counsel.
Paul G. Galindo, United States Department of Justice Tax Division, with whom were Kathryn Keneally, Assistant Attorney General, David I. Pincus, Chief, Court of Federal Claims Section, Mary M. Abate, Assistant Chief, Washington, DC, for defendant.
Before the court is defendant's motion for summary judgment brought under Rule 56 of the Rules of the United States Court of Federal Claims (RCFC). The motion has been thoroughly briefed, and oral argument was neither requested by the parties nor deemed necessary by the court. The dispositive issue before the court is whether plaintiff's health excused her from timely filing a federal gift tax return and payment. For the reasons set forth below, the court grants defendant'smotion because plaintiff has failed to identify a genuine issue of material fact as to a health-related incapacity.
Mrs. Stine seeks a refund of the $450,000 penalty and related $21,500 in interest assessed by the Internal Revenue Service (IRS) for failure to timely file a federal gift tax return and payment for tax year 2007. Compl. ¶ 1. Mrs. Stine's health problems beginning in the fall of 2007 included pneumonia, recurrent upper respiratory infections, knee pain, knee replacement surgery, a thyroid growth, heart palpitations, and cataract surgery. Id. ¶¶ 3-4. Plaintiff alleges that her health problems rendered her "unable to file a timely 2007 gift tax return for the gifts she had made to her daughters at the beginning of that year." Id. ¶ 5.
Mrs. Stine's gift tax return and payment were due on April 15, 2008. Pl.'s Opp. Ex. D at 1. On or about September 11, 2008, Mrs. Stine filed a gift tax return, Form 709, and payment for the gift taxes she owed for 2007, acknowledging that the form and payment were late. Compl. ¶¶ 12-13. Plaintiff requested the abatement of penalties due to "her combination of acute but temporary health issues." Id. ¶ 12. The IRS assessed Mrs. Stine a penalty in the amount of $450,000, denied her request for an abatement, and also assessed interest on the penalty in the amount of $21,500. Id. ¶¶ 14-17.
Mrs. Stine appealed the penalty, but her appeal was denied. Compl. ¶¶ 18-19. Plaintiff then filed a request for a refund for $471,500 in late 2009, but received no response from the IRS. Id. ¶¶ 20-21. Mrs. Stine filed her refund suit in this court on July 9, 2010. Discovery was completed by December 5, 2011. The court reserves further discussion of relevant facts for the analysis section of this opinion.
"[S]ummary judgment is a salutary method of disposition designed to secure the just, speedy and inexpensive determination of every action." Sweats Fashions, Inc. v. Pannill Knitting Co., 833 F.2d 1560, 1562 (Fed. Cir. 1987) (internal quotations and citations omitted). "[A] party seeking summary judgment always bears the initial responsibility of informing the . . . court of the basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (). A genuine issue of material fact is one that could change the outcome of the litigation. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).
The party moving for summary judgment will prevail "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." RCFC 56(a). "The moving party . . . need not produce evidence showing the absence of a genuine issue of material fact but rather may discharge its burden by showing the court that there is an absence of evidence to support the nonmoving party's case." Dairyland Power Coop. v. United States, 16 F.3d 1197, 1202 (Fed. Cir. 1994) (citing Celotex, 477 U.S. at 325). A summary judgment "motion may, and should, be granted so long as whatever is before the . . . court demonstrates that the standard for the entry of summary judgment, as set forth in Rule 56[ ], is satisfied." Celotex, 477 U.S. at 323.
A summary judgment motion is properly granted against a party who fails to make a showing sufficient to establish the existence of an essential element to that party's case and for which that party bears the burden of proof at trial. Id. at 324. The burden on the nonmovant in this scenario is to "designate 'specific facts showing that there is a genuine issue for trial.'" Id. (). The Supreme Court has instructed that "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson, 477 U.S. at 247-48. A nonmovant will not defeat a motion for summary judgment "unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Id. at 249 (citation omitted). "A nonmoving party's failure of proof concerning theexistence of an element essential to its case on which the nonmoving party will bear the burden of proof at trial necessarily renders all other facts immaterial and entitles the moving party to summary judgment as a matter of law." Dairyland, 16 F.3d at 1202 (citing Celotex, 477 U.S. at 323).
In considering a motion for summary judgment, the court does not "weigh[]" each side's evidence. Contessa Food Prods., Inc. v. Conagra, Inc., 282 F.3d 1370, 1376 (Fed. Cir. 2002) (citing Avia Grp. Int'l, Inc. v. L.A. Gear Cal., Inc., 853 F.2d 1557, 1565 (Fed. Cir. 1988)), abrogated on other grounds by Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 671, 678 (Fed. Cir. 2008). Rather, "[o]n summary judgment the inferences to be drawn from the underlying facts . . . must be viewed in the light most favorable to the party opposing the motion." United States v. Diebold, Inc., 369 U.S. 654, 655 (1962); see also Godley v. United States, 5 F.3d 1473, 1474-75 (Fed. Cir. 1993) () (citations omitted). That is, "all significant doubt over factual issues must be resolved in favor of the party opposing summary judgment." Mingus Constructors, Inc., v. United States, 812 F.2d 1387, 1390 (Fed. Cir. 1987) (citations omitted).
The statute that governs this case is 26 U.S.C. § 6651(a) (2006), which states in relevant part that failure to timely file a tax return and taxes owed will be subject to penalty "unless it is shown that such failure is due to reasonable cause and not due to willful neglect." Id. The leading case interpreting the terms "reasonable cause" and "willful neglect" in § 6651(a) is United States v. Boyle, 469 U.S. 241 (1985). Both parties rely heavily on Boyle.
The purpose of the penalty provision is "to ensure timely filing of tax returns to the end that tax liability will be ascertained and paid promptly." Boyle, 469 U.S. at 245. The United States Supreme Court noted that to show reasonable cause for a late filing, a taxpayer must have "'exercised ordinary business care and prudence,'" quoting 26 C.F.R. § 301.6651-1(c)(1). Id. at 243; see also 26 C.F.R. § 301.6651-1(c)(1) (2012) (). The Court observed that the IRS has identified several categories of reasonable cause for a delayed filing, including "thedeath or serious illness of the taxpayer or a member of his immediate family." Boyle, 469 U.S. at 243 n.1 (citation omitted). The Court also quoted a more general statement in an IRS manual, which explained that "'[a] cause for delinquency which appears to a person of ordinary prudence and intelligence as a reasonable cause for delay in filing a return and which clearly negatives willful neglect will be accepted as reasonable.'" Id. (citation omitted).
Turning to the legal standard for reasonable cause and willful neglect in § 6651(a) cases, the Court in Boyle held that:
To escape the penalty, the taxpayer bears the heavy burden of proving both (1) that the failure did not result from "willful neglect," and (2) that the failure was "due to reasonable cause." 26 U.S.C. § 6651(a)(1).
469 U.S. at 245. Although only reasonable cause was at issue in Boyle, the Court defined both terms:
[T]he term "willful neglect" may be read as meaning a conscious, intentional failure or reckless indifference. . . . [To show] "reasonable cause" . . . the taxpayer [must] demonstrate that he exercised "ordinary business care and prudence" but nevertheless was "unable to file the return within the prescribed time."
Id. at 245-46 (citations and footnote omitted). Thus, a tax penalty under § 6651(a) may be imposed for: (1) reckless indifference to the taxpayer's obligations under the tax laws; (2) failure to exercise ordinary business care and prudence; or (3) failure to show that the taxpayer was unable to file a timely return. See id. at 245-46 & n.4 (...
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