Stoddard v. U.S., Case No. 07-11173.
| Decision Date | 30 September 2009 |
| Docket Number | Case No. 07-11173. |
| Parties | Stanford C. STODDARD, Plaintiff, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
Marc E. Thomas, Bendure & Thomas, Bingham Farms, MI, for Plaintiff.
Thomas P. Cole, Washington, DC, for Defendant.
This matter is before the Court on cross Motions for Summary Judgment filed by the parties. The Motions were referred to Magistrate Steven Whalen, pursuant to 28 U.S.C. § 636(b)(1)(B), for a Report and Recommendation ("R & R"). On August 5, 2009, the Magistrate Judge issued an R & R recommending that the Court: (1) deny Plaintiff's Motion, (2) grant Defendant's Motion for the tax years 1980, 1995, and 1998 through 2000, and (3) deny Defendant's Motion for the 1984 tax year. Plaintiff objects to the Magistrate's conclusions regarding the 1980, 1995, and 1998 through 2000 tax years. Plaintiff accepts the balance of the R & R pertaining to 1984. For the reasons stated, the Court ADOPTS the Magistrate's R & R with modifications.
This is a taxpayer's refund action. At issue is whether the Internal Revenue Service ("IRS") erroneously applied a 2001 overpayment of $177,384.23 to taxes, penalties and interest owed for several prior years dating back to 1980. Plaintiff Stanford Stoddard contends the assessments were erroneous or otherwise barred by the statute of limitations.
Plaintiff was a partner in various business entities, including the Barrister Equipment Associates Series at issue in this case. Plaintiff timely filed IRS Forms 1040 for 1980 through 1986; on each return he listed income from various partnerships.
On December 29, 1987, Plaintiff filed Amended IRS Forms 1040s for the same years; he says he made additional payments for all years except 1983, for which he obtained a refund.
On March 4, 1988, Plaintiff again filed amended IRS Forms 1040 for the 1980 and 1983 tax years, both showing refunds.
In May 1989, Plaintiff and his wife entered into a settlement agreement with the IRS regarding partnership items for Barrister Equipment Associates 136.
In May 1990, Plaintiff and his wife filed an Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and of Acceptance of Overassessment on IRS Form 870-AD for tax years 1982 through 1986. The IRS accepted the offer on July 17, 1990. As set forth in the agreement, there was: (a) no change in the tax returns filed for 1985 or 1986; (b) liability of $4,072 for the 1982 year; (c) liability of $3,836 for the 1984 tax year; and (d) a reduction in liability of $73,121.00 for the 1984 tax year.
On April 4, 1996, the IRS made an assessment of $22,756.00 in additional taxes and $103,556.73 in interest for the 1980 tax year on IRS Form 3552. The IRS contends the additional assessment resulted from the recapture of an investment tax credit carryback related to Barrister Equipment Associates 140.
On April 23, 2002, Plaintiff filed an Offer in Compromise ("OIC") on Form 656, due to "doubt as to liability" for the tax years 1980, 1984, 1995, 1998, 1999 and 2000. The Form 656 contained a standard provision that the IRS would keep any refund due to the taxpayer because of overpayment for tax periods extending through the calendar year that the IRS accepts the offer; it states that this condition does not apply if the offer is based on doubt as to liability. On July 22, 2002, the IRS notified Plaintiff that it was reviewing the OIC.
On October 15, 2002, Plaintiff filed his 2001 federal income tax return on IRS Form 1040. He declared an overpayment of $411,480.00 and designated the entire overpayment to be applied to his 2002 estimated federal income tax payments.
Instead, in a December 2, 2002 correspondence, the IRS applied $177,384.23 of that overpayment to taxes it claimed were owed for six previous tax periods:
Tax Period Amount Applied
1980 $ 72,989.14
1984 $ 50,451.24
1995 $ 19,317.62
1998 $ 326.78
1999 $ 18,215.33
2000 $ 16,084.12
_________________________________
TOTAL $177,384.23
Plaintiff contends the assessments were erroneous.
On December 31, 2002 and January 23, 2003, Plaintiff filed administrative refund claims with the IRS, seeking refund of the seized overpayment and reversal of penalties and interest assessed for underpayment of tax.
On April 14, 2003, the IRS denied Plaintiff's OIC.
On April 15, 2004, Plaintiff filed amended income tax returns for the 1980 and 1984 tax years, both of which claimed a refund of the portion of the 2001 overpayment applied to those years. On the same date, Plaintiff filed formal refund claims for the tax years 1995, 1998, 1999 and 2000.
The IRS denied the refund claims by correspondence dated November 8, 2006. On March 13, 2007, following an informal review, the IRS reaffirmed its denial of the refund claims.
Plaintiff timely filed this action on March 19, 2007. During the course of discovery, the IRS notified Plaintiff that some tax files pertaining to him were lost or destroyed. Both parties filed motions for summary judgment. Plaintiff seeks summary judgment with respect to the portion of the 2001 overpayment that was applied to the 1980 tax period.
This Court has jurisdiction pursuant to 28 U.S.C. § 1346(a)(1).
This Court reviews de novo those portions of an R & R to which specific objections are made. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b). See also U.S. Fidelity and Guar. Co. v. Thomas Solvent Co., 955 F.2d 1085, 1088 (6th Cir.1992) (); Miller v. Currie, 50 F.3d 373, 380 (6th Cir.1995) ( ). The Court may accept, reject or modify any or all of the Magistrate Judge's findings or recommendations. 28 U.S.C. § 636(b)(1).
The standard for determining whether summary judgment is appropriate is "`whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Amway Distributors Benefits Ass'n v. Northfield Ins. Co., 323 F.3d 386, 390 (6th Cir.2003) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The evidence and all reasonable inferences must be construed in a light most favorable to the non-moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Redding, 241 F.3d at 532.
Federal Rule of Civil Procedure 56(c) empowers the court to render summary judgment "forthwith 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." See Redding v. St. Eward, 241 F.3d 530, 532 (6th Cir.2001).
If the movant establishes by use of the material specified in Rule 56(c) that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law, the opposing party must come forward with "specific facts showing that there is a genuine issue for trial." First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 270, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); see also McLean v. 988011 Ontario, Ltd., 224 F.3d 797, 800 (6th Cir.2000). Mere allegations or denials in the non-movant's pleadings will not meet this burden, nor will a mere scintilla of evidence supporting the non-moving party. Anderson, 477 U.S. at 248, 252, 106 S.Ct. 2505. Rather, there must be evidence on which a jury could reasonably find for the non-movant. McLean, 224 F.3d at 800 (citing Anderson, 477 U.S. at 252, 106 S.Ct. 2505).
In general, a presumption of correctness attaches to a tax assessment if the assessment is supported by a minimal evidentiary or factual foundation. United States v. Stonehill, 702 F.2d 1288 (9th Cir.1983). However, an assessment is "naked" and "beyond saving" when "the records supporting an assessment are excluded from evidence, ... or are nonexistent, ..., so that the basis upon which an assessment is calculated is beyond the knowledge of the court." United States v. Schroeder, 900 F.2d 1144, 1149 (7th Cir. 1990).
Although courts recognize that the loss of the administrative file may mean that an assessment lacks a factual foundation, loss of the file does not necessarily create a "naked assessment." Cook v United States, 46 Fed.Cl. 110, 114 (Ct. Fed.Cl.2000). When the government produces evidence to support the assessment in lieu of the lost file, demonstrating that the assessment has a "foundation in fact," then the presumption of correctness applies. Id. at 115. The burden of proof then shifts to the taxpayer to show that the assessment is arbitrary, erroneous or excessive. Helvering v. Taylor, 293 U.S. 507, 55 S.Ct. 287, 79 L.Ed. 623 (1935). If the taxpayer rebuts the presumption, it disappears. Stonehill at 1294. The burden of proving the deficiency then reverts to the government. Id.
The Magistrate said the Court lacked jurisdiction under the Tax Equity and Fiscal Responsibility Act of 1982, P.L. 97-248 ("TEFRA") to consider Plaintiff's arguments, because Plaintiff presented no evidence on which a reasonable fact finder could conclude that the 1980 assessment was for anything other than a partnership item.
Plaintiff argues the Magistrate...
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