United States of America v. Fuess

Filing 39

ORDER granting 32 Motion for Summary Judgment. Signed by Judge Roger T. Benitez on 4/10/2017. (All non-registered users served via U.S. Mail Service) (Certified Copy to USM) (fth)

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1 FILED 2 17APR 12 AM 8s 41 3 4 av M,*-W 5 ,f)EPUTV 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 UNITED STATES OF AMERICA, Case No.: 3:15-cv-01148-BEN-RBB Plaintiff, 12 13 v. 14 ORDER GRANTING MOTION FOR SUMMARY JUDGMENT WILLIAM C. FUESS, Defendant. 15 16 Before the Court is a Motion for Summary Judgment, filed by Plaintiff United 17 18 States of America (hereinafter “the government”). (Docket No. 32.) Defendant William 19 C. Feuss did not file an opposition. The Court finds the Motion suitable for 20 determination on the papers without oral argument, pursuant to Civil Local Rule 7.1.d.l. 21 For the reasons set for below, the Motion is GRANTED. FACTUAL BACKGROUND1 22 23 Defendant did not file a federal tax return for the tax years 2001 to 2016. (SUF 24 1.) The Internal Revenue Service (“IRS”) conducted audit examinations for each of the 25 26 27 28 i The government filed a Statement of Undisputed Facts (“SUF”). (Docket. No. 32-2.) Defendant did not. Therefore, the Court deems the government’s facts undisputed. l 3:15-cv-01148-BEN-RBB 1 tax years 2001, 2002, 2003, 2004, 2005, 2006, 2008, 2009, 2011, and 2012. (SUF 12.) 2 To determine and assess the correct federal income tax liabilities for these years, the IRS 3 obtained information reported by third parties on various IRS forms, including Forms 4 1098 (mortgage interest) and 1099 (non-employee compensation). (SUF ^ 3.) An 5 authorized delegate of the Secretary of the Treasury made timely assessments against 6 Defendant for the years 2001, 2002, 2003, 2004, 2005, 2006, 2008, 2009, 2011, and 7 2012. (SUF 16.) The government issued timely notice and demand for payments for 8 these assessments to Defendant, but Defendant neglected, failed, or refused to fully pay 9 the assessments for the aforementioned years, which remain due and owing with an 10 unpaid balance of $304,834.13, plus statutory interest and other additions accruing from 11 December 9,2016. (S.UF1[7.) 12 13 PROCEDURAL HISTORY The government filed its Complaint on May 21, 2015. (Docket No. 1.) It seeks 14 “to reduce federal income tax, penalty, and interest assessments, along with other 15 accruals that have not yet been formally assessed against [Defendant] to judgment.” 16 (Compl. ^[ 1.) Defendant filed his Answer on August 31, 2015. (Docket No. 5.) On May 17 25, 2016 and July 26, 2016, the government filed two separate motions for discovery 18 sanctions, which were both granted in part by Magistrate Judge Ruben B. Brooks. 19 (Docket Nos. 15, 20, 23, 27.) Concurrently with the minute order granting in part the 20 government’s second motion for discovery sanctions, Judge Brooks issued a Report and 21 Recommendation, recommending that this Court grant the government’s request for 22 evidence preclusion sanctions, pursuant to the provisions of 28 U.S.C. § 636(b)(1). 23 (Docket No. 27.) On October 28,2016, this Court adopted Judge Brooks’ Report and 24 Recommendation, and issued an order which precluded Defendant from presenting 25 documentary evidence (1) showing his entitlement to deductions or (2) rebutting the 26 accuracy of the government’s tax assessments when opposing a motion for summary 27 judgment or at trial. (Docket No. 31.) 28 2 3:15-cv-01148-BEN-RBB 1 2 LEGAL STANDARD A motion for summary judgment must be granted when “the pleadings, 3 depositions, answers to interrogatories, and admissions on file, together with the 4 affidavits, if any, show that there is no genuine issue as to any material fact and that the 5 moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. Proc. 56(a). “A 6 party seeking summary judgment always bears the initial responsibility of informing the 7 district court of the basis for its motion” and identifying the portions of the pleadings and 8 discovery responses that demonstrate the absence of a genuine issue of material fact. 9 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The moving party can do so by 10 negating an essential element of the non-moving party’s case, or by showing that the non­ 11 moving party failed to make a showing sufficient to establish an element essential to that 12 party’s case, and on which the party will bear the burden of proof at trial. Id. at 331. The 13 burden then shifts to the non-moving party to show that there is a genuine issue for trial. 14 Horphag Research Ltd. v. Garcia, 475 F.3d 1029, 1035 (9th Cir. 2007). 15 In evaluating the evidence to support or oppose a motion for summary judgment, 16 the court does not assume the jury functions of determining credibility, weighing of 17 evidence, or drawing legitimate inferences from the facts. Anderson v. Liberty Lobby, 18 Inc., All U.S. 242, 255 (1986) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 19 (1970)). Rather, “[t]he evidence of the non-movant is to be believed, and all justifiable 20 inferences are to be drawn in his favor.” Ibid. However, the inferences that may be 21 drawn are not limitless. T. W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass ’n, 809 F.2d 22 626, 632 (9th Cir. 1987). Inferences must be based on specific facts and only “‘rational’ 23 and ‘reasonable’” inferences may be drawn. Id.; United Steelworkers ofAm. v. Phelps 24 Dodge Corp., 865 F.2d 1539,1542 (9th Cir. 1989). Additionally, conclusory, speculative 25 testimony in affidavits and moving papers is insufficient to raise genuine issues of fact 26 and defeat summary judgment. See Nelson v. Pima Community College, 83 F.3d 1075, 27 28 3 3:15-cv-01148-BEN-RBB 1 1081-82 (9th Cir. 1996) (“mere allegation and speculation do not create a factual dispute 2 for purposes of summary judgment”). 3 Regardless of whether the non-movant responded to a moving party’s summary 4 judgment motion, a court may not grant summary judgment unless the moving party has 5 affirmatively shown “there is no genuine issue as to any material fact and that [it] is 6 entitled to a judgment as a matter of law.” Martinez v. Stanford, 323 F.3d 1178, 1182-83 7 (9th Cir. 2003) (internal citation omitted). 8 9 DISCUSSION The government bears the burden of proof in an action to collect taxes. United 10 States v. Stonehill, 702 F.2d 1288,1293 (9th Cir. 1983). It can usually carry this burden 11 by introducing its assessment of taxes due, after which “a presumption of correctness 12 attaches to the assessment, and its introduction establishes a prima facie case.” Id. A 13 Certificate of Assessments and Payments is presumed to be correct evidence of a 14 taxpayer's liability, “and is the proper means of establishing that assessments were 15 properly made and that notices and demand for payment were sent.” United States v. 16 Secapure, No. C 07-1050 TEH, 2008 WL 820719, at *2 (N.D. Cal. Mar. 26, 2008) (citing 17 Koffv. United States, 3 F.3d 1297, 1298 (9th Cir. 1993); Stonehill, 702 F.2d at 1293); see 18 also United States v. Boyce, 38 F. Supp. 3d 1135, 1152 (C.D. Cal. 2014) (quoting United 19 States v. Vacante, 717 F. Supp. 2d 992, 1004 (E.D. Cal. 2010) (“Certificates of 20 Assessments and Payments (‘Form 4340s') are highly probative and in the absence of 21 contrary evidence, are sufficient to establish a tax assessment was properly made and 22 notice and demand for payment were sent.”)). 23 The presumption does not arise unless it is supported by a “minimal evidentiary 24 foundation.” Oliver v. United States, 921 F.2d 916, 920 (9th Cir. 1990) {citing Stonehill 25 at 1293). A factual foundation for the assessment is laid by the government’s 26 introduction of “some substantive evidence” that demonstrates that the taxpayer received 27 28 4 3:15-cv-01148-BEN-RBB 1 unreported income. Stonehill at 1293 (quoting Edwards v. Commissioner, 680 F.2d 2 1268, 1270 (9th Cir. 1982)). 3 If the government introduces the presumptively correct assessment, the burden of 4 proof shifts to the taxpayer to prove that the assessment is “arbitrary or erroneous.” 5 Stonehill, 702 F.2d at 1294 (citing Helvering v. Taylor, 293 U.S. 507, 515 (1935); Cohen 6 v. Commissioner, 266 F.2d 5,11 (9th Cir. 1959)). If the defendant successfully rebuts the 7 presumption of correctness, the burden shift back to the government to “establish the 8 correctness of the assessment by sufficient and competent evidence.” Secapure, supra, 9 2008 WL 820719, at *2 (quoting United States v. Molitor, 337 F.2d 917, 923 (9th Cir. 10 1964)). However, “[i]f the taxpayer fails to rebut the presumption, the government is 11 entitled to judgment as a matter of law.” Vacante, 717 F. Supp. 2d at 1004 (citing 12 Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993) (affirming trial court’s grant of 13 the government’s motion for summary judgment after defendant taxpayers failed to 14 present sufficient evidence to rebut presumption of correctness). 15 The Court finds the government has established that its assessments are entitled to 16 a presumption of correctness. First, the government provided Defendant’s responses to 17 its requests for admissions, in which he admits he did not file a federal income tax return 18 for tax years 2001-2016, but received some income in each of the years at issue. (Exhs. 19 21-22; Declaration of Nithya Senra in Support of Motion for Summary Judgment 20 (hereinafter “Senra Decl.”) 21 Form 4340, Certificate of Assessments, Payments, and Other Specified Matters 22 (“Certificate of Assessments”) for the tax years 2001, 2002, 2003, 2004, 2005, 2006, 23 2008, 2009, 2011, and 2012. (Exhs. A-J; Declaration of Julie A. Piazza in Support of 24 Motion for Summary Judgment (hereinafter “Piazza Decl.”) 25 Certificates of Assessments were generated under seal and signed by an authorized 26 delegate of the Secretary of the Treasury. Ibid. 2-3.). Second, the government introduced copies of the 6-7.) Each of the 27 28 5 3:15-cv-01148-BEN-RBB Third, the government introduced copies of the Notice of Deficiency for the same 1 2 years that it purportedly mailed to Defendant prior to assessment. (Exhs. 1-10; Piazza 3 Decl. 4 worksheets, and Information Return Program (“IRP”) data2 used to determine the correct 5 amount of federal tax liabilities owed by Defendant. (Piazza Decl. 15.) Finally, the 6 government submitted the signed declaration of the IRS advisor who verified the 7 documents and information relied upon by the IRS in making its determination of 8 Defendant’s tax liabilities. (Piazza Decl. 9 minimal evidentiary burden to support a presumption of correctness in its tax assessments 10 11 12 13 14 15 16 17 18 19 20 21 4-5.) The Notices of Deficiency included summaries of IRS work papers, forms, 1-3.) Thus, the government has met its against Defendant. The amounts of the original and outstanding tax liability are as follows: Tax Period Ending Date of Assessment 2001 2002 06/06/2005 2003 2004 2005 2006 2008 2009 2011 2012 Balance on Certificate of Assessments3 $28,374.65 $29,502.10 07/30/2007 07/30/2007 07/30/2007 $5,982.44 $13,652.69 $8,928.88 $957.48 05/25/2009 05/25/2009 12/31/2012 $17,884.84 12/31/2012 $17,866.06 02/10/2014 $85,397.03 02/16/2015 $25,578.23 Total Outstanding Balance Outstanding Balance4 $45,072.64 $42,553.18 $8,595.05 $19,518.16 $11,499.51 $1,230.98 $20,536.46 $21,240.14 $102,016.82 $29,680.13 $304,834.13 22 23 24 25 26 27 28 2 IRP data includes “retrievable computer records maintained by the IRS reflecting data reported by third parties on various IRS forms, including Forms 1098 (mortgage interest) and 1099 (non-employee compensation.” (Piazza Decl. TJ 2.) 3 Amount reflects sum of “Tax Assessed,” “Failure to Pay Tax Penalty,” “Estimated Tax Penalty,” “Interest,” “Late Filing Penalty,” and “Fees and Collection Costs” in Form 4340 for each tax period. (Exhs. A-J; Piazza Decl. fflf 6-7, fn. 1.) 4 Including accrued by unassessed interest and credit and for payments received through December 9, 2016. (Piazza Decl. 16, fn. 2.) 6 3:15-cv-01148-BEN-RBB y -- 1 As noted above, Defendant did not file an opposition to the government’s motion. 2 Therefore, Defendant failed to rebut both the government’s prima facie case of tax 3 liability, and the presumption of correctness in its tax assessments against him. See 4 Stonehill, supra, 702 F.2d at 1293-94. As a result, there is no genuine issue of material 5 fact before the Court, and the government is entitled to summary judgment as a matter of 6 law. Fed. R. Civ. Proc. 56(a); see also Vacante, supra, 717 F. Supp. 2d at 1004 (citing 7 Hansen, supra, 7 F.3d at 138). Accordingly, the United States’ Motion for Summary 8 Judgment is GRANTED. 9 CONCLUSION 10 The government’s motion for summary judgment is GRANTED. The Court 11 ORDERS that William C. Feuss’s federal income tax liabilities and associated statutorily 12 authorized penalties and interest for the tax years 2001, 2002,2003, 2004, 2005, 2006, 13 2008, 2009, 2011, and 2012 be reduced to judgment. 14 IT IS SO ORDERED. 15 16 17 Dated: April/^ , 2017 /hon^c^^ubeniteV Unitea States District Judge 18 19 20 21 22 23 24 25 26 27 28 7 3:15-cv-01148-BEN-RBB

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