Suhadolnik v. United States of America

Filing 31

OPINION: Defendant/Counterclaimant United States' Motionfor Summary Judgment Against Plaintiff Michael F. Suhadolnik isDENIED as to the dismissal of his refund claim and ALLOWED insofaras it seeks a judgment obligating Michael F. Suhadolnik to t he UnitedStates in the amount of $263,628.71, plus interest from February 8,2011. Out of concern for the resources of all involved, the Court ordersthe Government to file an additional pleading which states whether itintends to continue to conte st Mr. Suhadolnik's $938.36 refund claim(and associated costs) or whether that amount will be conceded anddeducted from the more than $263,628.71 judgment allowed herein.The Government's brief is due June 14, 2011. Mr. Suhadolnik shallrespond by June 21, 2011. The Government's reply is due June 28,2011. Entered by Judge Sue E. Myerscough on 6/1/2011. (CT, ilcd)

E-FILED

Thursday, 02 June, 2011 09:46:00 AM
Clerk, U.S. District Court, ILCD

UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
MICHAEL F. SUHADOLNIK,

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

Plaintiff,
v.
UNITED STATES OF AMERICA,
Defendant/Counterclaimant,
v.
MICHAEL F. SUHADOLNIK, and
JAMES A. YAGOW,
Counterclaim-Defendants.

10-3021

OPINION
SUE E. MYERSCOUGH, U.S. District Judge:
The Court now considers Defendant/Counterclaimant United
States’ Motion for Summary Judgment Against Plaintiff Michael F.
Suhadolnik (the “Motion”). For the reasons stated below, the Motion is
DENIED IN PART AND ALLOWED IN PART.

1

I. INTRODUCTION
The Internal Revenue Code requires an employer to deduct and
withhold income and social security taxes from the wages paid to
employees. See 26 U.S.C. §§ 3102(a) and 3402(a); see also, Slodov v.
United States, 436 U.S. 238, 242-43 (1978). These so-called “trust fund
taxes” (a/k/a “withholding taxes”), which include amounts owed under
the Federal Insurance Contributions Act (FICA), are for the exclusive use
of the United States and are not to be used as working capital for the
business or to pay the employer’s business expenses, including payroll. 26
U.S.C. §§ 3102(b), 3403, 7501(a); see also United States v. Energy
Resources Co., Inc., 495 U.S. 545, 546-47 (1990) (since federal law
requires employers to keep these funds in “trust for the United States”
pursuant to 26 U.S.C. § 7501(a), the funds are commonly referred to as
“trust fund” taxes). Employers are required to report the amount of
withheld taxes on a payroll tax return (Form 941). See 26 C.F.R. §
31.6011(a)-4(a)(1). A Form 941 payroll tax return must be filed every
calendar quarter and is generally due on the last day of the first month

2

following the quarter. See 26 C.F.R. § 31.6071(a)-1(a). When
employers fail to pay trust fund taxes, the United States is deprived of
that revenue and incurs an unfunded Social Security and Medicare
liability. Therefore, 26 U.S.C. § 6672 provides that: “[a]ny person
required to collect, truthfully account for and pay over such tax, . . . shall
. . . be liable for a penalty equal to the total amount of the tax evaded, or
not collected, or not accounted for and paid over.” Id.
The United States (the “Government”) informed Mr. Suhadolnik
that he is liable for trust fund recovery penalties assessed against him as a
result of the nonpayment of withholding taxes owed for employees of Mr.
Suhadolnik’s now defunct company, CX Construction of Central Illinois,
Inc. (“CX”). Mr. Suhadolnik responded by suing the Government,
arguing that he has no liability and is actually entitled to a $938.96
refund (plus interest and costs) for taxes the Government wrongly
collected. The Government counterclaimed against Mr. Suhadolnik and
James Yagow (an accountant who formerly worked for CX), pursuant to
26 U.S.C. § 7401. The Government alleged the men were jointly and

3

severally liable for CX’s failure to pay trust fund liabilities from July 1,
2005, though December 31, 2007, in the amount of $263,628.71, plus
interest.
II. BACKGROUND1
Mr. Suhadolnik founded Construx Construction of Central Illinois
(“Construx”) in the late 1970s and grew the company into a business
with multiple related corporations, including Crazy Horse Concrete
(“Crazy Horse”), CDG Architects (“CDG”), and Superior Walls.
Construx experienced a financial decline and went bankrupt. In 2005,
Mr. Suhadolnik founded CX and served as its chief executive officer.
Due to concern that his personal creditors would interrupt CX’s business
activities if he was designated as CX’s owner, Mr. Suhadolnik made his
wife, Maureen Suhadolnik, the owner of CX.
From its start, CX had limited capital, no operating line of credit,
and no contracts to perform work. There were doubts as to CX’s

1

The Court largely adopts the facts as set forth by the Government in its
Motion (d/e 25). However, the Court also incorporates any genuine issue of disputed
material fact set forth in Suhadolnik’s responsive brief (d/e 28).

4

financial viability. CX did not garner a significant contract until 8
months after the company was created. Mr. Suhadolnik was not paid a
salary for his work at CX. However, he agreed to pay former Construx
employees Bill Shomidie, Jack Davis, and Jim Yagow salaries comparable
to those they received while working for Construx. During their time at
CX, accountants Mr. Shomidie and Mr. Yagow each earned
approximately $112,500.00 annually while Mr. Davis—who handled
CX’s operations—earned less. Mr. Suhadolnik also hired Kim
Brockhouse, Chrissy Simpson, and Gwen Hilligoss as part of CX’s
support staff.2
Mr. Suhadolnik knew that certain employees periodically went
without pay. CX reported a loss every year it was in operation.
While Maureen Suhadolnik was CX’s nominal owner, Mr.
Suhadolnik was the one who generated business, met with customers and
designers, estimated projects, organized time schedules, monitored the

2

Mr. Suhadolnik suggests that Mr. Shomidie, Mr. Yagow and Ms.
Brockhouse misappropriated funds. See d/e 28 at 39. Those allegations are
unsubstantiated and irrelevant to Mr. Suhadolnik’s liability under § 6672. As such,
they will not be further addressed.

5

progress of projects, and met with field staff, hired and fired employees,
was a signatory on one of CX’s two bank accounts, reviewed CX’s income
tax returns, decided where to locate the company’s office, set agendas,
and directed the payment of certain bills. Mr. Suhadolnik also set CX’s
financial policy and scrutinized its expenses. He was CX’s ultimate
authority.
Although Mr. Suhadolnik was informed at various points that CX
had substantial outstanding payroll tax obligations for a period spanning
July 1, 2005, though December 31, 2007, he failed to pay the taxes.
Instead, he used CX’s funds to pay the company’s rent and other
expenses.
CX struggled financially, but Mr. Suhadolnik nevertheless used
assets to subsidize his wife’s business—a Gold’s Gym fitness center—,his
other companies, and his personal legal battles. In January 2008, after
the State of Illinois and the Internal Revenue Service (IRS) began
investigating why CX had not paid its withholding taxes, Mr. Suhadolnik
failed to pay CX’s past due federal withholding taxes even though the

6

company had approximately $375,000 in revenue that year.
Mr. Suhadolnik specifically requested that withholding taxes be
addressed at CX’s weekly meetings, but he never requested updates about
the withholding taxes when employees included them in the reports. The
IRS appeared as an agenda item for at least one of the weekly meetings
and a number of CX’s employees recalled discussing the unpaid
withholding taxes on various occasions. Moreover, Mr. Suhadolnik was
presented with various balance sheets also showing substantial amounts
of liability for FICA and federal withholdings.
Rather than pay CX’s taxes, Mr. Suhadolnik paid payroll and other
CX expenses. He paid his wife more than $19,000. He also started a
new construction business called CXP Construction of Central Illinois,
allegedly to avoid the effect of an IRS levy. To keep CX’s operations
intact, Mr. Suhadolnik personally directed that certain expenses,
including rent, legal costs, and an approximately $5,000 payment on a
2005 personal loan at the Bank of Springfield be paid.
Despite CX’s financial straits, Mr. Suhadolnik decided not to lay

7

off employees. He continued to pay Mr. Shomidie, Mr. Yagow, and Mr.
Davis through the end of December 31, 2007. Funds from Gold’s Gym
(Gold’s) and Crazy Horse were used to pay CX employees. Mr.
Shomidie and Mr. Yagow each received approximately $3,000 from
Gold’s and Ms. Brockhouse received $1,200 from Gold’s. Furthermore,
Mr. Shomidie and Mr. Yagow each received about $1,500 from Crazy
Horse while Ms. Brockhouse was paid some $600 from Crazy Horse.
Mr. Suhadolnik knew that CX advanced certain sums to Gold’s,
and a $50,000 liability due to CX from Gold’s appeared on a 2006 tax
return Mr. Suhadolnik reviewed. In 2007, Maureen Suhadolnik received
no fewer than 12 CX paychecks totaling $8,422.44 even though she did
no work for CX. The checks were allegedly made out to Mrs. Suhadolnik
because Mr. Suhadolnik could not receive payments due to his creditor
situation. Beyond this, Mr. Suhadolnik permitted CX to pay more than
$20,000 to the law firm Murphy & Hourihane, LLC despite the fact that
the firm did no work for CX.
In January 2008, the Illinois Department of Revenue contacted Mr.

8

Suhadolnik concerning CX’s failure to pay Illinois withholding taxes. In
February 2008, Mr. Suhadolnik met with the IRS regarding serious
problems with CX’s payroll taxes. Thereafter, Mr. Suhadolnik
incorporated a business called CXP Construction of Illinois, Inc.
(“CXP”). He allegedly did this to avoid an IRS levy on CX’s assets and
to keep the IRS from reaching any account receivables which CX might
receive from the Spruce Estates job in Chatham, Illinois. A $3,000 check
made out to CX was deposited into CXP’s bank account. Later, another
$10,000 in CXP’s earnings was paid to the Suhadolniks.
Whatever money may have been available to him, Mr. Suhadolnik
made no voluntary payments towards CX’s back withholding taxes. He
did this even though in 2008, CX averaged more than $50,000 in
revenue for the first 6 months and over $375,000 in total annual
revenue. Of that money, $160,000 was used for salaries, $19,000 was
paid to Maureen Suhadolnik, and $70,000 was used for miscellaneous
expenses. Mr. Suhadolnik contends that he was unable to satisfy his
liabilities and went into personal bankruptcy on August 14, 2008.

9

Mr. Suhadolnik did not pay trust fund taxes for the quarters ending
September 30, 2005, through December 31, 2007. Pursuant to 26
U.S.C. § 6672 (which allows for “trust fund” recovery liability), a
delegate of the Secretary of the Treasury of the United States made
assessments against Mr. Suhadolnik for his allegedly willful failure to
collect, account for, and pay over taxes due and owing for CX’s
employees. The taxable periods, assessment dates, and amounts assessed
were as follows:
Taxable
Period

Assessment
Date

Assessment Type

Assessed
Amount

Balance as of 2/8/10

9/30/05

12/15/08

Trust Fund Taxes

$17,441.61

$14,733.54

12/31/05

12/15/08

Trust Fund Taxes

$18,976.80

$20,632.22

3/31/06

12/15/08

Trust Fund Taxes

$21,180.03

$23,063.94

6/30/06

12/15/08

Trust Fund Taxes

$28,692.81

$31,272.43

9/30/06

12/15/08

Trust Fund Taxes

$39,826.36

$43,430.37

12/31/06

12/15/08

Trust Fund Taxes

$33,618.34

$36,568.13

3/31/07

12/15/08

Trust Fund Taxes

$23,604.28

$25,744.56

6/30/07

12/15/08

Trust Fund Taxes

$6,876.83

$7,307.24

9/30/07

12/15/08

Trust Fund Taxes

$27,835.14

$30,627.57

12/31/07

12/15/08

Trust Fund Taxes

$28,135.61

$30,627.57

TOTAL owed as of February 8, 2011 = $263,628.71

10

On or about the date of each assessment listed above, a delegate of
the Secretary of the Treasury of the United States gave notice of the
assessment to and made a demand for payment upon Mr. Suhadolnik.
Mr. Suhadolnik could have instructed his subordinates to pay over CX’s
trust fund taxes, but he never did so.
In 2008, Mr. Suhadolnik decided to end CX as a business without
ever collecting the outstanding $50,000 loan to Gold’s. CX assets were
sold in 2008, including its office equipment, shop equipment, tools, and
furniture. The proceeds were used to pay insurance and other expenses.
The money was not used to pay CX’s past-due withholding tax liabilities.
On January 27, 2010, Mr. Suhadolnik sued the Government and
asked the Court to find that he has no trust fund liability and is entitled
to a $938.96 refund (plus interest and costs) for taxes the Government
wrongly collected. On February 16, 2011, former CX accountant James
Yagow stipulated to his liability regarding trust fund violations in the
amount of $259,916.81, plus statutory additions and interest. See d/e
23. On February 17, 2011, the Government filed the instant Motion

11

seeking to hold Mr. Suhadolnik liable for $263,628.71 in trust fund
liabilities, plus interest. The Government also asks the Court to dismiss
Mr. Suhadolnik’s refund claim because Mr. Suhadolnik has not met the
jurisdictional requirements for a refund. Mr. Suhadolnik filed a
responsive brief (d/e 28). In it, he admits that he did not pay the trust
fund taxes, but he argues that he should not be held liable because he
delegated the task of paying CX’s trust fund taxes to Mr. Shomidie and
Mr. Yagow. The Government filed a reply brief (d/e 29). The matter is
ripe for a decision.
III. JURISDICTION & VENUE
The Government is seeking unpaid taxes and is defending against
Mr. Suhadolnik’s refund claim. Since the Government is a party to the
litigation, the Court has jurisdiction pursuant to 28 U.S.C. §§ 1345,
1346(e), and 26 U.S.C. § 7402(a). Because Mr. Suhadolnik resides in
Springfield, Illinois, he is within the Court’s jurisdiction and venue is
appropriate here. See 28 U.S.C. § 1391(b).

12

IV. STANDARD OF REVIEW
A court may grant summary judgment only if the “pleadings, the
discovery, and discovery materials on file, and any affidavits show that
there is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). A
genuine issue of material fact exists when “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.” See
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505,
2510, 91 L.Ed.2d 202 (1986). The movant bears the burden of
establishing that there is no genuine issue of material fact. Celotex Corp.
v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
If the movant meets this burden, the non-movant must set forth specific
facts demonstrating that there is a genuine issue for trial. Fed.R.Civ.P.
56(e); Anderson, 477 U.S. at 252.
In deciding a motion for summary judgment, a court can only
consider sworn statements based on personal knowledge and other
evidence that would be admissible at trial under the Federal Rules of

13

Evidence. Stinnett v. Iron Works Gym/Executive Health Spa, Inc., 301
F.3d 610, 613 (7th Cir. 2002). The evidence is viewed in the light most
favorable to the non-movant and “all justifiable inferences are to be
drawn in his favor.” Anderson, 477 U.S. at 255, 106 S.Ct. 2505.
Summary judgment is inappropriate when alternate inferences can be
drawn from the evidence, as the choice between reasonable inferences
from facts is a jury function. Id.; Spiegla v. Hull, 371 F.3d 928, 935 (7th
Cir. 2004). However, conclusory allegations do not create issues of fact
which forestall summary judgment. See Sublett v. John Wiley & Sons,
Inc., 463 F.3d 731, 740 (7th Cir. 2006) (“it is . . . axiomatic that a
plaintiff’s conclusory statements do not create an issue of fact”).
V. ANALYSIS
The Court will first consider Mr. Suhadolnik’s refund claim. The
Court will then determine Mr. Suhadolnik’s trust fund liability.
A. Mr. Suhadolnik Can Assert a Refund Claim.
The Government argues that Mr. Suhadolnik’s refund claim should
be dismissed for lack of jurisdiction. The jurisdictional requirements for

14

a refund claim are contained in 28 U.S.C. § 1346(a)(1). While the
United States typically has sovereign immunity from lawsuits, there has
been a waiver of this immunity to the limited extent of a tax refund suit
pursuant to § 1346(a)(1). See Lighthall v. C.I.R., 948 F.2d 1292 (7th
Cir. 1991) (table opinion).
Generally, a court only has jurisdiction over a refund claim if a
taxpayer has fully paid the relevant tax. See Flora v. United States, 357
U.S. 63 (1958). However, for a refund claim pertaining to a divisible tax
such as the withholding taxes at issue here, a taxpayer must prove that he
paid the taxes for one employee for one quarter. See Lighthall, 948 F.2d
1292, citing Steele v. United States, 280 F.2d 89 (8th Cir. 1960) (a
taxpayer assessed under § 6672 need only pay the divisible amount of the
penalty assessment attributable to a single individual’s withholding
before filing a refund claim).
Mr. Suhadolnik asserts that on December 31, 2008, he erroneously
paid and the Government wrongfully collected $938.36 pursuant to §
6672. See d/e 1. He specifies that he paid this amount with respect to

15

quarterly taxes owed for nine CX employees (Christina Vahnying, Stan
Searchy, Teodoro Rivera, Michael Ruby, Jared White, Robert Davis, Karl
Karins, Travis Cline, and Chy Searchy). See d/e 28. Mr. Suhadolnik also
alleges that he engaged in the necessary IRS administrative review process
before filing his refund claim. Id. These factual allegations are sufficient
to fulfill the jurisdictional requirements of a § 6672 refund claim. See
Lighthall, 948 F.2d 1292.
The Government fails to offer evidence that proves Mr. Suhadolnik
did not: (1) pay the taxes during the period in question; and (2) complete
the IRS’ administrative review process. Therefore, the Government is not
entitled to summary judgment on Mr. Suhadolnik’s refund claim. While
this is not the result the Government sought, this holding actually inures
to its benefit. Had there been no valid § 6672 refund claim, the Court
might lack subject matter jurisdiction over the Government’s
counterclaim. See Boynton v. United States, 566 F.2d 50 (9th Cir. 1977)
(courts lack subject matter jurisdiction over United States’ § 6672
counterclaim if plaintiff failed to establish a valid refund claim); see also,

16

Turk v. United States, 1993 WL 402902 (N.D.Ind. (Apr. 23, 1993))
(recognizing disagreement between the Fifth and Ninth Circuit Court of
Appeals regarding the rule announced in Boynton).
B. Mr. Suhadolnik is Liable for the Trust Fund Taxes
IRS tax assessments are presumptively correct. See United
States v. Fior D’Italia, Inc., 536 U.S. 238, 242 (2002). Once the IRS
introduces evidence of an assessment, a taxpayer has the burden of
proving by a preponderance of the evidence that the assessment is
erroneous. See Pittman v. C.I.R., 100 F.3d 1308, 1313-14 (7th Cir.
1996).
Here, the IRS assessed unpaid taxes against Mr. Suhadolnik
pursuant to 26 U.S.C. § 6201, et seq. The Certificates of Assessments,
Payments, and Other Specified Matters, Form 4340 (“Certificates of
Assessment”) filed with the Government’s Motion are sufficient to prove
the IRS’s assessments against Mr. Suhadolnik for the periods in question.
See United States v. Davenport, 106 F.3d 1333, 1336, n.4 (7th Cir.
1997); Eugene G. Ziobron, Inc. v. United States, 1998 WL 879526 (7th

17

Cir. 1988); United States v. Hart, 1989 WL 69882 (C.D.Ill. Jan. 5,
1989). Therefore, the burden shifts to Mr. Suhadolnik to prove the
assessments are erroneous. See Pittman, 100 F.3d at 1313-14.
Mr. Suhadolnik argues that the assessments are erroneous because
they wrongly assert that he willfully failed to pay withholding taxes. Mr.
Suhadolnik contends that because he reasonably expected Mr. Shomidie
and Mr. Yagow to pay the taxes, he cannot be liable due to their failure
to pay.
Employers cannot escape liability through such a “delegation”
defense. See United States v. Charlton, 2 F.3d 237, 240 (7th Cir. 1993)
(delegating responsibility over taxes or dispersals to another officer or
employee is not a defense to responsibility under § 6672). As stated
earlier, § 6672 provides that: “[a]ny person required to collect, truthfully
account for and pay over such tax, . . . shall, . . . be liable for a penalty
equal to the total amount of the tax evaded, or not collected, or not
accounted for and paid over.” See 26 U.S.C. § 6672. “A person is
responsible under section 6672 if he retains sufficient control of

18

corporate finances that he can allocate corporate funds to pay the
corporation’s other debts in preference to the corporation’s withholding
tax obligations.” See Bowlen v. United States, 956 F.2d 723, 728 (7th
Cir. 1992). Nonpayment of trust fund taxes results in liability equal to
the amount of unpaid trust fund taxes, against any person who: (1) was
required to collect, truthfully account for or pay over the employment
taxes; and (2) who, in that capacity, willfully failed to collect, truthfully
account for or pay over the trust fund taxes. Id. at 727.
The evidence shows that Mr. Suhadolnik was CX’s CEO and de
facto owner. He had the authority to collect and pay trust fund taxes.
Since he hired employees, determined their salaries, established CX’s
financial policies, led weekly meetings where tax issues were discussed,
reviewed balance sheets and income tax returns, prioritized expenses, and
was a signatory on one of CX’s bank accounts, Mr. Suhadolnik was a
responsible person under 26 U.S.C. § 6672.
Because Mr. Suhadolnik was a “responsible person” under § 6672,
he bears liability if he “willfully” failed to collect, truthfully account for,

19

or pay over the withholding taxes. A “responsible person” is deemed to
have acted “willfully” if he “either knew the taxes were not being turned
over to the government and nonetheless opted to pay other creditors, or
recklessly disregarded a known risk that the taxes were not being paid
over.” United States v. Kim, 111 F.3d 1351, 1357 (7th Cir. 1997). If a
“responsible person” has knowledge of a trust fund tax delinquency and
pays other creditors after gaining such knowledge, his actions are
considered willful. See Thomas v. United States, 41 F.3d 1109, 1114
(7th Cir. 1994).
A “responsible person” can also be held liable if he: “(1) clearly
ought to have known that; (2) there was a grave risk that withholding
taxes were not being paid; and (3) he was in a position to find out for
certain very easily.” Wright v. United States, 809 F.2d 425, 427 (7th Cir.
1987). Liability also attaches if a “responsible person” acted with
“recklessness” in failing to pay withholding taxes. Id. at 428. Such
“recklessness” is proven by showing that a “responsible person” failed to
“correct mismanagement after being notified that the withholding taxes

20

have not been duly remitted.” See Running v. United States, 7 F.3d
1293, 1299 (7th Cir. 1993).
CX was an undercapitalized company as of the date Mr.
Suhadolnik began it in 2005. Although CX had no major contracts for
the first several months of its existence, Mr. Suhadolnik paid six-figure
salaries to numerous employees from CX’s inception. The company
suffered financial losses every year in was in operation.
On no fewer than six occasions, Mr. Suhadolnik was presented with
evidence that CX was not paying its payroll taxes. Four balance sheets
(dated June 30, 2006, July 30, 2006, December 31, 2006, and December
31, 2007) and the tax returns completed in February 2006 and June
2007 all showed overdue withholding taxes ranging from $10,000 to
$50,000. Mr. Suhadolnik made no effort to pay the past due
withholding taxes even though he specifically asked for weekly reports on
tax deposits. Rather than have withholding taxes paid, Mr. Suhadolnik
allowed disbursements for CX’s operating expenses and subsidized his
other companies. He used CX’s funds to pay salaries, a $20,000 legal

21

bill, an $8,000 payment to his wife, a $50,000 loan to his wife’s gym,
and a $5,000 payment on a personal loan. Mr. Suhadolnik did this even
though CX’s balance sheets and tax returns showed tax liabilities.
In early 2008, after he became aware that the Illinois Department
of Revenue and IRS were investigating the unpaid payroll taxes, Mr.
Suhadolnik still failed to pay withholding taxes. Although CX earned
some $375,000 in 2008 and its tax liabilities were well known to Mr.
Suhadolnik, CX’s money was used to pay almost $250,000 in salaries
and miscellaneous expenses rather than any past-due withholding taxes.
While Mr. Suhadolnik contends that he had to use CX’s money to pay
those expenses and there would have been no annual earnings in 2008 if
he failed to satisfy payroll and other obligations, such an argument
overlooks the fact that CX could have eliminated positions or found
other means of containing costs while making some effort to satisfy trust
fund taxes. Mr. Suhadolnik made no effort to pay the taxes and he made
other obligations a higher priority. The law does not allow that type of
prioritization. See Kim, 111 F.3d at 1357.

22

Furthermore, after Mr. Suhadolnik created his new company, CXP,
he deposited money earned by CX into accounts controlled by CXP in an
attempt to shield that money from CX’s liabilities. Similarly, when CX’s
assets were sold, Mr. Suhadolnik did not use any proceeds to pay overdue
taxes. Beyond this, there is the evidence of Mr. Suhadolnik’s failure to
collect the $50,000 loan he made to his wife’s gym.
The foregoing conduct is reckless with respect to § 6672. See
Wright, 809 F.2d at 427. As such, Mr. Suhadolnik bears liability for the
§ 6672 trust fund tax violations alleged by the Government.
VI. CONCLUSION
THEREFORE, Defendant/Counterclaimant United States’ Motion
for Summary Judgment Against Plaintiff Michael F. Suhadolnik is
DENIED as to the dismissal of his refund claim and ALLOWED insofar
as it seeks a judgment obligating Michael F. Suhadolnik to the United
States in the amount of $263,628.71, plus interest from February 8,
2011. Out of concern for the resources of all involved, the Court orders
the Government to file an additional pleading which states whether it

23

intends to continue to contest Mr. Suhadolnik’s $938.36 refund claim
(and associated costs) or whether that amount will be conceded and
deducted from the more than $263,628.71 judgment allowed herein.
The Government’s brief is due June 14, 2011. Mr. Suhadolnik shall
respond by June 21, 2011. The Government’s reply is due June 28,
2011.
IT IS SO ORDERED.
DATED:

June 1, 2011

ENTERED BY:

s/ Sue E. Myerscough
SUE E. MYERSOUGH
U.S. DISTRICT JUDGE

24