United States v. Nesline, Civ. A. No. M-79-1768.

CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)
Writing for the CourtJAMES R. MILLER, Jr.
Citation590 F. Supp. 884
PartiesUNITED STATES of America v. Joseph A. NESLINE.
Docket NumberCiv. A. No. M-79-1768.
Decision Date12 July 1984

590 F. Supp. 884

UNITED STATES of America
v.
Joseph A. NESLINE.

Civ. A. No. M-79-1768.

United States District Court, D. Maryland.

July 12, 1984.


590 F. Supp. 885

J. Frederick Motz, U.S. Atty., D.Md., Baltimore, Md., Thomas M. Lawler, Tax Div., U.S. Dept. of Justice, Washington, D.C., for plaintiff.

Vincent J. Fuller, Kendra E. Heymann, and Williams & Connolly, Washington, D.C., Andrew Jay Graham and Kramon & Graham, P.A., Baltimore, Md., for defendant.

MEMORANDUM AND ORDER

JAMES R. MILLER, Jr., District Judge.

The United States brought this action, pursuant to 28 U.S.C. §§ 1340, 1345 and I.R.C. § 7402, to recover taxes allegedly owed by the defendant, Joseph A. Nesline, for the tax years 1971 and 1972. The defendant has filed a motion for judgment on the pleadings,1 Rule 12(e), Fed.R.Civ.P., and the United States has moved for summary judgment,2 Rule 56. Having considered the parties' memoranda and the government's evidentiary materials, the court concludes that no hearing is necessary, Local Rule 6(E).

In his answer to the complaint,3 the defendant admitted that he has not paid the taxes, interest, and penalties alleged to be due and that such are in fact owed. The defendant also admitted the timeliness of the notices of assessment and demands for payment. The only issue remaining in this case concerns whether the government's claim is barred by the statute of limitations. To resolve this issue, the court must examine the application of the suspension rule of I.R.C. § 6503(c) to the six year period of limitations set out in I.R.C. § 6502(a)(1).

The statute of limitations question presented in this case has two aspects. The first concerns the validity and the application of Treas.Reg. § 301.6503(c)-1(b) (1971) (codified at 26 C.F.R. § 301.6503(c)-1(b) (1980)). Since the court has decided that Treas.Reg. § 301.6503(c)-1(b) is invalid, the court need not consider its application to the circumstances of this case. The second aspect concerns the application of I.R.C. § 6503(c). Since the government's evidentiary showing falls short of demonstrating conclusively that the defendant was absent from the United States for a continuous period of at least six months, its motion for summary judgment will be denied. On the other hand, because the government may be able to establish at trial or in an appropriate evidentiary proceeding that the defendant was so absent from the United States, the defendant's motion will likewise be denied.

I. Overview

The defendant filed his tax returns for the tax years 1971 and 1972 on June 26, 1972 and July 9, 1973, respectively. Both returns indicated deficiencies and the defendant was assessed for the same on the date the returns were filed. In addition, the defendant was assessed interest and penalties, I.R.C. § 6201 et seq. The complaint in this action was filed on September 21, 1979, and the defendant was ultimately served on January 22, 1980.

In the absence of a valid waiver by the taxpayer under I.R.C. § 6502(a)(2), the government must generally begin a court proceeding to collect unpaid taxes "within 6 years after the assessment of the tax," I.R.C. § 6502(a)(1). See United States v. Posner, 405 F.Supp. 934, 935-36 (D.Md. 1975). The running of the six year limitations period may be suspended, however, if one of the provisions of I.R.C. § 6503 applies. The suspension provision relied on by the government in this case is I.R.C. § 6503(c), which states:

590 F. Supp. 886
"Taxpayer outside United States. The running of the period of limitations on collection after assessment prescribed in section 6502 shall be suspended for the period during which the taxpayer is outside the United States if such period of absence is for a continuous period of at least 6 months. If the preceding sentence applies and at the time of the taxpayer's return to the United States the period of limitations on collection after assessment prescribed in section 6502 would expire before the expiration of 6 months from the date of his return, such period shall not expire before the expiration of such 6 months."

(Emphasis supplied).

The Commissioner has interpreted this provision such that a taxpayer will be deemed absent from the United States, for the purpose of I.R.C. § 6503(c), "if he is generally and substantially absent from the United States, even though he makes casual temporary visits during that period," Treas.Reg. § 301.6503(c)-1(b). In other words, although the Code requires the taxpayer's absence to be continuous before the limitations period will be suspended, the treasury regulation would suspend the limitations period if the taxpayer was only "generally and substantially" absent from the United States.

Relying on the defendant's passport records, customs declarations, and other evidentiary materials,4 the government contends that it has shown that the defendant was "generally and substantially" absent from the United States from January 27, 1978 through March 26, 1979, a period of more than six months. According to the government, since there were less than six months to run on the limitations period when the defendant returned to this country in March of 1979, under I.R.C. § 6503(c) the government had six months from March 26, 1979, to begin this action. The complaint having been filed on September 21, 1979, the government claims that this suit was timely filed.

The defendant asserts that Treas.Reg. § 301.6503(c)-1(b) is invalid, as it is contrary to the plain language of I.R.C. § 6503(c) and expands the scope of that subsection's suspension rule. According to the defendant, the six year period of limitations set out in I.R.C. § 6502(a)(1) bars any collection suit for the tax years 1971 and 1972, because the government has not shown that the defendant was continuously absent from the United States for a period of at least six months so as to suspend the statute of limitations by operation of I.R.C. § 6503(c).

II. Discussion

A. General Considerations

As an initial matter, it is necessary to determine when this action was "commenced" for the purpose of calculating any tolling of the statute of limitations. As noted above, the complaint was filed with the court on September 21, 1979. The initial process, issued by the Clerk on that same date, was sent by the government to the defendant, by registered mail, on September 24, 1979. As of January 7, 1980, however, the government had neither received from the Postal Service the return receipt card nor had the registered letter been returned unclaimed.5 Process was reissued on January 15, 1980, and was received by the defendant on January 22, 1980.6

The Supreme Court has not squarely confronted the question of whether, in a case to enforce a right created by a federal statute, the mere filing of the complaint, pursuant to Rule 3, tolls the running of the statute of limitations. See, e.g., Walker v. Armco Steel Corp., 446 U.S. 740, 751 n. 11, 100 S.Ct. 1978, 1985 n. 11, 64 L.Ed.2d 659 (1980); Ragan v. Merchants Transfer & Warehouse Co., 337 U.S. 530, 533, 69 S.Ct. 1233, 1234, 93 L.Ed. 1520 (1949). The lower

590 F. Supp. 887
federal courts have reached differing results depending on the particular circumstances of the case. Some hold that the mere filing of the complaint is sufficient, while others require the plaintiff to exercise reasonable diligence in obtaining service or the effect of filing the complaint will be nullified. See cases collected in 4 C. Wright & A. Miller, Federal Practice and Procedure §§ 1053, 1056 (1969 & 1983 Supp.). Assuming that reasonable diligence in obtaining service is required under the Federal Rules in order to commence the action when the complaint is filed and toll the statute of limitations, the court finds that the government's efforts to serve defendant, under the circumstances of this case, were reasonable. See generally 10 J. Mertens, The Law of Federal Income Taxation § 57.82 (1976 Rev.)

It is settled that a taxpayer has the burden of pleading and proving the running of the statute of limitations as a bar to the collection of a properly assessed tax deficiency. See, e.g., United States v. Gurley, 415 F.2d 144, 147 (5th Cir.1969); 10 J. Mertens, The Law of Federal Income Taxation § 57.31 (1976 Rev.). The defendant included such a defense in his answer to the complaint, and the government concedes that this proceeding did not begin within six years of the assessments for the tax years at issue, I.R.C. § 6502(a)(1). Consequently, the government can maintain this action only if the six year period of limitations was suspended by the operation of I.R.C. § 6503(c).

The Fourth Circuit has noted, but has not decided, the issue of which party bears the burden of proving an extension of, or an exception to, the statute of limitations in a tax case. C.I.R. v. Estate of J.B. Williams, 216 F.2d 598, 599 (4th Cir.1954). The view which will be adopted by this court is that "the burden of proving any exception to the running of the statute ... must be borne by the party seeking the benefit of it, in this case the Government." 10 J. Mertens, The Law of Federal Income Taxation § 57.92 at 178 (1976 Rev.) (footnote omitted) (emphasis in original). See United States v. Conry, 631 F.2d 599, 600 (9th Cir.1980) (per curiam); Yagoda v. C.I.R., 331 F.2d 485, 489 n. 2 (2d Cir.1964); Murray v. United States, 292 F.2d 602, 604 (1st Cir.1961).

B. Treasury Regulation § 301.6503(c)-1(b)

In the usual case, courts "must defer to Treasury Regulations that `implement the congressional mandate in some reasonable manner.'" C.I.R. v. Portland Cement Co., 450 U.S. 156, 169, 101 S.Ct. 1037, 1045, 67 L.Ed.2d 140 (1981), quoting United States v. Correll, 389 U.S. 299, 307, 88 S.Ct. 445, 450, 19 L.Ed.2d 537 (1967). Accord, United States v. Vogel Fertilizer Co., 455 U.S. 16, 24, 102 S.Ct. 821, 827, 70 L.Ed.2d 792 (1982). Such deference is particularly appropriate when Congress either fails to supply needed definitions or uses words...

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2 practice notes
  • Thibodeau v. Pierce, Civ. A. No. 87-0319 L.
    • United States
    • United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Rhode Island
    • March 30, 1988
    ...of Applebaum v. Commissioner of Internal Revenue, 724 F.2d 375, 381 (3d Cir.1983) (Adams, J., concurring); United States v. Nesline, 590 F.Supp 884, 887 (D.Md.1984) In the present case Congress has provided that a mortgagor under the provisions of the National Housing Act relevant here "sha......
  • Reinhart v. Comm'r, T.C. Memo. 2014-218
    • United States
    • United States Tax Court
    • October 16, 2014
    ...967 (2005). Petitioner further contends that section 301.6503(c)-1(b), Proced. & Admin. Regs., is invalid. See United States v. Nesline, 590 F. Supp. 884 (D. Md. 1984). C. Discussion There is no need to decide whether section 301.6503(c)-1(b), Proced. & Admin. Regs., is valid. Assuming, for......
2 cases
  • Thibodeau v. Pierce, Civ. A. No. 87-0319 L.
    • United States
    • United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Rhode Island
    • March 30, 1988
    ...of Applebaum v. Commissioner of Internal Revenue, 724 F.2d 375, 381 (3d Cir.1983) (Adams, J., concurring); United States v. Nesline, 590 F.Supp 884, 887 (D.Md.1984) In the present case Congress has provided that a mortgagor under the provisions of the National Housing Act relevant here "sha......
  • Reinhart v. Comm'r, T.C. Memo. 2014-218
    • United States
    • United States Tax Court
    • October 16, 2014
    ...967 (2005). Petitioner further contends that section 301.6503(c)-1(b), Proced. & Admin. Regs., is invalid. See United States v. Nesline, 590 F. Supp. 884 (D. Md. 1984). C. Discussion There is no need to decide whether section 301.6503(c)-1(b), Proced. & Admin. Regs., is valid. Assuming, for......

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