ORDER DENYING PLAINTIFFS' APPLICATION FOR DISMISSAL OF INSTANT ACTION IN THE INTEREST OF JUSTICE AND DUE PROCESS OF LAW

COYLE, District Judge:

On October 20, 1997, the court heard plaintiffs' Application for Dismissal of Instant Action in the Interest of Justice and Due Process of Law.

Upon due consideration of the written and oral arguments of the parties and the record herein, the court denies plaintiffs' application. Plaintiffs' application is without merit. The law is clear that the regulations and procedures for closing agreements under 26 U.S.C. §7121 and for compromises under 26 U.S.C. §7122 are the exclusive method of settling claims with the I.R.S. Botany Worsted Mills v. United States [1 USTC ¶348], 278 U.S. 282, 288-289 (1929); Luarins v. Commissioner [89-2 USTC ¶9636], 889 F.2d 910, 912 (9th Cir. 1989), Shumaker v. C.I.R. [81-2 USTC ¶9508], 648 F.2d 1198, 1999-1200 (9th Cir. 1981). As explained in Laurins,

First, an offer of compromise must be submitted on special forms prescribed by the Secretary, and an offer will not be considered to have been accepted until and unless the taxpayer is notified in writing of the acceptance. . . .

Here, the Packs have not complied with the regulations and procedures governing Sections 7121 or 7122.

Furthermore, the Packs are not seeking to enforce an agreement to compromise their tax liabilities. Rather, they are seeking to extinguish the tax liabilities found by this court when it granted summary judgment for the United States concerning the Packs' income tax liabilities involved in this action. In this regard, the Fifth Circuit in Overseas Inns S.A., P.A. v. United States, rejected an argument that the acceptance by the IRS of a plan of reorganization by which it was to receive 23.49% of any taxes due from the bankrupt corporation precluded the IRS from bringing a suit in the district court to collect the balance of the taxes due:

. . . Overseas bases error on the argument that the acceptance was 'an acquiescence in a judgment, not a 'compromise,' and that therefore, section 7122 does not control. It contends that the IRS acquiesced by failing to challenge the plan and by accepting payments which the IRS knew were made pursuant to the plan; that when one accepts the benefits of a judgment, one also accepts its burdens.

This argument is without merit. Overseas owed a fixed amount to the IRS and attempted to satisfy that amount by paying only 23.49% of it. This, therefore, is an attempted compromise, seeking to reduce the amount of the taxes owed. Accordingly, the exclusive statutory provisions would apply.

Id.

Furthermore, the Packs' Offer does not extinguish or in any way reduce the amount of the Packs' federal tax liabilities as adjudicated by this court under California law. Because the Packs' Offer is invalid under either federal or state law, it is not necessary for the court to determine whether the relevant provisions of the California Civil Code have been preempted by federal law with respect to contracts involving the federal government.

ACCORDINGLY, IT IS ORDERED that plaintiffs' Application for Dismissal of Instant Action in the Interest of Justice and Due Process of Law is denied.

 

 

 

 

[97-1 USTC ¶50,404] Nathan Segel and Esme Segel, Plaintiffs v. United States of America , Defendant

U.S. District Court, So. Dist. Fla. , 95-0522- CIV -MARCUS, 3/6/97

[Code Secs. 7121 and 7122 ]

Closing agreements: Compromises: Authority to enter: Proof.--The IRS could assess additional income tax and interest because it had not entered into a settlement agreement with a married couple for the years in question. Code Secs. 7121 and 7122 exclusively govern the settlement of disputed tax liabilities, and no agreement was entered into under those provisions. Letters from the IRS purported to be a settlement offer applied to a different tax year and were not signed by an official authorized to enter into settlement agreements. Further, the taxpayers' filing of amended returns for the disputed years containing changes based on the alleged settlement terms was not evidence of a settlement agreement; the taxpayer cited no authority for such a rule and the use of amended returns as a means of settlement would be contrary to the explicit settlement procedures set out in Code Secs. 7121 and 7122.

[Code Secs. 7121 and 7122 ]

Closing agreements: Compromises: Equitable estoppel: Evidence.--The IRS was not equitably estopped from assessing additional taxes and interest after a married couple paid taxes with amended returns. The taxpayers failed to prove the existence of a settlement agreement between them and the IRS as to the years at issue. Payment of taxes did not constitute the type of detrimental reliance necessary to invoke estoppel, and there was no representation by an authorized official of an intent to settle. BACK REFERENCES: ¶41,890.26 and 41,930.0254

[Code Sec. 6224 ]

Administrative proceedings: Settlement agreements: Authority to bind IRS .--Code Sec. 6224 provided no authority for settling tax disputes arising under the Tax Equity and Fiscal Responsibility Act of 1982 (P.L. 97-248). The settlement of disputed tax liabilities is governed exclusively by Code Secs. 7121 and 7122 . Code Sec. 6224 merely details the binding effect a settlement agreement that was otherwise properly concluded would have on the parties to the agreement. BACK REFERENCES: ¶38,669.35

Richard A. Josepher, Gutter & Josepher, P.A., 1 E. Broward Blvd., Fort Lauderdale, Fla. 33301, for plaintiffs. Robert Joseph Higgins, Robert L. Walsh, Department of Justice, Washington , D.C. 20530 , for defendant.

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS' CROSS-MOTION FOR SUMMARY JUDGMENT.

MARCUS, District Judge:

THIS CAUSE comes before the Court upon the Defendant's Motion for Summary Judgment, filed March 6, 1996 [D.E. 10], and the Plaintiffs' Cross-Motion for Summary Judgment, filed March 26, 1996 [D.E. 12]. Responsive pleadings were filed by the parties, and thereafter, the Court took oral argument on July 18, 1996 . Having reviewed the pleadings, the arguments, and the file, and being otherwise fully advised in the premises, the Defendant's Motion for Summary Judgment must be and is GRANTED, and the Plaintiffs' Cross-Motion for Summary Judgment must be and is DENIED.

I.

A.

Plaintiffs Nathan Segel and Esme Segel filed this action against Defendant United States of America for a refund of federal income taxes. Plaintiffs allege that between 1986 and 1987 they reached a cash out-of-pocket settlement with the Internal Revenue Service for the tax years 1981 through 1984 with regard to a limited partnership they had used as a tax shelter. The Plaintiffs further allege that on February 7, 1994 , the Defendant assessed against them additional federal income taxes and interest for tax years 1983 and 1984. According to the Plaintiffs, they paid the assessments and then sought refunds of their payments, contending that the additional assessments were erroneous and illegal in light of the settlement reached in respect to those tax years. The Defendant disallowed in full the Plaintiffs' request for a refund. Plaintiffs then instituted this action, claiming their entitlement to a refund in the amount of $15,983.00 plus interest for the Plaintiffs' taxable years 1983 and 1984.

B.

The Plaintiffs and the Defendant now seek summary judgment, and the relevant facts do not appear to be in dispute. Plaintiff Nathan Segel was an investor/partner in the tax shelter partnership known as Peat Oil and Gas Associates (the "Partnership"). For the taxable years 1981, 1982, 1983, and 1984, the Plaintiffs claimed losses related to the Partnership. In a letter dated November 1, 1985 , the IRS forwarded to the Plaintiffs an audit examination report for taxable year 1981, proposing an increased assessment of income tax and an overvaluation penalty as a result of a disallowance of losses claimed for that year in connection with the Partnership. Pl. Cross-Motion, Exh. A. On December 27, 1985 , the Plaintiffs' attorney mailed a letter to the IRS indicating that they wished to settle their case regarding the taxable years 1981 through 1984. Id. , Exh. F. Counsel's letter stated in pertinent part:

. . . Based upon the fact that similar cases . . . have been settled by allowing taxpayers in those cases a deduction to the extent of their cash invested, the above taxpayers have recomputed their tax liabilities on the assumption that all deductions in excess of the amount of the cash actually invested in the subject partnership will be disallowed.

Although it is my understanding that your settlement position with respect to Peat Oil & Gas Associates, Limited has not been finalized, there is no doubt that taxpayers will be disallowed all deductions in excess of their cash investment. On this basis, the taxpayers are filing amended returns for the years 1981 through 1984 and have mailed a waiver of restrictions on assessment with the District Director in Florida . . . .

Id. Enclosed with the letter were two checks executed on December 26, 1985 , one for a tax payment in the amount of $125,351.00 for the years 1981 through 1984, and the other for interest in the amount of $45,634.00 for those same years. Id. , Exhs. F & G.

In a notice dated December 1, 1986 , the IRS stated in pertinent part:

. . . The settlement policy for the tax shelter investments involved in this case have been developed, permitting us to resolve this case in the following manner:

. . .

Allowing a deduction for the amount of your cash investment in the year of payment unless allowed previously in any other taxable year. Having reviewed the case file, I do not find any canceled checks to substantiate the cash investment. Therefore, please forward copies for our files, and we will then prepare computations and the appropriate agreement forms for closing the case.

. . .

Id. , Exh. M. The notice clearly indicated that it only related to the tax year ending December 31, 1981 . Id. In response Plaintiffs' counsel sent a letter to the IRS on December 5, 1986 , stating in pertinent part:

The taxpayers accept your offer to settle their case based on an allowance of a deduction for the amount of their cash investment. The taxpayers have filed Form 1040X [amended return] for the years 1981 through 1984 in anticipation of the cash settlement proposal. Copies of those Amended Tax Returns are enclosed for your records.

Pursuant to your request in your December 1 letter, I am enclosing copies of canceled check [sic] reflecting principal and interest payments . . .

Id. , Exh. N. In a notice dated February 19, 1987 , the IRS stated that it had closed the case on the basis agreed upon for the tax year ended December 31, 1981 . Id. , Exh. O. In another notice, dated April 27, 1987 , the IRS indicated that it would resolve the 1982 taxable year by

[a]llowing a deduction for the amount of your cash investment in the year of payment unless allowed previously in any other taxable year. Enclosed herewith is a computation reflecting the above proposed settlement and the appropriate agreement forms. Please execute the agreement forms and return them to me in the envelope provided.

Id. , Exh. R. Under a cover letter dated May 11, 1987 , the Plaintiffs returned the executed agreement form for taxable year 1982. Id. , Exh. S.

At issue in the parties' summary judgment motions are the Plaintiffs' taxable years 1983 and 1984, the first two years for which the IRS conducted an audit of the Partnership pursuant to the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA"). The Act dictated that audit adjustments of the partnership's return would be passed through to the individual partners/investors. For the years 1983 and 1984, the audit results were contested at the partnership level under the TEFRA provisions, and as a result of the Tax Court's decision regarding the dispute, the IRS assessed additional tax and interest against the Plaintiffs on February 7, 1994 , for those years. Def. Mot., Exh. 1. Indicated on the assessment reports were credits to the 1983 and 1984 tax years for the Plaintiffs' payment on December 27, 1985 . Compare id. with Pl. Cross-Motion, Exh. F. Plaintiffs paid the new tax assessment and then protested it, arguing that the tax years 1984 and 1985 had already been settled and the tax paid.

At the core of the Plaintiffs' Complaint is the contention that they had already reached a settlement with the IRS regarding the Partnership losses for the 1983 and 1984 tax years. The Defendant, in turn, argues that it is entitled to summary judgment because the Plaintiffs have failed to come forward with any evidence that a settlement had been reached with the IRS regarding Plaintiffs' 1983 and 1984 tax years.

II.

A.

The standard to be applied when reviewing a motion for summary judgment is stated unambiguously in Rule 56(c) of the Federal Rules of Civil Procedure:

The judgment sought 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.

It may be entered only where there is no genuine issue of material fact. Moreover, the moving party has the burden of meeting this exacting standard. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970).

In applying this standard, the Eleventh Circuit has explained:

In assessing whether the movant has met this burden, the courts should view the evidence and all factual inferences therefrom in the light most favorable to the party opposing the motion. Adickes, 398 U.S. at 157, 90 S.Ct. at 1608; Marsh, 651 F.2d at 991. All reasonable doubts about the facts should be resolved in favor of the non-movant. Casey Enterprises v. Am. Hardware Mutual Ins. Co., 655 F.2d 598, 602 (5th Cir. 1981). If the record presents factual issues, the court must not decide them; it must deny the motion and proceed to trial. Marsh, 651 F.2d at 991; Lighting Fixture & Elec. Supply Co. v. Continental Ins. Co., 420 F.2d 1211, 1213 (5th Cir. 1969). Summary judgment may be inappropriate even where the parties agree on the basic facts, but disagree about the inferences that should be drawn from these facts. Lighting Fixture & Elec. Supply Co., 420 F.2d at 1213. If reasonable minds might differ on the inferences arising from undisputed facts, then the court should deny summary judgment. Impossible Electronics, 669 F.2d at 1031; Croley v. Matson Navigation Co., 434 F.2d 73, 75 (5th Cir. 1970).

Moreover, the party opposing a motion for summary judgment need not respond to it with any affidavits or other evidence unless and until the movant has properly supported the motion with sufficient evidence. Adickes v. S.H. Kress & Co., 398 U.S. at 160, 90 S.Ct. at 1609-10; Marsh, 651 F.2d at 991. The moving party must demonstrate that the facts underlying all the relevant legal questions raised by the pleadings or otherwise are not in dispute, or else summary judgment will be denied notwithstanding that the non-moving party has introduced no evidence whatsoever. Brunswick Corp. v. Vineberg, 370 F.2d 605, 611-12 (5th Cir. 1967). See Dalke v. Upjohn Co., 555 F.2d 245, 248-49 (9th Cir. 1977).

Clemons v. Dougherty County, 684 F.2d 1365, 1368-69 (11th Cir. 1982); see also Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486, 1502 (11th Cir. 1985), cert. denied, 475 U.S. 1107 (1986).

The United States Supreme Court has provided significant additional guidance as to the evidentiary standard that trial courts should apply in ruling on a motion for summary judgment:

[The summary judgment] standard mirrors the standard for a directed verdict under Federal Rule of Civil Procedure 50(a), which is that the trial judge must direct a verdict if, under the governing law, there can be but one reasonable conclusion as to the verdict. Brady v. Southern R. Co., 320 U.S. 476, 479-80, 64 S.Ct. 232, 234, 88 L.Ed. 239 (1943).

Anderson v. Liberty Lobby Inc., 477 U.S. 242, 250 (1986). The Court in Anderson further stated that "[t]he mere existence of a scintilla of evidence in support of the position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmovant]." Id. at 252. In determining whether this evidentiary threshold has been met, the trial court "must view the evidence presented through the prism of the substantive evidentiary burden" applicable to the particular cause of action before it. Id. at 254. If the nonmovant in a summary judgment action fails to adduce evidence that would be sufficient to support a jury finding for the nonmovant when viewed in a light most favorable to the nonmovant, summary judgment may be granted. Id. at 254-55.

In another case, the Supreme Court has declared that a nonmoving party's failure to prove an essential element of a claim renders all factual disputes as to that claim immaterial and requires the granting of summary judgment:

In our view, the plain language of Rule 56(c) mandates the entry of summary judgment. . . . against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine issue as to any material fact," since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial. The moving party is "entitled to judgment as a matter of law" because the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof.

Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). It is against these standards that we measure the parties' motions for summary judgment.

B.

Again, at the core of all four counts of the Plaintiffs' Complaint is the alleged existence of a settlement agreement for the 1983 and 1984 tax years. According to the Defendant, the settlement of tax liability disputes are governed exclusively by 26 U.S.C. §§7121 and 7122 and their accompanying regulations. Those provisions state in pertinent part:

§7121. Closing agreements

(a) Authorization.--The Secretary is authorized to enter into an agreement in writing with any person relating to the liability of such person . . . in respect of any internal revenue tax for any taxable period.

(b) Finality.--If such agreement is approved by the Secretary (within such time as may be stated in such agreement, or later agreed to) such agreement shall be final and conclusive, and, except upon a showing of fraud or malfeasance, or misrepresentation of a material fact--

(1) the case shall not be reopened as to the matters agreed upon or the agreement modified by any officer, employee, or agent of the United States , and

(2) in any suit, action, or proceeding, such agreement, or any determination, assessment, collection, payment, abatement, refund, or credit made in accordance therewith, shall not be annulled, modified, set aside, or disregarded.

§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.

26 U.S.C. §§7121, 7122(a). The Defendant argues that the requirements contained in these provisions are exclusive and strictly construed and therefore permit only specifically authorized IRS officers to bind the Government to such compromises. Further, the Defendant contends that the Plaintiffs cannot produce any document pertaining to their taxable years 1983 and 1984 where an authorized IRS employee accepted an offer to settle their tax liabilities for those years. In the absence of evidence suggesting a settlement for those years, Defendant argues, the Plaintiffs' Complaint must be rejected, and the Defendant is entitled to summary judgment.

Plaintiffs argue, however, that there is ample evidence demonstrating the existence of a settlement for 1983 and 1984. First, they point to the IRS 's December 1, 1986 letter to them, Pl. Cross-Motion, Exh. M, supra, which they contend was an offer for a cash out-of-pocket settlement that "unambiguously applied to 1981-1984, all of the years in which Plaintiffs' [sic] made out-of-pocket cash investments in the Partnership." Id. at 10. The Plaintiffs then note that their counsel timely responded to this offer in the December 5, 1986 letter, id., Exh. N, supra, and that they submitted, along with the letter, the requested canceled checks evidencing their cash investment. Id. at 10. According to the Plaintiffs, they fully complied with the terms of the IRS 's settlement offer by submitting the acceptance letter, the canceled checks, and their amended tax returns. Id. at 11. Plaintiffs also argue that when the IRS confirmed the amount of the cash investments reflected on their amended returns, the Plaintiffs' cases for 1981, 1982, 1983, and 1984 were closed. Id. Plaintiffs assert that the absence of a "closing agreement" does not preclude the existence of the settlement agreement. Id. Finally, Plaintiffs contend that the Defendant has relied on the wrong provisions and that 26 U.S.C. §6224 is the governing section with regard to these facts. Id. at 8. That provision states in pertinent part:

§6224. Participation in administrative proceedings; waivers; agreements

. . .

(c) Settlement agreement.--In the absence of a showing of fraud, malfeasance, or misrepresentation of fact--

(1) Binds all parties.--A settlement agreement between the Secretary and 1 or more partners in a partnership with respect to the determination of partnership items for any partnership taxable year shall (except as otherwise provided in such agreement) be binding on all parties to such agreement with respect to the determination of partnership items for such partnership taxable year. . . .

26 U.S.C. §6224(c)(1).

C.

The Defendant is plainly correct that the settlement of disputed tax liabilities is governed exclusively by sections 7121 and 7122 of the Internal Revenue Code. The Eleventh Circuit has explained:

The settlement of disputed tax liabilities is governed by 26 U.S.C. §§7121 and 7122; these sections authorize the Secretary of the Treasury or an authorized delegate to settle any tax disputes and compromise any civil or criminal case arising under the internal revenue laws. The requirements set forth in these statutes and the accompanying regulations are exclusive and strictly construed.

Klein v. Comm'r [90-1 USTC ¶50,251 ], 899 F.2d 1149, 1152 (11th Cir. 1990) (emphasis added) (internal citations omitted). Cf. Botany Worsted Mills v. United States [1 USTC ¶348 ], 278 U.S. 282, 288-89 (1929) (holding that precursor to current sections 7121 and 7122 prescribed exclusive method by which to compromise tax cases, explaining that "[w]hen a statute limits a thing to be done in a particular mode, it includes the negative of any other mode."). The highlighted language in the Klein holding disposes of Plaintiffs' assertion that section 6224 is an independent source of authority for settling TEFRA cases. Rather, section 6224 details the binding effect a settlement agreement that was otherwise properly concluded would have on the parties to that agreement. The IRS may only enter into that agreement pursuant to the terms of sections 7121 and 7122, and the regulations promulgated thereunder, which authorize the Secretary or his designee to settle any tax dispute arising under any of the tax provisions, including the TEFRA provisions.

The settlement of tax disputes is governed by general principles of contract law, and settlement offers made and accepted by letters can be enforced as binding agreements. Haiduk v. Comm'r [ CCH Dec. 46,888(M)], 60 T.C.M. ( CCH ) 864, 865-66 (1990). Accord Treaty Pines Inv. Partnership v. Comm'r [92-2 USTC ¶50,418], 967 F.2d 206, 211 (5th Cir. 1992). Settlements, however, that are entered upon by officials without authority to do so under sections 7121 and 7122 will not bind the United States . Klein [90-1 USTC ¶50,251], 899 F.2d at 1153.

The Plaintiffs have failed to present any evidence that supports their contention that a valid settlement in respect to the 1983 and 1984 tax years was consummated. The December 1, 1986 , letter from the IRS , Pl. Cross-Motion, Exh. M, unambiguously applied only to the tax year 1981. At the top of the letter, it stated that it regarded "Tax Year(s) Ending: 12-31-81 , Peat Oil & Gas." Id. We can find no basis for concluding that this purported offer to settle applied to any of the Plaintiffs' taxable years other than 1981. Moreover, the notice only stated that-upon the Plaintiffs' forwarding copies of the canceled checks to the IRS , the IRS would "then prepare computations and the appropriate agreement forms for closing the case." Id. The Plaintiffs' argument that this provision established a condition precedent for forming a binding contract is unpersuasive; this provision was merely a request for additional documentation. In fact, the February 19, 1987 letter from the IRS , Id. , Exh. O, was the "appropriate agreement form" referenced in the December 1, 1986 , letter, and it was sent upon the Plaintiffs' submission of the canceled checks. We hasten to note again, however, that the February 19th letter only applied to the tax year ending December 31, 1981 . A Form 872-T, which terminated the case, was apparently attached to that letter, and it too indicated that the "Tax Period(s) Covered by this Notice" was December 31, 1981 . Id. On this record, there is no basis upon which to conclude that the IRS offered to settle any tax year other than 1981 through these two letters. We are equally unpersuaded by the Plaintiffs' contention that the filing of returns for 1983 and 1984, containing changes based on the alleged settlement terms, is evidence that a settlement agreement existed. The Plaintiffs cite to no legal authority for this contention, and the use of amended returns as a means of settlement would be contrary to the explicit settlement procedures set out in sections 7121 and 7122 and their accompanying regulations.

Finally, the Plaintiffs have failed to come forward with any evidence that the December 1, 1986 letter sent to the Plaintiffs--which they contend was in fact an offer to settle--was signed by an official authorized to settle tax liabilities. The regulation accompanying section 7121 states in pertinent part:

The Commissioner may enter into a written agreement with any person relating to the liability of such person [] in respect of any internal revenue tax for any taxable period ending prior or subsequent to the date of such agreement.

26 C.F.R. §301.7121-1(a). This authority in turn has been delegated to "Regional Commissioners; Regional Counsel; Regional Directors of Appeals; Assistant Regional Commissioners (Examination); District Directors; Chiefs and Associate Chiefs of Appeals Offices; and Appeals Team Chiefs with respect to his/her team cases." Delegation Order No. 97 (Rev. 21), 47 F.R. 46,613 (1982). The December 1st letter was signed by an S. Chavez of the Miami Appeals Support Unit, and the Plaintiffs do not even suggest that Chavez held one of the positions listed in the Delegation Order. Likewise, the Plaintiffs have not come forward with any evidence to rebut the Defendant's contention that the letter was not signed by an authorized official. Accordingly, we are constrained to conclude that the Plaintiffs have not established that the December 1, 1986 , letter was an authorized offer to settle the Plaintiffs' taxable years 1983 and 1984. Further, the Plaintiffs have not come forward with any evidence to rebut what the February 19, 1987 letter indicates on its face, which is that the IRS settled and terminated the case only with regard to the 1981 tax year. In short, the Plaintiffs have failed to produce any evidence raising a genuine issue of material fact in respect to whether a settlement agreement was consummated for the 1983 and 1984 tax years.

The Plaintiffs have also failed to establish that they are entitled to the application of the doctrine of equitable estoppel. Under controlling law, for estoppel to lie against the Defendant, three conditions must be met: "(1) the traditional private law elements of estoppel must have been present; (2) the Government must have been acting in its private or proprietary capacity as opposed to its public or sovereign capacity; and (3) the Government's agent must have been acting within the scope of his or her authority." United States v. Vonderau, 837 F.2d 1540, 1541 (11th Cir. 1988). In the first place, the Plaintiffs have not satisfied any of the three traditional elements required by estoppel, which are "(1) words, acts, conduct, or acquiescence causing another to believe in the existence of a certain state of things, (2) willfulness or negligence with regard to the acts, conduct, or acquiescence, and (3) detrimental reliance by the other party upon the state of things so indicated." Dade County v. Rohr Indus., Inc., 826 F.2d 983, 989 (11th Cir. 1987). As has already been discussed, supra, the Plaintiffs have not produced any evidence that the IRS ever represented its intent to settle the 1983 and 1984 tax years along with tax years 1981 and 1982. To the contrary, the two documents upon which the Plaintiffs rely plainly apply only to the tax year ended 1981. At all events, however, the payment of taxes does not constitute the type of detrimental reliance necessary to invoke estoppel. Bunce v. United States [93-2 USTC ¶60,142], 28 Fed. Cl. 500, 506 (1993), aff'd, 26 F.3d 138 (Fed. Cir.), cert. denied, 115 S. Ct. 635 (1994). Rather, in the tax area, detrimental reliance usually refers to false information that caused the claimant to lose a legal right. Id. The Plaintiffs have not presented any evidence showing detrimental reliance other than having paid their taxes for the 1983 and 1984 tax years. Moreover, the Defendant, through the IRS , was clearly acting in its public capacity with respect to the assessment of federal tax liabilities, and not in a private or proprietary capacity. Cf. Gibson v. Resolution Trust Corp., 750 F. Supp. 1565, 1573 (S.D. Fla. 1990) ("Proprietary governmental functions include essentially commercial transactions involving the purchase or sale of goods and services and other activities for the commercial benefit of a particular government agency . . . Conversely, in its sovereign role, the government carries out unique governmental functions for the benefit of the whole public."), aff'd, 51 F.3d 1016 (11th Cir. 1995). Finally, as we have also already discussed, supra, the Plaintiffs have failed to present any evidence of a representation by an authorized official of an intent to settle the 1983 and 1984 tax years. In sum, the Plaintiffs have not created a genuine issue of material fact as to whether principles of equitable estoppel should apply here.

Because the Plaintiffs have failed to establish the existence of a settlement agreement in respect to the 1983 and 1984 tax years, and there being no basis for equitable estoppel to lie against the Defendant in this case, we must find that the Defendant's Motion for Summary Judgment should be granted as to all four counts of the Complaint. Accordingly, it is hereby

ORDERED AND ADJUDGED that the Defendant's Motion for Summary Judgment is GRANTED, and the Plaintiffs' Cross-Motion for Summary Judgment is DENIED. The Defendant is directed to submit a proposed Order of Final Summary Judgment to the Court within ten (10) days of this Order. It is further

ORDERED AND ADJUDGED that all other pending motions are DENIED as moot. The Clerk of the Court is directed to close the case.

 

 

 

[97-1 USTC ¶50,127] In re Charles L. Hobbs, Debtor. Charles L. Hobbs, Plaintiff v. United States of America (Internal Revenue Service), Defendant

U.S. Bankruptcy Court, No. Dist. Iowa , West. Div., 95-51466XS, 6/5/96

[Code Secs. 6871 and 7122 ]

Bankruptcy: Prepetition tax liability: Collection: 240-day period: Tolling: Offer in compromise: Termination of.--

A debtor's tax liabilities were dischargeable in bankruptcy because 240 days had passed between the date of the IRS assessment of the