Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_15-cv-01148/USCOURTS-casd-3_15-cv-01148-4/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 26:7401 IRS: Tax Liability - Authorization to collect via civil action

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8 UNITED STATES DISTRICT COURT

9 SOUTHERN DISTRICT OF CALIFORNIA

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11 UNITED STATES OF AMERICA, Case No.: 3:15-cv-01148-BEN-RBB

12 Plaintiff,

ORDER GRANTING MOTION FOR

13 v. SUMMARY JUDGMENT

14 WILLIAM C. FUESS,

15 Defendant.

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Before the Court is a Motion for Summary Judgment, filed by PlaintiffUnited

States ofAmerica (hereinafter “the government”). (Docket No. 32.) Defendant William

C. Feuss did not file an opposition. The Court finds the Motion suitable for

determination on the papers without oral argument, pursuant to Civil Local Rule 7.1.d.l.

For the reasons set for below, the Motion is GRANTED.

FACTUAL BACKGROUND1

Defendant did not file a federal tax return for the tax years 2001 to 2016. (SUF

1.) The Internal Revenue Service (“IRS”) conducted audit examinations for each ofthe

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27 i The government filed a Statement ofUndisputed Facts (“SUF”). (Docket. No. 32-2.)

Defendant did not. Therefore, the Court deems the government’s facts undisputed. 28

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tax years 2001, 2002, 2003, 2004, 2005, 2006, 2008, 2009, 2011, and 2012. (SUF 12.)

To determine and assess the correct federal income tax liabilities for these years, the IRS

obtained information reported by third parties on various IRS forms, including Forms

1098 (mortgage interest) and 1099 (non-employee compensation). (SUF ^ 3.) An

authorized delegate ofthe Secretary ofthe Treasury made timely assessments against

Defendant for the years 2001, 2002, 2003, 2004, 2005, 2006, 2008, 2009, 2011, and

2012. (SUF 16.) The government issued timely notice and demand for payments for

these assessments to Defendant, but Defendant neglected, failed, or refused to fully pay

the assessments for the aforementioned years, which remain due and owing with an

unpaid balance of $304,834.13, plus statutory interest and other additions accruing from

December 9,2016. (S.UF1[7.)

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12 PROCEDURAL HISTORY

The government filed its Complaint on May 21, 2015. (Docket No. 1.) It seeks

“to reduce federal income tax, penalty, and interest assessments, along with other

accruals that have not yet been formally assessed against [Defendant] to judgment.”

(Compl. ^[ 1.) Defendant filed his Answer on August 31, 2015. (Docket No. 5.) On May

25, 2016 and July 26, 2016, the government filed two separate motions for discovery

sanctions, which were both granted in part by Magistrate Judge Ruben B. Brooks.

(Docket Nos. 15, 20, 23, 27.) Concurrently with the minute order granting in part the

government’s second motion for discovery sanctions, Judge Brooks issued a Report and

Recommendation, recommending that this Court grant the government’s request for

evidence preclusion sanctions, pursuant to the provisions of 28 U.S.C. § 636(b)(1).

(Docket No. 27.) On October 28,2016, this Court adopted Judge Brooks’ Report and

Recommendation, and issued an order which precluded Defendant from presenting

documentary evidence (1) showing his entitlement to deductions or (2) rebutting the

accuracy ofthe government’s tax assessments when opposing a motion for summary

judgment or at trial. (Docket No. 31.)

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LEGAL STANDARD

A motion for summary judgment must be granted when “the pleadings,

depositions, answers to interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any material fact and that the

moving party is entitled to a judgment as a matter oflaw.” Fed. R. Civ. Proc. 56(a). “A

party seeking summary judgment always bears the initial responsibility ofinforming the

district court ofthe basis for its motion” and identifying the portions ofthe pleadings and

discovery responses that demonstrate the absence of a genuine issue ofmaterial fact.

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The moving party can do so by

negating an essential element ofthe non-moving party’s case, or by showing that the nonmoving party failed to make a showing sufficient to establish an element essential to that

party’s case, and on which the party will bear the burden ofproof at trial. Id. at 331. The

burden then shifts to the non-moving party to show that there is a genuine issue for trial.

Horphag Research Ltd. v. Garcia, 475 F.3d 1029, 1035 (9th Cir. 2007).

In evaluating the evidence to support or oppose a motion for summary judgment,

the court does not assume the jury functions of determining credibility, weighing of

evidence, or drawing legitimate inferences from the facts. Anderson v. Liberty Lobby,

Inc., All U.S. 242, 255 (1986) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157

(1970)). Rather, “[t]he evidence ofthe non-movant is to be believed, and all justifiable

inferences are to be drawn in his favor.” Ibid. However, the inferences that may be

drawn are not limitless. T. W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass ’n, 809 F.2d

626, 632 (9th Cir. 1987). Inferences must be based on specific facts and only “‘rational’

and ‘reasonable’” inferences may be drawn. Id.; United Steelworkers ofAm. v. Phelps

Dodge Corp., 865 F.2d 1539,1542 (9th Cir. 1989). Additionally, conclusory, speculative

testimony in affidavits and moving papers is insufficient to raise genuine issues offact

and defeat summary judgment. See Nelson v. Pima Community College, 83 F.3d 1075,

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1081-82 (9th Cir. 1996) (“mere allegation and speculation do not create a factual dispute

for purposes ofsummary judgment”).

Regardless ofwhether the non-movant responded to a moving party’s summary

judgment motion, a court may not grant summary judgment unless the moving party has

affirmatively shown “there is no genuine issue as to any material fact and that [it] is

entitled to a judgment as a matter oflaw.” Martinez v. Stanford, 323 F.3d 1178, 1182-83

(9th Cir. 2003) (internal citation omitted).

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8 DISCUSSION

The government bears the burden ofproofin an action to collect taxes. United

States v. Stonehill, 702 F.2d 1288,1293 (9th Cir. 1983). It can usually carry this burden

by introducing its assessment oftaxes due, after which “a presumption of correctness

attaches to the assessment, and its introduction establishes a prima facie case.” Id. A

Certificate ofAssessments and Payments is presumed to be correct evidence of a

taxpayer's liability, “and is the proper means of establishing that assessments were

properly made and that notices and demand for payment were sent.” United States v.

Secapure, No. C 07-1050 TEH, 2008 WL 820719, at *2 (N.D. Cal. Mar. 26, 2008) (citing

Koffv. United States, 3 F.3d 1297, 1298 (9th Cir. 1993); Stonehill, 702 F.2d at 1293); see

also United States v. Boyce, 38 F. Supp. 3d 1135, 1152 (C.D. Cal. 2014) (quoting United

States v. Vacante, 717 F. Supp. 2d 992, 1004 (E.D. Cal. 2010) (“Certificates of

Assessments and Payments (‘Form 4340s') are highly probative and in the absence of

contrary evidence, are sufficient to establish a tax assessment was properly made and

notice and demand for payment were sent.”)).

The presumption does not arise unless it is supported by a “minimal evidentiary

foundation.” Oliver v. United States, 921 F.2d 916, 920 (9th Cir. 1990) {citing Stonehill

at 1293). A factual foundation for the assessment is laid by the government’s

introduction of “some substantive evidence” that demonstrates that the taxpayer received

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unreported income. Stonehill at 1293 (quoting Edwards v. Commissioner, 680 F.2d

1268, 1270 (9th Cir. 1982)).

Ifthe government introduces the presumptively correct assessment, the burden of

proofshifts to the taxpayer to prove that the assessment is “arbitrary or erroneous.”

Stonehill, 702 F.2d at 1294 (citing Helvering v. Taylor, 293 U.S. 507, 515 (1935); Cohen

v. Commissioner, 266 F.2d 5,11 (9th Cir. 1959)). Ifthe defendant successfully rebuts the

presumption of correctness, the burden shift back to the government to “establish the

correctness ofthe assessment by sufficient and competent evidence.” Secapure, supra,

2008 WL 820719, at *2 (quoting United States v. Molitor, 337 F.2d 917, 923 (9th Cir.

1964)). However, “[i]fthe taxpayer fails to rebut the presumption, the government is

entitled to judgment as a matter oflaw.” Vacante, 717 F. Supp. 2d at 1004 (citing

Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993) (affirming trial court’s grant of

the government’s motion for summary judgment after defendant taxpayers failed to

present sufficient evidence to rebut presumption of correctness).

The Court finds the government has established that its assessments are entitled to

a presumption of correctness. First, the government provided Defendant’s responses to

its requests for admissions, in which he admits he did not file a federal income tax return

for tax years 2001-2016, but received some income in each ofthe years at issue. (Exhs.

21-22; Declaration ofNithya Senra in Support ofMotion for Summary Judgment

(hereinafter “Senra Decl.”) 2-3.). Second, the government introduced copies ofthe

Form 4340, Certificate ofAssessments, Payments, and Other Specified Matters

(“Certificate ofAssessments”) for the tax years 2001, 2002, 2003, 2004, 2005, 2006,

2008, 2009, 2011, and 2012. (Exhs. A-J; Declaration ofJulie A. Piazza in Support of

Motion for Summary Judgment (hereinafter “Piazza Decl.”) 6-7.) Each ofthe

Certificates ofAssessments were generated under seal and signed by an authorized

delegate ofthe Secretary ofthe Treasury. Ibid.

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Third, the government introduced copies ofthe Notice ofDeficiency for the same

years that it purportedly mailed to Defendant prior to assessment. (Exhs. 1-10; Piazza

Decl. 4-5.) The Notices ofDeficiency included summaries ofIRS work papers, forms,

worksheets, and Information Return Program (“IRP”) data2 used to determine the correct

amount offederal tax liabilities owed by Defendant. (Piazza Decl. 15.) Finally, the

government submitted the signed declaration ofthe IRS advisor who verified the

documents and information relied upon by the IRS in making its determination of

Defendant’s tax liabilities. (Piazza Decl. 1-3.) Thus, the government has met its

minimal evidentiary burden to support a presumption of correctness in its tax assessments

against Defendant.

The amounts ofthe original and outstanding tax liability are as follows:

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12 Tax Period

Ending

Date of

Assessment

Balance on

Certificate of

Assessments3

Outstanding

Balance4

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14 2001 06/06/2005 $28,374.65 $45,072.64

2002 $29,502.10 07/30/2007 $42,553.18 15

2003 07/30/2007 $5,982.44 $8,595.05

16 2004 07/30/2007 $13,652.69 $19,518.16

2005 05/25/2009 $8,928.88 $11,499.51 17

2006 05/25/2009 $957.48 $1,230.98

18 2008 12/31/2012 $17,884.84 $20,536.46

19 2009 12/31/2012 $17,866.06 $21,240.14

2011 02/10/2014 $85,397.03 $102,016.82

20 2012 02/16/2015 $25,578.23 $29,680.13

21 Total Outstanding Balance $304,834.13

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23 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.)

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y --

As noted above, Defendant did not file an opposition to the government’s motion.

Therefore, Defendant failed to rebut both the government’s prima facie case oftax

liability, and the presumption of correctness in its tax assessments against him. See

Stonehill, supra, 702 F.2d at 1293-94. As a result, there is no genuine issue ofmaterial

fact before the Court, and the government is entitled to summary judgment as a matter of

law. Fed. R. Civ. Proc. 56(a); see also Vacante, supra, 717 F. Supp. 2d at 1004 (citing

Hansen, supra, 7 F.3d at 138). Accordingly, the United States’ Motion for Summary

Judgment is GRANTED.

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9 CONCLUSION

The government’s motion for summary judgment is GRANTED. The Court

ORDERS that William C. Feuss’s federal income tax liabilities and associated statutorily

authorized penalties and interest for the tax years 2001, 2002,2003, 2004, 2005, 2006,

2008, 2009, 2011, and 2012 be reduced to judgment.

IT IS SO ORDERED.

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Dated: April/^ , 2017 16 /hon^c^^ubeniteV

Unitea States District Judge 17

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