Free Motion to Transfer - District Court of Federal Claims - federal

Case 1:05-cv-00956-CCM

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Filed 11/10/2005

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

DAVID S. LITMAN and MALIA A. LITMAN Plaintiffs-Counterdefendants, vs. THE UNITED STATES Defendant-Counterplaintiff.

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No. 05-956 T (Judge Mary Ellen Coster Williams)

UNOPPOSED MOTION FOR TRANSFER AND SUGGESTION FOR CONSOLIDATION Defendant-counterplaintiff, The United States, pursuant to Rules 40.1, 40.2 and 42.1 of the Rules of the United States Court of Federal Claims ("RCFC"), moves this Court to either (a) transfer a directly related case and consolidate it with this case or (b) transfer this case for consolidation with the related case. In support, the United States states as follows: 1. As the Court is aware, plaintiffs-counterdefendants, the Litmans, seek refund of an

alleged overpayment of income taxes. In Deiner et al. v. The United States, No. 05-971 T, currently pending before Judge Christine O.C. Miller, the Deiners also seek refund of an alleged overpayment of income taxes. The taxes at issue in both cases (a) arise from the same transaction; (b) involve valuation of identically sized blocks of restricted stock in the same corporation; and (c) involve disallowance of the same employee compensation deduction. Consolidated discovery and trial will, therefore, promote an efficient and, where appropriate, consistent determination of these actions.

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2.

A copy the complaints in this case and Deiner are attached as Exhibits A and B. A

brief review demonstrates that the allegations and issues presented are virtually identical. In sum, both the Litmans and Deiners allege that they each owned a 50% interest in a Subchapter S corporation, TMF, Inc., whose assets were sold in 1999, and that TMF liquidating trust, as successor to TMF, Inc., received restricted stock in another company, HRN Inc., as part of the consideration for the sale in 2000. The income and loss of the liquidating trust were taxable to the Deiners and Litmans as co-grantors of the trust. The Deiners and Litmans both allege that the Internal Revenue Service overvalued this restricted stock in determining their taxable income in 2000. (They valued the stock at $4.54 per share; the IRS valued the stock at $16.00 per share in its Notice of Deficiency, the same value used by HRN Inc. for its 2000 tax return.) The Litmans and Deiners also both allege that the IRS erroneously disallowed the same employee compensation deduction taken by the TMF liquidating trust in 2000. 3. The United States' counterclaims against the Litmans and Deiners seek the interest

owed by them on the late payments of their 2000 taxes and on the applicable penalties. 4. Diener was filed on September 7, 2005, only eight days after this case was filed on

August 30, 2005. Obviously, because the cases are at the same early stage, a common discovery and trial schedule can easily be implemented for both. Additionally, the Deiners and Litmans are represented by the same attorney. Counsel for plaintiffs agrees that the cases should be consolidated. 5. Currently, the joint preliminary status report in this case is due December 23, 2005.

The joint preliminary status report in Deiner is due December 29, 2005. If the cases are consolidated, one status report for both cases would be appropriate. 2

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6.

The United States has filed a Notice of Directly Related Case in this case and

Deiner. See, RCFC 40.2(a)(3). The United States is filing a motion to transfer in this case because, according to RCFC 40.2, the "assigned judge in the earliest -filed case, after consultation with the judge in the later-filed case, will grant or deny the motion to transfer." WHEREFORE, The United States prays that this Court enter an order either (a) transferring the case of Deiner et al. v. The United States to this Court and consolidating it with this case; or (b) transferring this case to Judge Christine O.C. Miller for consolidation with Deiner. Respectfully submitted,

s/ Cory A. Johnson Cory A. Johnson Attorney of Record U.S. Department of Justice Tax Division Court of Federal Claims Section P.O. Box 26 Ben Franklin Station Washington D.C. 20044 202-307-3046 Eileen J. O'Connor Assistant Attorney General David Gustafson Acting Chief, Court of Federal Claims Section Steven I. Frahm Assistant Chief, Court of Federal Claims Section s/ Steven I. Frahm Of Counsel Dated: November 10, 2005

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