US v. Langert

• Decision Date: 10 October 1995
• Docket Number: Civ. No. 3-94-1464.
• Citation: 902 F. Supp. 999
• Parties: UNITED STATES of America, Plaintiff, v. Donald V. LANGERT, Linda M. Langert, TCF Mortgage Corporation, and the Minnesota Department of Revenue, Defendants.
• Court: U.S. District Court — District of Minnesota

902 F. Supp. 999

UNITED STATES of America, Plaintiff, v. Donald V. LANGERT, Linda M. Langert, TCF Mortgage Corporation, and the Minnesota Department of Revenue, Defendants.

Civ. No. 3-94-1464.

United States District Court, D. Minnesota, Third Division.

August 22, 1995.

Order Modifying Judgment October 10, 1995.

Stephen P. Kranz, Tax Division, United States Department of Justice, Washington, DC, for plaintiff.

Donald V. Langert, pro se.

Thomas L. Iliff, Iliff Law Offices, Bloomington, Minnesota, for defendant Linda M. Langert.

MEMORANDUM OPINION AND ORDER

KYLE, District Judge.

Introduction

Before the Court is the Plaintiff United States of America's ("the United States") Motion for Summary Judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. The United States filed suit in this Court pursuant to sections 7401, 7402, and 7403 of the Internal Revenue Code ("the Code"), 26 U.S.C. §§ 7401-7403. In Count I of the Complaint, the United States seeks to reduce to judgment tax assessments made against defendants Donald V. Langert and Linda M. Langert for unpaid income taxes and civil penalties from the years 1978 through 1983. In Count II of the Complaint, the United States requests that the Court foreclose upon a tax lien placed on certain real property owned by the Langerts and order a sale of the property. The United States further requests that the Court order a distribution of the proceeds of the sale. The parties — other than the Langerts — have agreed to the relative priorities of their interests in the property by a stipulation (Doc. No. 16). For the reasons set forth below, the Court will grant the motion.

Background

Donald V. Langert and Linda M. Langert presently own, as joint tenants with right of survivorship, real property legally described as "Lot 5, Block 2, Arcadian Acres 2nd Addition, Anoka County, Minnesota," and located at 18450 Jivaro Street N.W., Anoka, Minnesota 55303 (hereinafter "the property"). The Langerts received a warranty deed for the property from Ralph and Lilliam Pearson on May 26, 1976. (Gov't Ex. 1.) On May 28, 1976, the Langerts granted a mortgage against the property to Twin City Federal Savings and Loan Association ("TCF"); the mortgage was recorded on June 15, 1976 with the Anoka County Recorder. (Gov't Ex. 2.)

The Langerts failed to file individual federal income tax returns for the tax years 1978 through 1982.¹ See Declaration of David Sussman, ¶ 3 (Gov't Ex. 5). On June 20, 1983, the United States assessed a civil penalty against Donald Langert individually in the amount of $500.00. Id., ¶ 4. On April 13, 1984, the United States sent Notices of Assessment to Donald Langert individually for the tax years 1978 through 1980. Id. On July 11, 1984, the Anoka County Recorder recorded a federal tax lien against the property with respect to the amounts owed by Donald Langert under those assessments; the lien was refiled on February 9, 1990. (Gov't Ex. 4.) On May 24, 1988, the United States sent Notices of Assessment to the Langerts jointly for the 1981 and 1982 tax years. Sussman Decl., ¶ 4. On March 11, 1994, the Anoka County Recorder recorded a federal tax lien against the property with respect to the amounts indicated as being owed by the Langerts, filing jointly, under those assessments. (Gov't Ex. 4.) On June 20, 1993, tax liens in favor of the United States arose under 26 U.S.C. § 6321 for liability assessed against Donald V. Langert for a civil penalty due for the year ending April 1983.

As of June 20, 1995, Donald Langert continued to owe the sum of $113,496.32, plus additional interest and additions accruing pursuant to law after August 1, 1994.² Sussman Decl., ¶ 5. As of July 20, 1995, Linda M. Langert owed the sum of $3,143.53, plus additional statutory interest and accruals.³ Second Decl. of David Sussman, ¶¶ 3, 4.

Analysis

I. Standard of Decision

Rule 56 of the Federal Rules of Civil Procedure governs motions for summary judgment. Under that Rule:

summary judgment shall be rendered 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 a judgment as a matter of law.

Fed.R.Civ.P. 56(c). Summary judgment is to be granted only where the evidence is such that no reasonable jury could return a verdict for the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).

Initially, the movant bears the burden of bringing forward sufficient evidence to establish that there are no genuine issues of material fact and that the movant is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). In evaluating the movant's showing, the evidence offered by the non-moving party is to be believed and all justifiable inferences therefrom are to be drawn in a light most favorable to that party. Matsushita Elec. Indus. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 1357, 89 L.Ed.2d 538 (1986). Where a moving party, with whatever it provides the court, makes and supports a motion for summary judgment in accordance with Rule 56, a party opposing the motion may not rest upon the allegations or denials of its pleadings; rather, the nonmovant must "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256, 106 S.Ct. at 2514; Krenik v. County of Le Sueur, 47 F.3d 953, 957 (8th Cir.1995). Accordingly, the nonmovant "must make a sufficient showing on every essential element of its case for which it has the burden of proof at trial." Wilson v. Southwestern Bell Telephone Co., 55 F.3d 399, 405 (8th Cir.1995). A summary judgment motion should be denied, however, unless the court is convinced that there is no evidence to sustain recovery in any circumstances. Foster v. Johns-Manville Sales Corp., 787 F.2d 390, 392 (8th Cir.1986).

II. The Establishment of the Langerts' Liability for Taxes Owed

When a taxpayer fails to file a tax return, the IRS may reconstruct the income of that individual through any reasonable method. See 26 U.S.C. § 446(b); Holland v. United States, 348 U.S. 121, 125, 75 S.Ct. 127, 130, 99 L.Ed. 150 (1954). The Langerts do not dispute that tax returns were not filed for the tax years 1978 to 1982. In this case, the IRS has reconstructed the Langerts' income for that period and assessed deficiencies, interest and penalties in the amounts set forth above. The United States has submitted official Certificates of Assessments and Payments for the Langerts' accounts. These Certificates are sufficient to establish the validity of the assessments. United States v. Gerads, 999 F.2d 1255, 1256 (8th Cir.1993), cert. denied, ___ U.S. ___, 114 S.Ct. 1300, 127 L.Ed.2d 652 (1994). Each of the parties has raised legal challenges to the validity of the assessments; the Court will consider each argument in turn.

A. The Federal Government's Authority to Impose Income Taxes

Donald Langert argues that he does not owe federal individual income taxes because the Internal Revenue Service has failed to identify any agency regulation which entitles the IRS to impose a tax upon him. Plaintiff argues that the statutes which comprise the Internal Revenue Code do not, in and of themselves, authorize the IRS to take any action; the IRS may only "implement" these statutes through the regulations contained in Title 26 of the Code of Federal Regulations.

The Court finds Plaintiff's "implementing regulation" argument without merit; it fundamentally misconstrues those provisions of the Internal Revenue Code which relate to the powers and duties of the Secretary of the Treasury, 26 U.S.C. § 7801(a),⁴ and the Commissioner of the Internal Revenue Service, 26 U.S.C. § 7802(a).⁵ Pursuant to Section 7805(a) of the Code, the Commissioner has broad authority to "prescribe all needful rules and regulations for the enforcement of the Code, including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue." 26 U.S.C. § 7805(a) (emphasis added); see also Commissioner of Internal Revenue v. Engle, 464 U.S. 206, 226-27, 104 S.Ct. 597, 604, 78 L.Ed.2d 420 (1984). Section 7805(a) is a general grant of authority by Congress to the Commissioner to promulgate — as necessary — "interpretive regulations" stating the agency's views of what the existing Code provisions already require. E.I. duPont de Nemours & Co. v. Commissioner of Internal Revenue, 41 F.3d 130, 135 & n. 20 (3th Cir.1994). Section 7805(a) does not require the promulgation of regulations as a prerequisite to the enforcement of each and every provision of the Code. The Commissioner's power to promulgate regulations pursuant to section 7805(a)

... "is not the power to make law," but only the power "to carry into effect the will of Congress as expressed by the statute." In cases where "the provisions of the Code are unambiguous, and its directions specific, there is no power to amend it by regulation."

Lovett's Estate v. United States, 621 F.2d 1130, 1135, 224 Ct.Cl. 32 (1980) (citations omitted). Thus, if the Congressional mandate of a Code provision is sufficiently clear, an interpretative regulation is not necessary. Russell v. United States, 95-1 U.S.Tax Cas. (CCH) ¶ 50,029, at 87,122, 1994 WL 750673 (W.D.Mich. Nov. 23, 1994).

Mr. Langert has failed to identify any ambiguity in any section of the Code pertaining to individual income tax which requires the promulgation of interpretive regulations. See 26 U.S.C. §§ 1, 6012, 6013, 6071(a), 6072(a), 6151(a). The Court concludes that Mr. Langert has failed to challenge the validity of the assessments made against him.

B. The "Innocent Spouse" Defense

Linda Langert argues that she is not jointly liable for the taxes assessed for the years 1981 and 1982 because she is an ...