Free Motion for Leave to File Out of Time - District Court of Federal Claims - federal

Case 1:98-cv-00533-CFL

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

FENTON GINGERICH, et. al. Plaintiffs, V. UNITED STATES OF AMERICA, Defendant.

§ § § § § § § § §

DOCKET NO. 98-533 T JUDGE LETTOW

PLAINTIFFS' REPORT OF OVERPAYMENT AMOUNTS TO BE REFUNDED The amount of the refund due to Plaintiffs was addressed in the Plaintiffs' Memorandum of Contentions of Facts and Law (the "Pre-trial Memorandum"), Document No. 108. In the Pre-trial Memorandum, Plaintiffs summarized the amounts at issue as pled in the original complaint, broken down by Plaintiff and year, and pointed out that the government has previously admitted in its answer and never contested in this action that the amounts assessed pursuant to the settlement and alleged by the Plaintiffs are correct as set out in the Plaintiffs' Original Complaint. As Plaintiffs explained in the Pre-trial Memorandum, "[t]he Court's determination of the issues set out by the Federal Circuit will establish when the settlement of the partnership items before the Tax Court took place and, consequently, the statute of limitations for assessment. If the settlement occurred on December 30, 1992, the day the Redding Acceptance Forms were submitted, then the assessments should have been made by December 30, 1993. Because the assessments were not made until January 3, 1994, at the earliest, the assessments for all Plaintiffs were untimely and all amounts paid by Plaintiffs, tax and interest, should be refunded." The government did not object to this statement of the amounts at issue or differentiate the §6621(c) portion of the assessment so
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that it could be timely and properly addressed. Plaintiffs have added a column to the Pre-trial Memorandum chart that references the documents and Trial Exhibits that address the amounts in controversy, which are identified using the following legend: (i) the complaint and answer, Documents No. 1 and 7, [CA¶ *]; (ii) the paragraphs in the Proposed Findings of Uncontroverted Facts filed with Plaintiffs' original motion for summary judgment, Document No. 42, [PF ¶:*] ; (iii) the government's agreement to each of the proposed findings (with one exception noted below) in its Statement of Genuine Issues, Document No. 51 [SGI ¶:*], and (iv) the Certificates of Assessment introduced at trial by the government [DE:*], that establish that there is no controversy regarding the amounts at issue.1

Plaintiff

Overpayment Amount by Tax Year $19,318.89

Total Tax Year Overpayment for All Years 1983

Supporting Authority

Gingerich

[CA¶:6,7,12] [PF ¶: 56] [SGI ¶:55-62] [DE:3 at 12-13] [CA¶:16,17,22] [PF ¶:57] [SGI ¶:55-62] [DE:3 at 16] [CA¶:26,27,32] [PF ¶:58] [SGI ¶:55-62] [DE:3 at 19]

37,621.66

1984

22,768.63

1985

1

A review of those documents indicates that there are minor discrepancies in the amounts previously identified in the Pre-trial Memorandum chart. Those amounts are identified with an *.
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Plaintiff

Overpayment Amount by Tax Year 21,841.21

Total Tax Year Overpayment for All Years 1986

Supporting Authority

[CA¶:36,37,42] [PF ¶:59] [SGI ¶:55-62] [DE:3 at 21]

$101,550.39

Karl

$56,820.61 *

1984

[CA¶:47,48,53] [PF ¶:60] [SGI ¶:55-62] [DE:4 at 23] [CA¶:57,58,63] [[PF ¶:61] [SGI ¶:55-62] [DE:4 at 26]

$1,304.78

1986

$58,125.39*

Kim

$10,629.71

1983

[CA¶:68,69,74] [PF ¶:62] [SGI ¶:55-62] [DE:5 at 30] [CA¶:78,79,84] [PF ¶:63] [SGI ¶:63 The government objected to interest of $148.04. Plaintiffs have agreed with the government's adjustment, which is reflected in the proposed overpayment amount.] [DE:5 at 32]

36,492.38*

1984

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Plaintiff

Overpayment Amount by Tax Year 26,135.48

Total Tax Year Overpayment for All Years 1985

Supporting Authority

[CA¶:88,89,94] [PF ¶:64] [SGI ¶:64-97] [DE:5 at 34-35] [CA¶:98,99,104] [PF ¶:65] [SGI ¶:64-97] [DE:5 at 38-39]

11,418.13

1986

$84,675.70*

Liebovich, Albert

$7,305.34

1983

[CA¶:110,111, 116] [PF ¶:66] [SGI ¶:64-97] [DE:7 at 59-60] [CA¶:121,122, 127] [PF ¶:67] [SGI ¶:64-97] [DE:7 at 66] [CA¶:132,133, 138] [PF ¶:68] [SGI ¶:64-97] [DE:7 at 76-77]

9,527.21

1984

9,580.72

1985

$26,413.27

Liebovich, Carl

$6,590.66

1985

[CA¶:144,145, 150] [PF ¶:69] [SGI ¶:64-97] [DE:8 at 89] [CA¶:155,156, 161] [PF ¶:70] [SGI ¶:64-97] [DE:8 at 96]

$1,930.73

1986

$8,521.39
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Plaintiff

Overpayment Amount by Tax Year $5,907.74

Total Tax Year Overpayment for All Years 1983

Supporting Authority

Liebovich, Gregory

[CA¶:167,168, 173] [PF ¶:71] [SGI ¶:64-97] [DE:9 at 103] [CA¶:178,179, 184] [PF ¶:72] [SGI ¶:64-97] [DE:9 at 110] [CA¶:189,190, 195] [PF ¶:73] [SGI ¶:64-97] [DE:9 at 117] [CA¶:200,201, 206] [PF ¶:74] [SGI ¶:64-97] [DE:9 at 124]

6,825.88*

1984

2,777.35

1985

6,227.99

1986

$21,738.96*

Liebovich, Joe

$7,637.39

1983

[CA¶:212,213, 218] [PF ¶:75] [SGI ¶:64-97] No Certificate of Assessments Submitted at Trial [CA¶:223,224, 229] [PF ¶:76] [SGI ¶:64-97] No Certificate of Assessments Submitted at Trial

9,092.40

1984

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Plaintiff

Overpayment Amount by Tax Year 6,629.21

Total Tax Year Overpayment for All Years 1985

Supporting Authority

[CA¶:234,235, 240] [PF ¶:77] [SGI ¶:64-97] No Certificate of Assessments Submitted at Trial [CA¶:245,246, 251] [PF ¶:78] [SGI ¶:64-97] No Certificate of Assessments Submitted at Trial

1,968.26

1986

$25,327.26

Liebovich, Larry

$4,595.27

1983

[CA¶:257,258, 263] [PF ¶:79] [SGI ¶:64-97] [DE:11 at 152] [CA¶:268,269, 274] [PF ¶:80] [SGI ¶:64-97] [DE:11 at 159] [CA¶:279,280, 285] [PF ¶:81] [SGI ¶:64-97] [DE:11 at 166] [CA¶:290,291, 296] [PF ¶:82] [SGI ¶:64-97] No Certificate of Assessment Presented at Trial

6,062.91

1984

2,802.72

1985

5,427.72

1986

$18,888.62

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Plaintiff

Overpayment Amount by Tax Year $1,630.50*

Total Tax Year Overpayment for All Years 1983

Supporting Authority

Liebovich, Samuel

[CA¶:302,303, 308] [PF ¶:83] [SGI ¶:64-97] [DE:10 at 131] [CA¶:313,314, 319] [PF ¶:84] [SGI ¶:64-97] [DE:10 at 138] [CA¶:324,325, 330] [PF ¶:85] [SGI ¶:64-97] [DE:10 at 145] [CA¶:335,337, 341] [PF ¶:86] [SGI ¶:64-97] No Certificate of Assessment Presented at Trial

3,149.36

1984

9,297.90

1985

2,488.45

1986

$16,566.21*

Rosol

$19,464.44

1983

[CA¶:346,347, 352] [PF ¶:87] [SGI ¶:64-97] [DE:12 at 172] [CA¶:356,357, 362] [PF ¶:88] [SGI ¶:64-97] [DE:112 at 173] [CA¶:366,367, 372] [PF ¶:89] [SGI ¶:64-97] [DE:12 at 174]

24,026.95

1984

12,155.30

1985

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Plaintiff

Overpayment Amount by Tax Year 8,577.66

Total Tax Year Overpayment for All Years 1986

Supporting Authority

[CA¶:376,377, 382] [PF ¶:90] [SGI ¶:64-97] [DE:12 at 175]

$64,224.35

Scruggs

$8,926.60

1983

[CA¶:387,388, 393] [PF ¶:91] [SGI ¶:64-97] [DE:13 at 177-178] [CA¶:397,398, 403] [PF ¶:92] [SGI ¶:64-97] [DE:13 at 182 ] [CA¶:407,408, 413] [PF ¶:93] [SGI ¶:64-97] [DE:13 at 187] [CA¶:417,418, 423] [PF ¶:94] [SGI ¶:64-97] [DE:13 at 191-192]

36,966.30

1984

27,597.94*

1985

19,246.36

1986

$92,737.20*

Yoon

$15,819.26

1983

[CA¶:428,429, 434] [PF ¶:95] [SGI ¶:64-97] [DE:14 at 197] [CA¶:438,439, 444] [PF ¶:96] [SGI ¶:64-97] [DE:14 at 202]

15,806.15

1984

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Plaintiff

Overpayment Amount by Tax Year 15,981.74

Total Tax Year Overpayment for All Years 1985

Supporting Authority

[CA¶:448,449, 454] [PF ¶:97] [SGI ¶:64-97] [DE:14 at 207]

$47,607.15 $566,373.89

Pursuant to 26 U.S.C. § 6611(a), interest shall be paid on overpayments at the statutory rate. Plaintiffs ask to reserve the right to review and protest to this Court should Plaintiffs disagree with the Internal Revenue Service's overpayment interest computations. Prior to preparing this report, the government never contested that these are the true and correct overpayments resulting from the government's untimely assessments. During the course of preparing this report, the government asserted, for the first time, that the Court's determination that the assessments were untimely does not address the portion of the interest assessed at the enhanced tax motivated §6621(c) penalty rate. The government now objects to refund of the portion of interest assessed at that enhanced rate. Without benefit of review of a brief supporting this belated and novel assertion, Plaintiffs would initially respond that it is much too late to raise this issue for the first time and much too late to raise it at this juncture. The government has had over nine (9) years to raise this issue. At every stage of this proceeding the government has admitted and/or not objected to the amounts in controversy, which included all interest assessed. In the Joint Status Report filed with the Court on November 25, 1998, Document No.8, the

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government and Plaintiffs agreed that this was a winner-take-all proceeding and that separate trials for liability and damages were not necessary. The parties asked the Court to limit trial to the issue of liability with time to file a stipulation to the amount of judgment. The parties cited to Cohen v. United States, 995 F.2d 205 (Fed.Cir. 1993) for the proposition that any amounts assessed after the statute of limitations are refundable overpayments. The parties agreed that the only issue in the case was the timeliness of the assessments. The government remained true to this understanding in its motion for summary judgment, in which the government agreed in the first paragraph that the total amount in controversy is $556,640.78, on appeal, and on remand, including the government's pre-trial memorandum, at trial, and in its post-trial brief. It was not until the Court ruled for Plaintiffs that the government raised this §6621(c) penalty interest issue. Not only is the government's belated objection an unfair surprise that would prejudice Plaintiffs, but the government's position is facially and legally incorrect. The Court's decision does directly address this issue. As the Court held: The IRS thereafter failed to assess applicable taxes within the statutorily prescribed one-year period. See I.R.C. §§6229(f), 6231(b)(1). Thus, the assessments were time barred, and plaintiffs are entitled to a refund. Pursuant to §6401, an "overpayment" is the amount of the payment of tax assessed or collected after the expiration of the limitations for assessment. Pursuant to §6402(a) overpayments shall be refunded to the taxpayer. Cohen, at 207 (payment of a time-barred tax liability is an overpayment subject to mandatory refund). And as this Court has recently determined, pursuant §6601(e)(1), "Congress has explicitly expanded the definition of the word `tax' as used in the Internal Revenue Code beyond the word's

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ordinary meaning by specifying that `[a]ny reference in this title [ i.e., the Internal Revenue Code] ... to any tax imposed by this title shall be deemed also to refer to interest imposed by this section [ i.e., § 6601] on such tax.'" McGann v. United States, 76 Fed.Cl. 745, 751-2 (2007). As this Court held, interest assessed at the enhanced rate provided by former § 6621(c) is included within the statutory definition of the term "tax." McGann at 752. Consequently, by statute the untimely assessment included tax and all interest. Finally, the Court's determination that the tax was untimely assessed meant that the assessment was void and of no effect. See e.g., United States v. Brown, 782 F.Supp. 321 (N.D.Tex, 1990); Conger v. United States, 188 F.Supp. 769 (D.C.Neb., 1960). Consequently, there is no underpayment of tax upon which to assess interest ­ at the regular §6621(a)(2) rate or the enhanced §6621(c) penalty rate. Plaintiffs respectfully request an opportunity to briefly respond to the government's formal assertions should the Court consider the government's objection to full refund of tax and all interest. Respectfully,

/s/ Teresa J. Womack Teresa J. Womack Redding & Associates, P.C. 2914 W. T.C. Jester Houston, Texas 77018 Telephone: (713) 965-9244 Fax: (713) 621-5227 ATTORNEY FOR PLAINTIFFS

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