United States v. Mason

• Decision Date: 27 November 2019
• Docket Number: No. 2:19-cv-02351-TLP-cgc,2:19-cv-02351-TLP-cgc
• Parties: UNITED STATES OF AMERICA, Plaintiff, v. MICHAEL D. MASON, REGAN D. REEDY, and CAPITAL ONE BANK (USA), N.A. Defendants.
• Court: U.S. District Court — Western District of Tennessee

UNITED STATES OF AMERICA, Plaintiff, v. MICHAEL D. MASON, REGAN D. REEDY, and CAPITAL ONE BANK (USA), N.A. Defendants.

No. 2:19-cv-02351-TLP-cgc

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TENNESSEE WESTERN DIVISION

November 27, 2019

ORDER GRANTING MOTION FOR SUMMARY JUDGMENT

Plaintiff United States of America moves for summary judgment against Defendant Michael D. Mason to recoup $930,041 in unpaid taxes and associated statutory penalties that Defendant failed to pay for tax years 2000 to 2004. (ECF No. 14.) Plaintiff also seeks to foreclose federal tax liens against real property that Defendant allegedly owned when the Internal Revenue Service ("IRS") assessed Defendant's tax liabilities. (Id.) Defendant has responded. (ECF No. 15.) And Plaintiff has replied to Defendant's response. (ECF No. 16.) For the reasons below, the Court GRANTS Plaintiff's motion for summary judgment.

PROCEDURAL BACKGROUND

Plaintiff sued Defendant to recover tax liabilities that Defendant owes to the federal government. (ECF No. 1.) Defendant moved to dismiss Plaintiff's action arguing that, because the IRS did not file notices of deficiency in his taxpayer records, Plaintiff lacked the authority to sue. (ECF No. 7, at PageID 28.) He also argued that the Court lacked jurisdiction to adjudicate this case because, in another case brought by Defendant against the IRS, the U.S. Tax Court found that it had no jurisdiction over the matter. (ECF No. 7-1 at PageID 32.) This Court found these arguments meritless and denied Defendant's motion to dismiss. (ECF No. 22.)

Turning to this motion for summary judgment, Plaintiff requests that the Court reduce to judgment Defendant's income tax liability. (ECF No. 14.) It also requests that the Court authorize the foreclosure and judicial sale of some parcels of real estate in Cordova, Tennessee ("Cordova Property"). For the reasons below, the Court GRANTS Plaintiff's requests and therefore its motion for summary judgment in whole.

STATEMENT OF FACTS

Plaintiff submitted an exhaustive record about Defendant's tax liability and his ownership interest in the Cordova Property, which Defendant does not contest.¹ The Court quotes these facts from Plaintiff's Concise Statement of Undisputed Facts (ECF No. 14-1) verbatim:²

A. Mason's Income Tax Liability is $930,041 as of April 22, 2019.

1. A delegate of the Secretary of the Treasury made income tax assessments against Defendant Michael D. Mason ("Mason") based on the income tax returns he filed for the years 2000 to 2004. In addition, the fraudulent failure-to-file penalty provided by 26 U.S.C. § 6651(f) was assessed against him. Theseassessments for taxes and penalties, together with the outstanding balance owed as of April 22, 2019, for each year are listed as follows:

Tax

Period

Date of

Assessment

Type of

Assessment

Amount of

Assessment

Balance

Outstanding as

of April 22, 2019

2000

6/8/2009

Income Tax

$47,249

$91,356

8/12/2009

§ 6651(f) penalty

$15,449

2001

6/8/2009

Income Tax

$54,641

$223,961

8/12/2009

§ 6651(f) penalty

$39,812

2002

6/8/2009

Income Tax

$46,652

$186,834

8/12/2009

§ 6651(f) penalty

$34,989

2003

6/8/2009

Income Tax

$54,552

$209,703

8/12/2009

§ 6651(f) penalty

$40,914

2004

6/8/2009

Income Tax

$59,267

$218,187

8/12/2009

§ 6651(f) penalty

$44,450

Total: $930,041

Ex. 101-105 (Certificates of Assessments, Payments, and Other Specified Matters (Form 4340)); Ex. 106 (Transcripts of Accounts for the years 2000 to 2004.)

2. Proper notice and demand for payment of the tax assessments described in paragraph 1, above, was given to Mason. Ex. 101-105.

3. The amount of the income tax assessed was based on Mason's sworn income tax returns. Ex. 107-111, Income Tax Return (Forms 1040), line 57. For example, Mason reported a total tax of $47,249 on his income tax return for that year, and the IRS assessed that amount as against him. Compare Ex. 101, Form 4340, with Ex. 107 Form 1040, line 57. Mason signed each return under penalty of perjury, averring that it was true, correct, and complete. Id.

4. Despite notice and demand for payment of the assessments described in paragraph 1, above, Mason has failed to pay the full amounts due and owing, and, as of April 22, 2019, he was indebted to the United States in the amount of $930,041. Id.

B. Mason Is Liable for the Failure-to-File Penalty.

5. For the years 2000 to 2004, Mason was required to file a return or request an extension by April 15^th of the subsequent year. 26 U.S.C. § 6702.6. Mason did not file the income tax returns for the tax years 2000 to 2004 on April 15 of the subsequent year. Ex. 101-105.

7. Mason eventually filed his federal income tax returns for the 2000 to 2004 tax year on a timely basis. Ex. 107-111, Form 1040s, p. 2 (jurat).

8. Mason was indicted on six counts of attempting to evade or defeat his federal income taxes for the 2000 to 2004 tax years under 26 U.S.C. § 7201. Ex. 112 (indictment).

9. Mason pleaded guilty to one count of attempting to evade or defeat the federal income tax. Ex. 113 (plea agreement). In part of his plea agreement, Mason admitted that he had willfully attempted to evade and defeat his income tax liability for 2003 by attempting to conceal his true and correct income by filing a false employee Withholding Allowance Certificates (Form W-4) with his employer. Id.

10. As a further condition of his plea agreement, Mason admitted that a federal tax loss was incurred by the United States for purpose of determining criminal restitution against him in the amount of $229,064 for 2000 to 2004. Id. A criminal restitution judgment was entered in that amount on February 11, 2009. Ex. 114.

11. During his change of plea hearing, the prosecutor was asked what was the factual basis underlying the indictment. Ex. 115, Change of Plea Hrg. Tr., pp. 14:7-17:3. The prosecutor made the following proffer:

Had this case proceeded to trial, essentially the proof would have shown that the defendant, Mr. Mason, at the time period set forth in the indictment was a pilot employed by Federal Express, that he attempted to evade and defeat the determination of his 2000 through his 2004 income tax liabilities by failing to file income tax returns on the due date of April 15th of the said tax years set out in the indictment and by failing to make payment of the outstanding tax liability. The defendant's conduct was coupled with affirmative acts of evasion in furtherance thereof including the filing of false W4 forms using nominee entities and individuals and engaging in substantial cash transactions to conceal the disposition of his income.

Specifically, the proof would have shown that this investigation began in approximately July 2005 upon a referral from the Internal Revenue Service Examination Division. The subsequent criminal investigation revealed that Mr. Mason had failed to file income tax returns for tax years 2000 through 2004. The proof would have shown for these tax years defendant earned gross taxable incomeabove the statutory gross income amount requiring an individual to file a federal income tax return. The proof would have further shown that for these tax years, Mr. Mason signed false W4 employee withholding forms for each tax year claiming that he was exempt from federal income tax withholding on his wages thereby effectively ceasing any federal withholding from his paycheck.

The proof would have further shown that once Mr. Mason became aware of the investigation by the Internal Revenue Service into his failure to file these tax returns and his filing of the false W4s, that he sought to evade the determination of his tax due by committing several acts of evasion. First of all, we would have shown that the defendant formed entities which were used as nominees. The nominee entity names that he formed were MDM-01, LGM- 01 and CPM-01. Mr. Mason opened bank accounts under these nominee names, utilized these accounts for depositing his paychecks and also for his personal expenditures.

Proof would further have shown that Mr. Mason soon thereafter rented a postal mailbox in the name of the nominee entities and changed the mailing address for all the bank accounts that he had to this post office box. Mr. Mason also went from having direct payroll deposits from Federal Express to receiving paper payroll checks which he would then deposit into the nominee accounts or accounts that he also had opened in either his wife or son's names. The proof would have shown after the manual deposits were made of his paychecks, substantially all the payroll checks would be systematically withdrawn in U.S. currency.

The proof would have also shown another act of evasion in that Mr. Mason employed an attorney here in Shelby County to prepare legal documents making it appear as if Mr. Mason's residence in Cordova was mortgaged to a third-party company known as LGM-01, thus attempting to shelter his residence from any potential IRS collection efforts. The evidence would have shown that the entity LGM-01 was a sham or nominee entity and that no money had actually changed hands and that the lien that had been placed against his residence was in effect nonexistent.

As a result of all these and other affirmative acts of evasion, the proof would have shown that there is a tax due and owing to the United States for tax years 2000 through 2004 of approximately $229,064.48.

Id., pp. 14:7-16:24.

12. The Court asked Mason if these statements were "correct and accurate," and Mason stated "yes." Id., pp. 16:25-17:2. Mason was under oath when he affirmed the recitation of the facts the United States could prove beyond a reasonable doubt was correct and accurate. Id., pp. 3:19-4:8.

C. Federal Tax Liens Attach to the Real Property.

13. Federal tax liens arose on the dates of each assessment described in paragraph 1, above, and attached to all of Mason's property and rights to property, including any after-acquired interest in the property. See 26 U.S.C. §§ 6321, 6322.

14. On July 16, 1987,

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