U.S. v. Vacante
| Decision Date | 20 May 2010 |
| Docket Number | No. 1:08-CV-01349-OWW-DLB,1:08-CV-01349-OWW-DLB |
| Citation | 717 F.Supp.2d 992,105 A.F.T.R.2d 2010 |
| Court | U.S. District Court — Eastern District of California |
| Parties | UNITED STATES of America, Plaintiff, v. Frank A. VACANTE, et al., Defendants. |
Adair Ford Boroughs, Guy Patrick Jennings, U.S. Department of Justice, Washington, DC, for Plaintiff.
Frank Vacante, Hilmar, CA, pro se.
Ute Vacante, Hillmar, CA, pro se.
Darryl J. Horowitt, Coleman & Horowitt, LLP, Fresno, CA, Deirdre McGrath, Modesto, CA, Marc Merrill Hartley, Law Office of Marc Hartley, Stockton, CA, Ronald William Hillberg, Law Office of Ronald W. Hillberg, Turlock, CA, Jane Ann O'Donnell, Deputy Attorney General, Edmund G. Brown Jr., Attorney General of California, Sacramento, CA, Clarisa M. Rockwell, Los Angeles, CA, Roger S. Matzkind, Merced, CA, Jeffrey Scott Allison, Houser and Allison, Irvine, CA, for Defendants.
Adair Ford Boroughs, U.S. Department of Justice, Washington, DC. for Defendant and Counter Defendant.
Plaintiff United States filed this action to reduce federal tax assessments to judgment and foreclose federal tax liens on real property on June 10, 2008. The tax assessments at issue are against husband and wife Frank and Ute Vacante and their alleged alter egos, Central Valley Insurance Services, Inc. ("CVIS"), and Instant Services, Inc.
Before the Court for decision are several motions. The United States moves for summary judgment against DefendantsFrank Vacante and Ute Vacante, proceeding pro se, seeking to reduce to judgment individual tax liabilities for tax years 2000 and 2004. In addition to reducing to judgment the individual tax liabilities assessed against Frank and Ute Vacante, Plaintiff moves to reduce to judgment Frank Vacante's Form 941 Employment Tax Liabilities for the tax periods ending June 30, 1993, September 30, 1993, December 31, 1993, March 31, 1994, June 30, 1994, September 30, 1994, and December 31, 1994; Plaintiff also seeks to reduce to judgment Frank Vacante's Form 940 Federal Unemployment Tax ("FUTA") liabilities for the tax periods ending December 31, 1993 and December 31, 1994.
Pro se Defendants' first motion, filed on November 30, 2009, seeks entry of summary judgment on each cause of action contained in the Second Amended Complaint ("SAC"). Defendants argue that summary judgment is appropriate because they did not have the ability to pay CVIS's taxes, did not have knowledge of the past due amounts, and did not take part in the financial decisions of CVIS.
Defendants' second motion, filed on December 16, 2009, also seeks to dismiss the entire SAC on grounds that: (1) Defendants were denied their due process rights during an unidentified appeals proceeding; (2) Defendants have a binding pre-nuptial agreement; (3) Revenue Officers Randy Reese and John Certini made material misrepresentations and false statements during their investigations; and (4) IRS manager Martha Rodriguez failed to properly supervise Revenue Officers Reese and Certini.
Oral argument on these motions was held on February 26, 2010, during which Mr. Vacante requested an extension of time to file a supplemental opposition to the United States' motion. Mr. Vacante's request was granted and the Court set a supplemental briefing schedule on the United States' summary judgment motion only.1 Although the parties' arguments in the original and supplemental briefing are largely the same, there is one important distinction: Based on the employment tax figures provided by Mr. Vacante in his supplemental opposition, the United States reduced his Form 941 tax liabilities for the seven tax quarters in 1993 and 1994. The government also recalculated Mr. Vacante's Form 940 tax liabilities for the 1993 and 1994 tax years. However, the tax adjustments were limited to Mr. Vacante's employment tax liabilities, i.e., the figures did not impact or reduce the Vacantes' individual income tax liabilities for tax years 2000 and 2004.
This case arises out of the government's attempt to reduce to judgment certain federal tax assessments made against Frank Vacante, Ute Vacante, CVIS and Instant Services, Inc., and to foreclose federal tax liens arising from federal tax liabilities against five parcels of property owned by the Vacantes.
Frank and Ute Vacante ("the Vacantes"), husband and wife have, since 1987, owned and operated a number ofinsurance businesses beginning in the 1980's. (F. Vacante Dep. at 26:20-30:9, 34:5-35:24.) In 1993 and 1994, Frank Vacante's insurance business operated as a sole proprietorship-VIF Insurance-and employed several individuals, including Ute Vacante, Cynthia Burris and Dan Belew III. (PSUF 15, 29-33; Doc. 145, 11:2-11:3.) In 1995, the Vacante's incorporated the insurance business as Central Valley Insurance Services, Inc. (F. Vacante Dep. at 68:5-68:10.) The California Department of Insurance closed Central Valley Insurance Services, Inc. in 2001, at which time it was absorbed by Instant Services, Inc., an existing real estate company owned by the Vacantes. ( Id. at 70:5-70:12, 255:3-257:12.) The Vacantes operated Instant Services, Inc. from 2001 through 2005, issuing a number of insurance policies and engaging in other financially-related transactions.3
Following an investigation into the Vacantes' delinquent taxes, the IRS assessed employment tax liabilities and penalties against Frank Vacante relating to VIF Insurance's outstanding payroll liabilities for seven tax periods from June 30, 1993 through December 31, 1994. The IRS determined that Frank Vacante failed to properly assess and pay his federal employment taxes-Form 940 and 941-based on his 1992 Form 1040 tax return, Ute Vacante's 1994 W-2 and Form 1040 tax return, the business records of CPA Daniel Burke, and the deposition testimony of Cynthia Burris and Dan Belew III. The IRS's investigation also determined that the Vacantes failed to properly pay their individual income taxes for the 2000 and 2004 tax years.
At oral argument on February 26, 2010, Mr. Vacante disputed these "estimated" amounts, and requested an extension of time to oppose the United States' motion. On March 12, 2010, as part of his supplemental briefing, Mr. Vacante provided figures for wages paid to workers Dan Belew and Cynthia Burris by VIF Insurance in 1993 and 1994. He described the payments as "commissions." According to Mr. Vacante, Mr. Belew and Ms. Burris were paid $26,095-$16,495 and $9,600-in 1993. As to the 1994 tax year, Mr. Vacante contends that the two employees were paid commissions of $17,479 (Mr. Belew) and $9,600 (Ms. Burris), for a total of $27,079.
The United States accepts Mr. Vacante's tax figures for 1993 and 1994, however, it contends that Mr. Vacante omits $75,000 in wages paid to Mrs. Vacante in 1994. The United States contends that Mrs. Vacante signed, under penalty of perjury, a bank loan document stating that she "received $75,000 in wages from VIF insurance in 1994." The United States also submitted VIF Insurance's W-2 for 1994, which stated that Ute Vacante received $75,000 in wages from VIF insurance in 1994. According to the United States, the operative wage figures for the 1993 and 1994 tax years are $26,095 and $102,079. The $26,095 and $102,079 paid in wages are the foundation for Mr. Vacante's 1993 and 1994 employment tax liabilities (Form 940 and 941).
In late 2006, the IRS, pursuant to 26 U.S.C. § 6020(b), assessed income tax liabilities and penalties against Frank Vacante and Ute Vacante for the 2000 tax year. (Doc. 120, Reece Dec. ¶ 4.) The assessments were based on Frank and Ute Vacante's failure to file Form 1040 IndividualTax Returns for the tax year ending December 31, 2000. ( Id.)
On April 7, 2008, the IRS received the Vacantes' Joint Form 1040 Individual Tax Return for the tax year ending December 31, 2000. (PSUF 1.) The IRS accepted the Vacantes' untimely return and abated the earlier assessments to the extent they conflicted with the joint return. (Reece Dec. ¶ 4.) The only offset to the Vacantes' 2000 tax liability was a $1.07 overpayment applied by the IRS on March 28, 2007. (Doc. 120, Reece Dec. ¶ 6.)
On November 16, 2009, the IRS determined that Frank and Ute Vacante failed to make estimated income tax payments for the 2000 tax year and issued a "Form 4340, Certificate of Assessments, Payments and Other Specified Matters for Frank A & Ute G. Vacante for U.S. Individual Income Tax Return (Form 1040), for the tax period ending December 31, 2000." (Reece Dec. ¶ 6; Doc. 120-3.) The Certificates of Assessments (known as "Form 4340s") detail the amount in taxes the IRS believes the Vacantes owe for the 2000 tax year, as well as any penalties, costs, and interest assessed to the Vacantes due to their failure to make timely payments. ( Id.) As of December 1, 2009, the total outstanding balance of the federal income tax liabilities due from Frank and Ute Vacante for the 2000 tax year, including interest, is $7,102.58.4 (Reece Dec. ¶ 26; Doc. 121-3.)
Defendants dispute the accuracy of the IRS assessments, arguing that their individual income tax issues were summarily resolved pursuant to a $52,064.67 check they sent to the IRS on October 29, 2004. According to the United States, however, the $52,064.67 was used to satisfy the Vacantes' outstanding tax liabilities for the 1993-1999 and 2001 years. It contends that the Vacantes' 2000 and 2004 tax liabilities were not satisfied by the October 29, 2004 payment.
On June 5, 2007, the IRS received the Vacantes' Joint Form 1040 Individual Tax Return for the tax year ending December 31, 2004. (PSUF 9.) After reviewing the joint return, the IRS determined that Frank and Ute...
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