Westenberg v. United States, Civ. No. 2370.

Decision Date10 April 1968
Docket NumberCiv. No. 2370.
Citation285 F. Supp. 915
PartiesCharles E. WESTENBERG, Plaintiff, v. UNITED STATES of America, Defendant.
CourtU.S. District Court — District of Arizona

James Powers, Powers & Rehnquist, Phoenix, Ariz., for plaintiff.

A. Jerry Busby, Tax Division, Justice Department, Washington, D.C., and Edward Davis, U.S. Atty., District of Arizona, Tucson, Ariz., for defendant.


KILKENNY, District Judge:

This is an action for refund of a "penalty" imposed on plaintiff pursuant to Section 6672 of the Internal Revenue Code of 1954.1 Defendant counterclaims for a claimed liability under the same section. Each of the parties waived a trial by jury.

The taxpayer is a citizen and a resident of the State of Arizona, United States of America, and is subject to the Internal Revenue Laws. Vi-Le-Bar Construction Co., Inc. was organized on May 1, 1962, to take over the contracting business of the taxpayer. The taxpayer was president of the said corporation and owned 90% of its stock. Robert W. Jansen was vice-president and owned the remaining 10% of the stock. E. Grace Smith was secretary-treasurer. When the corporate bank accounts were set up, the corporate resolution and signature cards went to the bank indicating that any of the above-named officers was authorized to sign checks. The corporation filed Employer's Quarterly Federal Tax Returns (Form 941) for withheld income and social security taxes for the second and third quarters of 1962 over the signatures of E. Grace Smith, secretary-treasurer, and for the fourth quarter of 1962 over the signature of the taxpayer, Charles E. Westenberg, President, showing employment tax liability as follows:

                2nd quarter             $15,943.67
                3rd quarter              12,542.36
                4th quarter               1,799.56
                Total                   $30,285.59

A depository receipt in the amount of $5,246.65 accompanied the return for the second quarter, leaving a second quarter balance of $10,697.02, which when added to the third and fourth quarter unpaid taxes of $12,542.36 and $1,799.56, accounted for the $25,038.94 in unpaid employment taxes. In contrast to the unpaid employment taxes of $25,038.94, the 100% penalty assessed against the taxpayer was $17,990.58, the difference is explained by the fact that the Government received payments which it applied against the second and third quarters to reduce the unpaid balance to $6,230.04 and $10,241.26, respectively. In addition, the difference is explained by the fact that the $1,799.56 unpaid corporate balance for the fourth quarter, the Government assessed $1,518.68 of this amount against the taxpayer because only one-half of the FICA taxes constitute a trust fund in favor of the Government.

The District Director of Internal Revenue for the State of Arizona timely made an assessment in the amount of $17,990.58 against the taxpayer on September 24, 1963. On March 17, 1965, $149.00 was collected from the taxpayer by levy on a bank account; on November 9, 1965, $548.01 was collected by crediting a refund due to the taxpayer from his 1962 personal income tax return; and an additional $14.76 was collected by crediting the interest on the foregoing. These collections totaled $711.79, the amount of the taxpayer's first claim for refund and the amount sued for in the complaint. On March 31, 1967, $424.20 was collected by crediting a refund due the taxpayer from his 1966 personal income tax. This amount was the subject of the taxpayer's second claim for refund, but is not part of the amount set forth in the complaint. A payment of $381.61 was made on February 26, 1965, and another payment of $154.25 was made on February 25, 1965, and a credit of $131.23 was made on May 26, 1966. These amounts have not been claimed by the taxpayer on any claim for refund or in the complaint. On December 9, 1966, within two years from the time the tax was paid, the District Director received a claim for refund in the amount of $711.79 for the three quarters involved. Notice of Disallowance of this claim was sent by certified mail to the taxpayer on August 14, 1967.

On December 26, 1962, taxpayer filed a Petition in bankruptcy, and on January 15, 1963, Vi-Le-Bar Construction Co., Inc. followed suit. On March 24, 1965, the taxpayer received a discharge in bankruptcy. The two...

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6 cases
  • First Nat. Bank of Duncanville v. United States, CA3-77-909-F.
    • United States
    • U.S. District Court — Northern District of Texas
    • 10 Agosto 1979
    ...(officer only liable under § 6672 if corporation does not pay . . . withheld taxes at date prescribed); See also Westenberg v. U. S., 285 F.Supp. 915, 917 (D.Ariz.1968) (Liability imposed, though designated as a penalty is merely a shift of liability and not a penalty added to the tax); Lar......
  • Misbin v. Commissioner
    • United States
    • U.S. Tax Court
    • 13 Junio 1985
    ...is deductible. United States v. Sotelo 78-1 USTC ¶ 9446, 436 U. S. 268 (1978); Westenberg v. United States 68-1 USTC ¶ 9351, 285 F. Supp. 915 (D. Ariz. 1968); and Lynn v. Scanlon 64-2 USTC ¶ 9616, 234 F. Supp. 140 (E. D. N. Y. 1964), which petitioner cites, are also distinguishable. These c......
  • Sotelo, Matter of, 76-1429
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • 3 Diciembre 1976
    ...purposes. In re Murphy, 533 F.2d 941, 942 (5th Cir. 1976), aff'g In re Murphy, 381 F.Supp. 813 (N.D.Ala.1974); Westenberg v. United States, 285 F.Supp. 915 (D.Ariz.1968); Lynn v. Scanlon, 234 F.Supp. 140 (E.D.N.Y.1964); Sherwood v. United States, 228 F.Supp. 247 (E.D.N.Y.1964). Notwithstand......
  • In re Murphy
    • United States
    • U.S. District Court — Northern District of Alabama
    • 23 Agosto 1974
    ...have not shown that the government has not so acted here, their complaint was properly dismissed." (p. 394) The case of Westenberg v. United States, D.C., 285 F.Supp. 915, is to the like It is apparent that the order appealed from is in error and that the Director was under a duty to collec......
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