MEMORANDUM
ON UNITED STATES' MOTION FOR SUMMARY JUDGMENT
STAIR, JR., Bankruptcy Judge: On
October 19, 2001
, the Plaintiffs, Kenneth and Peggy Hurley,
filed the Complaint initiating this adversary
proceeding in which they seek equitable relief
from this court setting aside certain recorded
deeds transferring the Plaintiffs' real
property, which the Plaintiffs claim were
fraudulendy [fraudulently] obtained by the
Debtor, Ragip Sinan Mungan d/b/a Mortgage
Masters, Inc. The United States of America,
"by and through the Internal Revenue
Service" (
IRS
) is named as a defendant due to federal tax
liens levied against the real property on
account of taxes assessed against the Plaintiffs
and Defendant Mortgage Masters, Inc. (Mortgage
Masters).
Before the court is a Motion for Summary
Judgment (Motion) filed by the
IRS
on
October 4, 2002
, asserting that regardless of which entity
actually owns the real property real at issue,
the Plaintiffs or Mortgage Masters, the
IRS
has liens encumbering the real property based on
recorded federal tax liens. The Plaintiffs filed
a "Plaintiffs' Response to
United States
' Motion for Summary Judgment" on
October 15, 2002
, stating that their tax liability has been
satisfied pursuant to payment and settlement
with the
IRS
. Neither Mortgage Masters, the Longs, nor any
other defendant filed a response to the Motion.
Accordingly, no defendant opposes the Motion. 1
This is a core proceeding. 28 U.S.C.A
§157(B)(2)(A), (K), and (O). (West 1993).
I
The facts, as pertinent to the Motion, are set
forth in the Plaintiffs' Complaint and the
Motion. Prior to December 1997, the Plaintiffs
owned two parcels of real property, one located
at
4220 Van Dyke Drive
,
Knoxville
,
Tennessee
(collectively, the Real Property). For reasons
in dispute and still to be litigated, the
Plaintiffs transferred at the Van Dyke property
to the Defendants Michael and Robin Hunley and
transferred the Van Dyke property was
subsequently transferred to Mortgage Masters. By
this adversary proceeding, the Plaintiffs are
seeking to set aside these conveyances as
fraudulent.
The
IRS
filed four federal tax liens against the
Plaintiffs: (1) on August 15, 1994, in the
aggregate amount of $12,920.98; (2) on September
29, 1994, in the amount of $1,617.00; (3) on
February 10, 1998, in the aggregate amount of
$2,285.64; and (4) on March 23, 2001, in the
amount of $1,083.34 (the Federal Tax Liens). 2
The
IRS
claims that these tax liens are secured by the
Real Property, regardless of whether it is owned
by tho Plaintiffs, the Longs, or Mortgage
Masters. The
IRS
argues that if the Plaintiffs still own the Real
Property, the 1994 tax liens attached to it
prior to any alleged fraudulent conveyances or
other encumbrances. Additionally, if the court
later determines that the Real Property is owned
by Mortgage Masters and/or the Longs, the
IRS
again claims to be a secured creditor by virtue
of its tax liens. 3
II
Rule 56 of the Federal Rules of Civil Procedure
provides for summary judgment "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 the moving party is entitled to a
judgment as a matter of law."
FED
R.
CIV
. P. 56(c). Rule 56(c) is made applicable to
this adversary proceeding by Rule 7056 of the
Federal Rules of Bankruptcy Procedure.
The
IRS
, as the moving party, bears the initial burden
of proving both that there is no issue of
material and that it is entitled to judgment as
a matter of law. Owens Corning v. Nat'l Union
Fire Ftre Ins. Co., 257 F.3d 484, 491 (6th
Cir. 2001), The burden then shifts to the
nonmoving party, in this case, the Plaintiffs,
to produce specific facts showing that there is,
in fact, a genuine issue for trial. Matsushita
Elec. Indus. Co., Ltd. v. Zenith Radio Corp.,
106 S.Ct. 1348, 1356 (1986) (citing
FED
. R.
CIV
. P. 56(e)). In doing so, the nonmoving party
must cite specific evidence and may not merely
rely upon allegations contained in the
pleadings. Harris v. Gen. Motors Corp,
201 F.3d 800, 802 (6th Cir. 2000). The facts,
and all resulting inferences must be viewed in
the light most favorable to the nonmovant. Matsushita,
106 S.Ct. at 1356. The court must then decide
whether "the evidence presents a sufficient
disagreement to require submission to a jury or
whether it is so one-sided that one party must
prevail as a matter of law." Anderson v.
Liberty Lobby, Inc., 106 S.Ct. 2505, 2512
(1986).
III
In support of its Motion for Summary Judgment,
the
IRS
attached copies of the Federal Tax Liens
recorded against both the Plaintiffs and
Mortgage Masters. The Federal Tax Liens
concerning the Plaintiffs are itemized as
follows:
(1) Lien filed
August 15, 1994
, which includes taxes in the amount of
$12,920.98 for the periods ending
December 31, 1989
, and
December 31, 1992
. These taxes were assessed on
May 28, 1990
, and
October 4, 1993
, respectively.
(2) Lien filed
September 29, 1994
, which includes taxes in the amount of
$1,617.00 for the period ending
December 31, 1993
, which were assessed on
September 5, 1994
.
(3) Lien filed
February 10, 1998
, which includes taxes in the amount of
$2,285.64 for the periods ending
December 31, 1994
,
December 31, 1995
, and
December 31, 1996
. These taxes were assessed on
October 2, 1995
,
September 9, 1996
, and
September 29, 1997
, respectively.
(4) Lien filed
March 23, 2001
, which includes taxes in the amount of
$1,083.34 for the period ending
December 31, 1997
, and assessed on
November 16, 1998
.
In response, the Plaintiffs rely upon the
Affidavit of the Plaintiff, Kenneth Hunley,
together with a payment receipt showing payment
to the
IRS
in the amount of $359.84 on
October 9, 2001
, and a second copy of the payment receipt with
a handwritten "Paid in full. D. Sester ID
62-11031" and marked "Received
October 10, 2001
Internal Revenue Service, W & I Area 3,
Territory 4,
Knoxville
,
Tennessee
." In his Affidavit, the Plaintiff states
that Ms. Sester, an employee of the
IRS
in Knoxville, Tennessee, told him that payment
of the $359.84 would clear the Plaintiffs' debt
with the
IRS
because "the rest of the debt was in a
`non-collectable [sic] status."' The
Plaintiff also avers that Ms. Sester told the
Plaintiffs that "the uncollectable [sic]
debt liens would be gone or expire by the end of
2003." The Plaintiffs therefore contend
that their debt to the
IRS
has been "fully satisfied and paid in
full."
IV
Federal Tax Liens are governed by the Internal
Revenue Code (I.R.C.), located at title 26 of
the United States Code. The statutes pertinent
to this action are, as follows:
§6321. Lien for taxes.
If any person liable to pay any tax neglects or refuses to pay the
same after demand, the amount (including any
interest, additional amount, addition to tax, or
assessable penalty, together with any costs that
may accrue in addition thereto) shall be a lien
in favor of the United States upon all property
and rights to property, whether real or
personal, belonging to such person.
I.R.C. §6321 (West 2002).
§6322. Period of lien.
Unless another date is specifically fixed by law, the lien imposed
by section 6321 shall arise at the time the
assessment is made and shall continue until the
liability for the amount so assessed (or a
judgment against the taxpayer arising out of
such liability) is satisfied or becomes
unenforceable by reason of lapse of time.
I.R.C. §6322 (West 2002).
§6325. Release of lien or discharge of property.
(a) Release of lien. --Subject to such regulations as the Secretary
may prescribe, the Secretary shall issue a
certificate of release of any lien imposed with
respect to any internal revenue tax not later
than 30 days after the day on which --
(1) Liability satisfied or unenforceable. --The Secretary finds
that the liability for the amount assessed,
together with all interest in respect thereof,
has been fully satisfied or has become legally
unenforceable; ...
....
(f) Effect of certificate. --
(1) Conclusiveness. --... [I]f a certificate is issued pursuant to
this section by the Secretary and is filed in
the same office as the notice of lien to which
it relates (if such notice of lien has been
filed) such certificate shall have the following
effect:
(A) in the case of a certificate of release, such certificate shall
be conclusive that the lien referred to in such
certificate is extinguished;
(B) in the case of a certificate of discharge, such certificate
shall be conclusive that the property covered by
such certificate is discharged from the lien[.]
I.R.C. §6325(a)(1) (West 2002).
§7122. Compromises.
(a) Authorization. --The Secretary may compromise any civil or
criminal case arising under the internal revenue
laws prior to reference to the Department of
Justice for prosecution or defense; ...
(b) Record. --Whenever a compromise is made by the Secretary in any
case, there shall be placed on file in the
office of the Secretary the opinion of the
General Counsel for the Department of the
Treasury or his delegate, with his reasons
therefor, with a statement of --
(1) The amount of tax assessed,
(2) The amount of interest, additional amount, addition to the tax,
or assessable penalty, imposed by law on the
person against whom the tax is assessed, and
(3) The amount actually paid in accordance with the terms of the
compromise.
Notwithstanding the foregoing provisions of this subsection, no
such opinion shall be required with respect to
the compromise of any civil case in which the
unpaid amount of tax assessed (including any
interest, additional amount, addition to the
tax, or assessable penalty) is less than
$50,000. However, such compromise shall be
subject to continuing quality review by the
Secretary.
I.R.C. §7122 (West 2002).
In summary, a valid tax lien, once recorded,
remains as long as the underlying tax liability
is enforceable. I.R.C. §6322; United States
v. Hodes [ 66-1
USTC ¶9232], 355 F.2d 746, 748 (2d
Cir. 1966). There are only three methods for
releasing an
IRS
tax lien: "1) the tax lien becomes
unenforceable by operation of time, (2) the debt
which is the basis of the lien is paid in full
or (3) an Offer in Compromise is accepted by the
IRS
which would settle the debt and any tax lien
associated with the debt would be no longer
enforceable and have to be released." United
States v. Alfano [ 99-1
USTC ¶50,303], 34 F.Supp.2d 827, 840
(
E.D.
N.Y.
1999) (quoting In re Robert Turner Optical,
Inc. [ 94-2
USTC ¶50,555], Bankr. No. 93-01004,
1994 WL 779352, at *4 (Bankr. N.D.
Ala.
Sept. 8, 1994
)). To be unenforceable under I.R.C. §6322,
"all of the [
IRS
's] remedies ... must be extinguished."
Id.
at 839 (quoting Dillard v.
United States
(In re Dillard), 118 B.R. 89, 93 (Bankr.
N.D.
Ill.
1990)).
V
In the present case, there is no question that
the Federal Tax Liens have not become
unenforceable by operation of time. As noted on
the Federal Tax Liens, with the exception of the
1989 assessments, the re-file deadlines have not
yet expired. As such, the Liens would still be
enforceable. 4
Additionally, there is no question that the
Plaintiffs have not paid in full the total
amounts assessed and covered by the Federal Tax
Liens.
The first issue is whether the Plaintiffs'
$359.84 payment to the
IRS
constituted a compromise for the entire amount
of tax liability owed by the Plaintiffs, such
that it would release the Federal Tax Liens on
the Real Property.
"An offer to compromise a tax liability
must be made in writing, must be signed by the
taxpayer under penalty of perjury, and must
contain all of the information prescribed or
requested by the Secretary." 26 C.F.R.
§301.7122-1(d)(1). The offer must also be
accepted by an
IRS
delegate authorized to accept such compromises. See
Foulds v. Comm'r [ CCH
Dec. 45,433(M)], 56 T.C.M. (CCH) 1112
(1989). "An offer to compromise has not
been accepted until the IRS issues a written
notification of acceptance to the taxpayer or
the taxpayer's representative." 26 C.F.R.
§301.7122-1(e)(1). These regulations are
strictly construed and compliance therewith is
mandatory. Delohery v. Internal Revenue Serv.
[ 94-1
USTC ¶50,144], 843 F.Supp. 666, 669
(D. Colo. 1994) (citing Boulez v. Comm'r
[ 87-1
USTC ¶9177], 810 F.2d 209, 215 (D.C.
Cir. 1987)). These regulations provide the only
means by which a compromise with the IRS may be
effectuated.
Id.
(citing Klein v. Comm'r [ 90-1
USTC ¶50,251], 899 F.2d 1149, 1152
(11th Cir. 1990); Laurins v. Comm'r [ 89-2
USTC ¶9636], 889 F.2d 910, 912 (9th
Cir. 1989); Brooks v. United States [ 87-2
USTC ¶9626], 833 F.2d 1136, 1145
(4th Cir. 1987)).
An informal "agreement" does not
constitute a compromise under the I.R.C. and
does not bind the government. See Botany
Worsted Mills v. United States [1 USTC
¶348], 49 S.Ct. 129, 132 (1929). Therefore,
"even if subordinate revenue officials at a
conference informally [agree] to accept the
taxpayer's payment of a lien in full
satisfaction of [his] liability, that agreement
would not bind [the IRS]." Foulds [ CCH
Dec. 45,433(M)], 56 T.C.M. 1112
(citing Parks v. Comm'r [ CCH
Dec. 23,848], 33 T.C. 298, 301
(1959)).
The Plaintiffs have the burden of proving that
their payment of $359.84 was a compromise of
their entire tax liability of $17,906.96.
Id.
(citing Welch v. Helvering [3 USTC
¶1164], 290 U.S. 111 (1933)). The Plaintiffs
must likewise prove that D. Sester, as the
government official who allegedly formed a
compromise with them, had the actual authority
to bind the IRS to such agreement. See
Brubaker v. United States [ 65-1
USTC ¶9274], 342 F.2d 655, 662 (7th
Cir. 1965); Buesing v. United States [ 99-1
USTC ¶50,246], 42 Fed.Cl. 679, 688
(Fed. Cl. 1999) (citing, among others, City
of El Centro v. United States, 922 F.2d 816,
820 (Fed. Cir. 1990)).
The documents provided by the Plaintiffs do not
convince the court that the Plaintiffs and the
IRS entered into a compromise whereby the
Plaintiffs were released from their total
$17,906.96 tax liability by the payment of
$359.84. First, there was no offer to compromise
in writing, as required by 26 C.F.R.
301.7122-1(d)(1), nor was there a written
acceptance by the IRS of an offer of compromise,
as required by 26 C.F.R. §301.7122-1(e)(1). The
receipt of payment evidencing the handwritten
"Paid in full. D. Sester ID 62-11031"
and marked "Received October 10, 2001
Internal Revenue Service, W&I Area 3,
Territory 4, Knoxville, Tennessee" does not
satisfy this requirement.
Moreover, after reviewing these documents, it is
obvious to the court that the $359.84 payment
made by the Plaintiffs was in satisfaction of
their past due 1999 taxes, for which the IRS has
not recorded or asserted a lien. The taxes
covered by the Federal Tax Liens are for the
years 1989, 1992, 1993, 1994, 1995, 1996, and
1997.
Second, the IRS did not file a certificate of
release pertaining to the Federal Tax Liens with
the Knox County Register of Deeds, as it is
required to do in the event of a party's
satisfaction. See I.R.C. §6325. A
certificate of release of the lien must be
filed, otherwise, the tax lien is not released. United
States v. Waite, Inc. [ 80-1
USTC ¶9128], 480 F.Supp. 1235,
1239-40 (W.D. Pa. 1979). Clearly, the IRS did
not intend for the Plaintiffs' $359.84 payment
to satisfy the entire $17,906.96 balance owed by
the Plaintiffs and secured by the Federal Tax
Liens. 5
VI
The next issue before the court is whether the
Federal Tax Liens which attached to the Real
Property prior to any alleged conveyances or
transfers would still attach regardless of the
current owner of the Real Property.
Federal tax liens attach to the property and
property rights of the delinquent taxpayer. Pronto
Enters., Inc. v. United States, 188 B.R. 590
(W.D. Mo. 1995). This includes real and personal
property owned at the time of assessment and
after-acquired. United States v. Gen. Motors
Corp. [ 91-2
USTC ¶50,158], 929 F.2d 249, 251
(6th Cir. 1991). Once a federal tax lien has
attached, the delinquent taxpayer "cannot
avoid or defeat liability by disclaiming or
renouncing interest in the property or
transferring or conveying the interest." United
States v. Jepsen [ 2000-2
USTC ¶50,608], 131 F.Supp.2d 1076,
1085 (W.D. Ark. 2000) (citing United States
v. Rodgers [ 83-1
USTC ¶9374], 103 S.Ct. 2132, 2141
n.6 (1983)). Likewise, once the lien has
attached, any subsequent purchaser of the
property takes subject to the
IRS
lien. See United States v. Bess [ 58-2
USTC ¶9595], 78 S.Ct. 1054, 1058
(1958) ("The transfer of property
subsequent to the attachment of the
lien...."); United States v. Donahue
[ 90-2
USTC ¶50,343], 905 F.2d 1325, 1331
(9th Cir. 1990) ("[A] lien continues to
attach to a taxpayer's property regardless of
any subsequent transfer of the property.").
It does not matter whether the Real Property is
presently owned by the Plaintiffs, by the Longs,
or by Mortgage Masters. In either event, the
IRS
maintains a security interest in the Real
Property pursuant to its Federal Tax Liens filed
prior to any sort of transfer. Accordingly, if
the Plaintiffs still own the Real Property, it
is encumbered by the Federal Tax Lies filed in
their names. However, if Mortgage Masters is the
owner of the Van Dyke property, that property is
encumbered not only by the Federal Tax Liens in
Mortgage Masters' name, but also by the Federal
Tax Liens filed in the Plaintiffs' names prior
to the first date of transfer, i.e., all
Federal Tax Liens filed prior to August 1, 1999.
Likewise, the
Jade Road
property allegedly transferred to the Longs is
encumbered with the Federal Tax Liens in the
Plaintiffs' names prior to and at the time of
the transfer.
VII
Taking all facts and inferences in the light
most favorable to the Plaintiffs, the court
finds that there is no genuine issue of material
fact. There was no compromise of the total tax
liability evidenced by the Federal Tax Liens.
Additionally, pursuant to the Internal Revenue
Code, the Federal Tax Liens attaching the Real
Property remain until either released or
satisfied. As such, the
IRS
is entitled to summary as a matter of law.
An order consistent with this Memorandum will be
entered.
ORDER
Pursuant to the Memorandum on
United States
' Motion for Summary Judgment filed this date,
the court directs the following:
1. The United States' Motion for Summary
Judgment filed October 4, 2002, by the Defendant
United States of America, on behalf of its
agency, the Internal Revenue Service, is
GRANTED.
2. The Federal Tax Liens filed against the
Plaintiffs by the Internal Revenue Service on
August 15, 1994, September 29, 1994, February
10, 1998, and March 23, 2001, unless otherwise
released by the Internal Revenue Service,
continue to encumber the real property known as
4220 Van Dyke Drive, Knoxville, Tennessee, and
610 Jade Road, Knoxville, Tennessee, and the
interest of the Defendant United States in these
properties is superior to all subsequently filed
interests in the properties.
3. The Federal Tax Liens filed against the
Defendant Mortgage Masters, Inc., by the
Internal Revenue Service on February 23, 2001,
April 10, 2001, and October 29, 2001, continue
to encumber the real property known as 4220 Van
Dyke Drive, Knoxville, Tennessee, and the
interest of the United States in this property
is superior to all subsequently filed interests
in this property.
SO ORDERED.
1
Pursuant to E.D.Tenn. LBR 7007-1, a party
opposing a motion for summary judgment
"shall be respond within twenty days after
the date of the filing of the motion.... A
failure to respond shall be construed by the
court to mean that the respondent does not
oppose the relief requested by the motion."
2
Additionally, the
IRS
filed the following three Federal Tax Liens
against Mortgage Masters: (1) February 23, 2001,
in the aggregate amount of $65,897.03; (2) April
10, 2001, in the amount of $1,650.00; and (3)
October 29, 2001, in the amount of $7,363.61.
Because Mortgage Masters and Robert and Melissa
Long do not oppose the Motion, summary judgment
will be granted the
IRS
as to them. See supra 1.
3
Summary judgment is being granted on this claim,
so if Mortgage Masters and the Longs are deemed
to own the Real Property, the Real Property is
subject to the
IRS
liens.
4
The Federal Tax Lien notices each provide that:
With respect to each assessment below, unless
notice of lien is refiled by the date in column
(e), this notice shall constitute the
certificate of release of lien as defined in IRC
6235(a).
The deadline for re-filing the Federal Tax Lien
as to the 1989 assessment was June 27, 2000. It
appears that the 1989 assessment was not
re-filed, and if so, the tax liability therefor,
in the amount of $11,079.25, was in fact
released.
5
As noted earlier, however, if the
IRS
did not re-file its Federal Tax Lien for the
1999 assessment prior to June 27, 2000, the
Notice of Tax Lien recorded on August 15, 1994,
will, in fact, serve as the Certificate of
Release of Lien as to $11,079.25 in tax
liability, thus leaving the Plaintiffs' total
tax liability as $6,827.71.
[2000-1 USTC ¶50,386] James R. Smith and Thelma J. Smith,
Plaintiffs v. The
United States
, Defendant
U.S. Court of Federal Claims, 99-227T,
4/10/2000
[Code
Sec. 6402 ]
Refund claims: Tax overpayment: Offset of
prior years' liability.--Married taxpayers
who filed suit for payment of income tax refunds
allegedly due failed to raise any triable issue
of fact. The government's introduction into
evidence of assessments against the couple for
unpaid taxes, penalties and interest from prior
years established a prima facie case of
liability. Although the couple alleged that the
IRS
had wrongfully retained refunds due them as a
result of overpayments for several tax years,
they did not introduce any evidence to rebut the
government's prima facie case that the
couple had outstanding tax liabilities to which
the overpayments had been applied. BACK
REFERENCES: ¶38,519.16
ORDER
MEROW, Senior Judge:
This case is currently before the court on the defendant's Motion
for Summary Judgment. After a careful review of
the parties' submissions, the defendant's motion
is GRANTED.
FACTS
Plaintiffs James R. and Thelma J. Smith filed suit in this court
seeking payment of personal income tax refunds
allegedly due. Plaintiffs previously litigated
personal income tax deficiencies in the United
States Tax Court. In a decision filed November
26, 1990, 1
the Tax Court determined that plaintiffs had an
income tax deficiency of $5,810, a substantial
understatement of liability penalty of $1,453
and a late filing penalty of $1,183 for the 1983
tax year. In addition, the Tax Court found a tax
deficiency of $12,312, a substantial
understatement of liability penalty of $3,078,
and a late payment penalty of $3,078, for the
1984 tax year. A second Tax Court Decision,
filed April 29, 1994, 2
determined that plaintiffs had an income tax
deficiency of $3,545 and a late filing penalty
of $100 for the tax year 1986. Finally, the
decision determined that plaintiffs had an
income tax deficiency of $4,142 and a late
filing penalty of $671 for 1987.
Following each of the Tax Court decisions, the Internal Revenue
Service ("
IRS
") assessed against plaintiffs the amounts
determined by the Tax Court 3
along with interest. On or about April 24, 1991,
the
IRS
assessed $7,485.56 in interest on plaintiffs'
1983 tax return and $15,219.75 in interest on
plaintiffs' 1984 tax return. On or about July 4,
1994, the
IRS
assessed $3,582.78 in interest for plaintiffs'
1986 tax return and $3,178.91 in interest for
plaintiffs' 1987 tax return. As of
May 26, 1999
,
IRS
records show that plaintiffs have an outstanding
balance of $7,925.90 in accrued interest for tax
year 1983; assessed tax, penalties, and interest
of $34,509.35 for tax year 1984; assessed tax,
penalties, and interest of $7,251.78 for tax
year 1986; and assessed tax, penalties, and
interest of $8,591.91 for tax year 1987.
Following the first Tax Court decision, plaintiffs filed their
personal income tax return for the 1991 tax
year, on or about April 15, 1992. 4
Plaintiffs overpaid $2,548 and this amount was
refunded to them, along with $40.76 in interest.
On or about April 15, 1993, plaintiffs filed
their 1992 tax return and requested a refund of
$925. On or about March 25, 1993, the
IRS
applied the $925 tax overpayment against
plaintiffs' outstanding liability for income
tax, penalties and interest assessed for their
1983 tax year. On or about April 15, 1994,
plaintiffs filed their 1993 tax return and
requested that their $1,102 overpayment be
refunded. On or about April 4, 1994, the
IRS
applied plaintiffs' $1,102 refund to their
outstanding assessments for the 1983 tax year.
On or about April 15, 1995, plaintiffs filed
their 1994 tax return and requested a refund of
their overpayment of $869. On or about April 15,
1995, the
IRS
applied the $869 overpayment to plaintiffs'
outstanding assessments for the tax year 1983.
On or about April 15, 1996, plaintiffs filed
their 1995 tax return and requested a refund of
$2,115. On or about April 15, 1996, the
IRS
applied the $2,115 overpayment to plaintiffs'
outstanding assessments for the tax year 1983.
On or about April 15, 1997, plaintiffs filed
their 1996 tax return and reported an amount
owed of $1,189. Plaintiffs included payment of
$1,189 with their return. The
IRS
determined that plaintiffs made an error in
calculating their tax liability and had overpaid
by $721. The
IRS
applied the $721 overpayment to plaintiffs'
outstanding assessments for the tax year 1983.
Plaintiffs filed their first Complaint, pro se, on April 16,
1999. 5
On June 4, 1999, the defendant filed a Motion
For a More Definite Statement Pursuant to RCFC
12(e), as the Complaint did not contain
sufficient information to allow a responsive
pleading. The defendant's motion was allowed on
June 8, 1999
, and plaintiffs filed a First Amended Complaint
on
June 21, 1999
. Following defendant's Motion to Dismiss
Pursuant to RCFC 12(b)(4) for Failure to State a
Claim Upon Which Relief Can Be Granted, this
Court held that plaintiffs:
have asserted a claim within this Court's
jurisdiction pursuant to 28 U.S.C. §1491 for
refunds allegedly due them for the tax years
1991-1996. To the extent plaintiffs' papers can
be construed to request relief beyond refund
claims for these years, the Court does not have
jurisdiction to grant relief and this will be
reflected in the final resolution of this
litigation.
DISCUSSION
Plaintiffs maintain that the
IRS
has wrongfully retained money due them from
income tax overpayments for the tax years 1991
to 1996. The defendant maintains that any
overpayments were either refunded or properly
credited against outstanding assessments for
previous tax years. The defendant correctly
points to 26 U.S.C. §6402(a) to demonstrate
that the
IRS
' application of income tax overpayments to
other outstanding assessments is proper. The
section provides that:
In the case of any overpayment, the Secretary, within the
applicable period of limitations, may credit the
amount of such overpayment, including any
interest allowed thereon, against any liability
in respect of an internal revenue tax on the
part of the person who made the overpayment and
shall, subject to subsections (c), (d) and (e),
refund any balance to such person.
26 U.S.C. §6402(a) (1994).
The
IRS
records demonstrate that plaintiffs received a
refund for the tax year 1991 and that refunds
for the tax years 1992 to 1996 were applied to
outstanding assessments. Plaintiffs, for their
part, deny that they received any funds from the
IRS
. Assessments by the
IRS
, properly entered into evidence establish a prima
facie case of liability. See e.g. Welch
v. Helvering [3 USTC ¶1164], 290 U.S. 111,
15 (1933); Adams v. United States, 358
F.2d 986, 994 (Ct.Cl. 1966); Michaud v.
United States [97-2 USTC ¶50,972], 40
Fed.Cl. 1, 15 (1997). As plaintiffs have not
introduced any evidence to rebut the defendant's
prima facie case, or to raise any triable
issue of fact, the Motion for Summary Judgment
must be granted. 6
CONCLUSION
Based on the foregoing, it is hereby ORDERED:
(1) Defendant's
November 8, 1999
Motion For Summary Judgm