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RICHARD V. VERMAZEN (State Bar #153029) Law Office of Richard V. Vermazen 1951 Cable Street San Diego, CA 92107 Telephone: (619) 523-8495 Fax: (619) 523-8575 LAUREN A. RINSKY (State Bar #240012) Ernest S. Ryder & Associates, Inc., APLC 11440 West Bernardo Court, Suite 170 San Diego, CA 92127 Telephone: (858) 674-8000 Fax (858) 674-0788 Attorneys for Plaintiffs

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

RICHARD D. EMMERSON AND M. HELEN EMMERSON, Plaintiffs, vs. UNITED STATES OF AMERICA, Defendant.

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Civil No. 08 CV 1439 W (WMc) REDACTED COMPLAINT FOR REFUND AND ABATEMENT OF TAX DEMAND FOR JURY TRIAL

COMPLAINT Richard D. Emmerson and M. Helen Emmerson, as Plaintiffs (the "Plaintiffs"), by and through their attorneys, Richard V. Vermazen and Lauren A. Rinsky, hereby allege against United States of America as Defendant (the "Defendant"), as follows: Nature of Complaint 1. This is a civil cause of action against the United States of America and is based upon 26 U.S.C.A. § 7422(a) which provides for actions by taxpayers for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty

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claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected. Jurisdiction 2. The District Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. §§ 1340, 1346(a)(1), which provides that the District Court has shall have original jurisdiction of any civil action arising under any act of Congress providing for internal revenue and for the recovery of any internal revenue tax alleged to have been collected without authority, or any sum alleged to have been excessive or in any manner wrongfully collected under the Internal Revenue laws. Venue 3. Plaintiffs, Richard D. Emmerson and M. Helen Emmerson, are citizens of the United States and reside at 4612 Rancho Reposo, Del Mar, California 92014, and therefore venue is proper in the Southern District of California. Procedural Facts 4. The full amount of the tax, penalties, and interest in question was paid by the Plaintiffs to the District Director of Internal Revenue at Fresno, California prior to filing a refund claim. The amounts of the penalties for the 1999 tax year plus interest paid by the Plaintiffs which are demanded to be refunded to the Plaintiffs are as follows:

Penalty/Interest 26 U.S.C. §6651(a)(1) 26 U.S.C. §6651(a)(2) Interest Charged Interest on Overpayment

Tax Year 1999 1999 1999 1999 TOTAL

Payment Amount $42,003.63 $14,001.21 $129,609.14 $3,445.66 $189,059.64

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Additional taxes and penalties for the 1999 tax year have been assessed were paid in full by Plaintiffs; however only penalties and interest in the amount of $189,059.64 are subject to the abatement and refund demand of Plaintiffs. 5. Subsequent to the payments set out above in paragraph 12, no further payments, refunds or credits of tax, or interest for the tax period at issue have been made. 6. On September 27, 2005, the Plaintiffs filed a timely IRS Form 843, Claim for Refund and Request for Abatement together with documentation in support of the Plaintiffs' position, attached hereto as Exhibit A and incorporated by reference, with the Internal Revenue Service for the penalties and interest paid by the Plaintiffs for the 1999 tax year. 7. On or about August 15, 2006, the Internal Revenue Service issued a letter (IRS Form LTR 854C) denying the Plaintiffs' claim for refund (see Exhibit B ). Relevant Facts 8. During the year at issue, the Plaintiffs employed an accountant, Bill Boettger, CPA, to prepare and file their 1999 tax return. 9. Without extensions, the Plaintiffs 1999 tax return would have been due April 15, 2000. 10. It is not disputed that the Plaintiffs timely filed an extension with the Internal Revenue Service to extend the due date for their 1999 tax return to August 15, 2000. Further it is not disputed that the tax return was filed on or before October 16, 2000. The essence of the dispute is whether the Plaintiffs filed a "second extension" to extend the due date from August 15, 2000 to October 16, 2000, as October 15, 2000 was a Sunday. 11. The Plaintiffs adamantly believe that their CPA tax preparer filed a second extension, IRS Form 2688, Application for Additional Extension of Time To File U.S. Individual Income Tax Return, in a timely fashion for the Plaintiffs, requesting an extension of time until October 15, 2000, for the Plaintiffs' to file their 1999 tax return. 12. Pursuant to the second extension, the Plaintiffs filed their Form 1040 for the 1999 tax year on or before the extended due date of October 16, 2000. 13. Although the Plaintiffs have provided the Internal Revenue Service with various documents and testimony to prove that the second extension request was prepared and timely

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filed, it is the position of the Internal Revenue Service that a second extension was not timely filed because the Plaintiffs have not been able to provide the Internal Revenue Service with a copy of an approved second extension from the Internal Revenue Service. 14. The Plaintiffs entered into the Internal Revenue Service's Announcement 2004-46 Settlement Initiative Program ("Settlement Initiative Program") for the 1999 tax year. Upon completion of the settlement, the Plaintiffs were assessed additional tax of $628,329.00, as well as a 10% 26 U.S.C. §6662(a) penalty in the amount of $62,833.00, a 26 U.S.C. §6651(a)(1) late filing penalty in the amount of $42,003.63, a 26 U.S.C. §6651(a) (2) late-payment penalty in the amount of $14,001.21.21, and interest calculated continuously from April 15, 2000 through the date of the settlement. 15. The Plaintiffs entered into the Settlement Initiative Program with the understanding that no penalties other than the 10% 26 U.S.C. §6662(a) penalty would be assessed. There was no mention of a late-payment penalty assessment. Improper Actions By Defendant United States of America 16. The assessment of a 26 U.S.C. §6651(a)(1) late-filing penalty and a 26 U.S.C. §6651(a)(2) late-payment penalty against Richard D. Emmerson and M. Helen Emmerson for the 1999 tax year was improper since a timely extension was filed with the Internal Revenue Service to extend the due date of their 1999 individual tax return from August 15, 2000 to October 16, 2000, and their 1999 individual tax return was filed on or before October 16, 2000. Therefore, the Plaintiffs are entitled to abatement and refund of the $189,059.64 penalties and interest paid for the 1999 tax year, which amount includes interest due to the Plaintiffs of $3,445.66 on the overpayments made, calculated through September 15, 2005. 17. The assessment of a 26 U.S.C. §6651(a)(1) late-filing penalty and a 26 U.S.C. §6651(a)(2) late-payment penalty against Richard D. Emmerson and M. Helen Emmerson for the 1999 tax year was improper even if the Court concludes based upon the evidence that a valid second extension was not filed because Richard D. Emmerson and M. Helen Emmerson exercised reasonable and prudent oversight in the hiring and employment of their tax preparer, so that a failure to file a valid second extension would be excusable under a reasonable cause

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standard. Therefore, the Plaintiffs are entitled to abatement and refund of the $189,059.64 penalties and interest paid for the 1999 tax year, which amount includes interest due to the Plaintiffs of $3,445.66 on the overpayments made, calculated through September 15, 2005. 18. The assessment of the 26 U.S.C. §6651(a)(1) late-filing penalty against Richard D. Emmerson and M. Helen Emmerson and corresponding interest calculated continuously from April 15, 2000 was improper since Richard D. Emmerson and M. Helen Emmerson timely filed an extension with the Internal Revenue Service to extend the due date for their 1999 tax return until August 15, 2000. Thus, even if the Court concludes based on the evidence that a second extension was not filed, Richard D. Emmerson's and M. Helen Emmerson's 1999 tax return would not have been "late" until after August 15, 2000. Therefore, the Plaintiffs are entitled to abatement and refund of amounts paid attributable to the 26 U.S.C. §6651(a)(1) late-filing penalty for the 1999 tax year. 19. The assessment of the 26 U.S.C. §6651(a)(2) late-payment penalty against Richard D. Emmerson and M. Helen Emmerson and corresponding interest calculated continuously from April 15, 2000 was improper since Richard D. Emmerson and M. Helen Emmerson timely filed an extension with the Internal Revenue Service to extend the due date for their 1999 tax return until August 15, 2000. Thus, even if the Court concludes based on the evidence that a second extension was not filed, Richard D. Emmerson's and M. Helen Emmerson's 1999 tax return would not have been "late" until after August 15, 2000. Therefore, the Plaintiffs are entitled to abatement and refund of amounts paid attributable to the 26 U.S.C. §6651(a)(2) late-payment penalty for the 1999 tax year. 20. The Plaintiffs have incurred and continue to incur attorneys' fees in this action. WHEREFORE, the Plaintiff respectfully requests the following relief: A. Judgment for Plaintiff and against the Defendant, United States of America, upon the facts and law in the total amount of $189,059.64, or such greater amount as may be legally payable, with interest thereon as provided by law; B. Reimbursement by Defendant to Plaintiff of all of their attorneys' fees and costs in this action pursuant to 28 U.S.C. §2412(b) and 26 U.S.C. §7430;

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C. Such other relief as this Court deems just and appropriate.

Dated: August 27, 2008

By: s/ Richard V. Vermazen Richard V. Vermazen, Attorney for Plaintiffs

By: s/ Lauren A. Rinsky Lauren A. Rinsky, Attorney for Plaintiffs

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List of Exhibits

Exibit A

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Type of Document Claim for Refund and Request for Abatement (IRS Form 843 together with documentation in support of Plaintiffs' position) for tax period ending December 31, 1999.

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B

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IRS denial of Claim for Refund (IRS Form LTR 854C, dated August 14, 2006) for tax period ending December 31, 1999.

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Civil No. 08-CV-1439 W (WMc)

CERTIFICATE OF SERVICE I certify that a copy of the foregoing Redacted Complaint for Refund and Abatement of Tax was this date served upon the United States Attorney's Office Southern District of California Civil Division electronically through the United States District Court for the Southern District of California CM/ECF system. I also certify that a copy of the foregoing Redacted Complaint for Refund and Abatement of Tax was this date sent by United States Mail, postage prepaid, certified return receipt requested, to the Attorney General of the United States in Washington, D.C., the Internal Revenue Service in Washington, D.C. and the Internal Revenue Service in Laguna Niguel, California, at the following addresses:

U.S. Department of Justice Attorney General's Office Attn: Tax Division 950 Pennsylvania Avenue, NW Washington, D.C. 20530-0001 Department of the Treasury Internal Revenue Service 24000 Avila Road Laguna Niguel, CA 92677 San Diego, CA this 27th day of August, 2008.

Department of the Treasury Internal Revenue Service Attn: Office of General Counsel 1500 Pennsylvania Avenue, NW Washington, D.C. 20220

s/ Lauren A. Rinsky Lauren A. Rinsky, Attorney for Plaintiffs
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