Opinion
Civil Action No. 01-1214, Section: "D" (2)
December 11, 2002
MINUTE ENTRY
Before the court is the renewed "Motion for Summary Judgment" filed by plaintiff, the United States of America. Defendants, Edwin Nicholson and Rebecca Nicholson, filed a memorandum in opposition. The motion is before the court on briefs, without oral argument.
On December 17, 2001, the Government initially filed its Motion for Summary Judgment. Defendants filed a memorandum in opposition, which the court treated as a Rule 56(f) request for discovery. On March 6, 2002, the court denied the Government's motion as premature, but without prejudice to be reasserted when discovery was complete. On August 27, 2002, the Government filed its renewed Motion for Summary Judgment, which was set for hearing on October 16, 2002. Defendants filed an opposition on October 8, 2002 and a Motion for Leave to File a Counter-Claim on October 10, 2002.
On November 22, 2002, the Government filed a Motion to Supplement the Record, which was set for hearing on December 11, 2002. Defendants did not file a memorandum in opposition to the Government's Motion to Supplement, and the court granted that motion in a Minute Entry simultaneously entered with this Minute Entry.
Having reviewed the memoranda and attachments of the parties, the record and the applicable law, the court finds that there is no genuine issue of material fact and, as a matter of law, the Government is entitled to have Defendants' assessed tax liabilities reduced to Judgment. The United States assessed federal income tax liability against the Defendants for the years 1993 and 1994, and federal employment tax liability for the first and third quarters of 1986 and the first, third and fourth quarters of 1987. Prior to the commencement of this lawsuit, Defendants made several payments on these tax liabilities which were credited to the Defendants' accounts. (See certified original Certificates of Assessments and Payments, attached as Exhibits A B to Plaintiff's original Motion for Summary Judgment).
In opposition to the Government's motion, the Defendants assert several arguments: that the statute of limitations has expired; that payments made to the IRS were not properly applied; and that various employees of the IRS told Defendants if they made certain payments, their tax liability would be paid. As discussed below, none of these arguments have merit.
(1) The Statute of Limitations has not expired.
Pursuant to § 6502 of the Internal Revenue Code of 1986, the United States may collect a tax (1) within 10 years after the assessment or (2) if there is an installment agreement between the taxpayer and Secretary, prior to the date which is 90 days after the expiration of any period for collection agreed upon in writing by the Secretary and taxpayer. IRC § 6502(a).
Further, the statute of limitations is suspended during the time period an offer of compromise is under investigation plus one year. See IRC § 6502(a)(2) IRS Forms 656 (attached as Exhibits A B to the Government's Motion to Supplement Record, Doc. No. 33); see also United States v. Ressler, 576 F.2d 650, 652 (5th Cir. 1978). Finally, the collection statute is suspended during the time a taxpayer has a petition for bankruptcy pending in a United States Bankruptcy Court plus an additional 6 months. IRC § 6503(h)
IRS Standard Forms 656 (attached as Exhibits A B to the Government's Motion to Supplement the Record) contain the following language:
6. The taxpayer-proponents waive the benefit of any statute of limitations applicable to the assessment and collection of the liability sought to be compromised and agree to the suspension of the running of the statutory period of limitations on assessment and collection for the period during which this offer is pending, or the period during which any installment remains unpaid, and for 1 year thereafter. For these purposes, the offer shall be deemed pending from the date of acceptance of the waiver of the statutory period of limitations by an authorized Internal Revenue Service official, until the date on which the offer is formally accepted, rejected; or withdrawn in writing.
"The purpose of giving a waiver, in connection with an offer of compromise, is to enable the Government to consider the offer without suffering prejudice because of the running of the statute of limitations against the collection of the tax while the offer is being considered." United States v. Ressler, 576 F.2d 650, 652 (5th Cir. 1978).
Here, Defendants were initially assessed employment tax liability for the first quarter of 1986 on January 26, 1987. ( See certified original Certificates of Assessment and Payment, attached as Exhibit B to the Government's original Motion for Summary Judgment). Defendants filed a petition for bankruptcy with the United States Bankruptcy Court for the Eastern District of Louisiana on June 28, 1988, and that bankruptcy case (No. 88-12707) was closed on February 28, 1989.
Further, Defendants filed an offer of compromise regarding their employment taxes on April 26, 1988, and that offer was withdrawn on August 1, 1988. ( See certified original Certificates of Assessment and Payment, attached as Exhibit B to the Government's original Motion for Summary Judgment). Defendants also filed another offer in compromise on February 21, 1992, and that offer was rejected on January 8, 1993. ( Id.).
The Government was unable to submit the actual offer of compromise submitted by Defendants on April 26, 1988 (and withdrawn on February 21, 1992), because the IRS destroys such documents six years after the offers are rejected or withdrawn. However, the Government supplemented the record with IRS Standard Form 656 which was in effect on April 26, 1988. (See Government's Motion to Supplement with attached Exhibit A Schneidau Declaration).
Again, the Government was unable to submit the actual offer of compromise submitted by Defendants on February 21, 1992 (and rejected on January 8, 1993), because the IRS destroys such documents six years after the offers are rejected or withdrawn. However, the Government supplemented the record with IRS Standard Form 656 which was in effect on February 21, 1992. (See Government's Motion to Supplement with attached Exhibit B Schneidau Declaration).
Since the collection statute was suspended when the Defendants were in bankruptcy (plus 6 months) and when each of their offers in compromise was under investigation (plus one year), the statute of limitations for collecting Defendants' business/employment taxes was tolled approximately 4 years, 3 1/2 months. Thus, the statute of limitations for Defendants' employment tax liability had not expired when this suit was filed on April 20, 2001. Defendants' federal income tax liability for the tax years 1993 and 1994 were assessed on May 19, 1997. ( See certified original Certificates of Assessment and Payment, attached as Exhibit A to the Government's original Motion for Summary Judgment). Thus, the 10-year statute of limitations had not expired with respect to those taxes.
(2) Defendants have failed to submit competent evidence to defeat the Government's motion for summary judgment.
The only evidence submitted with Defendants' opposition memorandum is the Affidavit of Ernest D. Kelly, who attests that he is an accountant and tax consultant, and that he is familiar with the facts and circumstances of this case. In Paragraph 14 of his Affidavit, Mr. Kelly states that he "believes that the current tax liability being claimed by the IRS is erroneous on several counts. However, Mr. Kelly's beliefs are not facts constituting competent evidence to defeat the Government's motion. Further, other statements made by Mr. Kelly are either not based on personal knowledge, are conclusory assertions made without supporting evidence, or constitute mistaken legal conclusions ( e.g. re: statute of limitations).
The Government states in its reply memorandum that the Affidavit of Mr. Kelly is not signed. However, the Affidavit that is filed into the record is signed. (See Kelly Affidavit, Doc. No. 27, Exhibit 10).
The court has also compared the Affidavit of Mr. Kelly with the Affidavit of Defendant, Edwin Nicholson, which was submitted with Defendant Nicholson's opposition to the Government's initial motion for summary judgment. ( See Nicholson Affidavit, attached to Opposition Memorandum, Doc. No. 16). The striking similarity between these two affidavits is suspect, or at least curious.
Finally, Defendants argue that IRS employees informed them that their tax liability would be paid if Defendants made certain payments, and that the IRS should now be estopped from collecting taxes made on these statements. However, Defendants offer no competent evidence to support such an argument.
Conclusion
The Government has provided the court with certified originals of Certificates of Assessment and Payment which presumptively establish Defendants' tax liability. Yoon v. Commissioner of Internal Revenue, 135 F.3d 1007, 1012 (5th Cir. 1998); Portillo v. Commissioner of Internal Revenue, 932 F.2d 1128, 1132 (5th Cir. 1991)
To rebut this presumption, Defendants bear the burden of proving by a preponderance of the evidence that the assessments were arbitrary or erroneous. Yoon, 135 F.2d at 1012; Bar L. Ranch, Inc. v. Phinney, 426 F.2d 995, 998-99 (5th Cir. 1970) Defendants have failed to do so.
Thus, the Government is entitled to have the following unpaid, assessed tax liabilities (plus statutory additions) against Defendants reduced to Judgment:
(1) the federal income tax liability owed by and assessed against Defendants, Edwin and Rebecca Nicholson, for the 1993 and 1994 tax years (in the respective amounts of $4,443.10 and $2,333.52, plus statutory additions including interest calculated since the respective dates of assessment); and
(2) the federal employment tax liability owed by and assessed against Defendants for the first and third quarters of 1986 (in the respective amounts of $5.73 and $2,053.40, plus statutory additions, including interest calculated since the respective dates of assessment) and for the first, third and fourth quarters of 1987 (in the respective amounts of $5,483.61, $3,684.29 and $3,669.03, plus statutory additions, including interest calculated since the respective dates of assessment)
Accordingly;
IT IS ORDERED that the Government's unopposed "Motion for Summary Judgment" be and is hereby GRANTED, and Judgment will be so entered.