Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-04295/USCOURTS-cand-3_05-cv-04295-3/pdf.json

Parties Involved:
Joseph Leveroni
Plaintiff
United States of America
Defendant

Document Text:

United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

JOSEPH LEVERONI, as Executor of THE

ESTATE OF LOUISE K. LEVERONI and as

Trustee of the LOUISE K. LEVERONI TRUST,

Plaintiff,

 v.

UNITED STATES OF AMERICA,

Defendant. /

No. C 05-04295 SI

ORDER GRANTING DEFENDANT’S

MOTION FOR PARTIAL SUMMARY

JUDGMENT

Defendant United States of America has filed a motion for partial summary judgment, which is

currently scheduled for a hearing on October 6, 2006. Pursuant to Civil Local Rule 7-1(b), the Court

determines the matter is appropriate for determination without oral argument, and accordingly

VACATES the October 6, 2006 hearing. The 2:30 p.m. case management conference on October 6,

2006 remains on calendar. For the reasons set forth below, the Court hereby GRANTS defendant’s

motion for partial summary judgment.

BACKGROUND

Plaintiff Joseph Leveroni is the Executor and Trustee of the Estate and Trust of Louise K.

Leveroni, who died on June 9, 1996. Compl. ¶¶ 1, 5. Plaintiff filed the estate tax return on August 30,

1996, id. ¶ 5, and it was entered into IRS computer records on October 14, 1996; the return showed a

tax due of $866,418.00. Supp. Weill Decl. ¶ 2. Plaintiff thereafter made the following installment

payments:

Case 3:05-cv-04295-SI Document 21 Filed 10/04/06 Page 1 of 8
United States District Court

For the Northern District of California

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While the amended estate tax return form indicates an overpayment of $214,193.10, plaintiff’s

complaint seeks relief for overpayment “in the amount of $246,150.52, plus interest.” Compl. ¶ 6. No

explanation is given for the discrepancy.

2

Check No. Date Paid / Posted by IRS Amount

110 3/7/97 3/10/97 $62,189.92

5876 5/6/98 5/8/98 $71,064.03

16604 3/8/99 3/11/99 $56,490.89

17599 3/9/00 3/13/00 $57,090.35

18419 3/7/01 3/13/01 $63,452.91

$310,288.10 

Weill Decl. Ex. A; Supp. Weill Decl. Ex. B. 

The tax return, however, included an error resulting in an overstatement of estate tax liability.

Dal Poggetto Decl. ¶ 7. Plaintiff ultimately discovered the error and, on February 27, 2002, submitted

an amended estate tax return reflecting a total tax liability of $96,095, and claiming an overpayment and

refund due of $214,193.10. Weill Decl. Ex. A.

On October 22, 2003, defendant rejected plaintiff’s refund claim in part, asserting that with the

exception of the final two payments ($57,090.35 and $63,452.91), plaintiff’s overpayment refund claim

is barred by the statute of limitations of the Internal Revenue Code. Compl. ¶ 7. No refund was issued.

Id. On October 21, 2005, plaintiff filed this complaint seeking $246,150.52,1 plus interest and costs.

Defendant moves for partial summary judgment on the statute of limitations issue and argues that the

refund claim is limited to the $120,543.26 which is comprised of the final two payments.

LEGAL STANDARD

Summary adjudication is proper when “the pleadings, depositions, answers to interrogatories,

and admissions on file, together with 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 of law.” Fed. R. Civ. P.

56(c). In a motion for summary judgment, “[if] the moving party for summary judgment meets its initial

burden of identifying for the court those portions of the materials on file that it believes demonstrate the

absence of any genuine issues of material fact, the burden of production then shifts so that the nonmoving party must set forth, by affidavit or as otherwise provided in Rule 56, specific facts showing that

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there is a genuine issue for trial.” See T.W. Elec. Service, Inc., v. Pac. Elec. Contractors Ass’n, 809 F.2d

626, 630 (9th Cir. 1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317 (1986)). Summary judgment is

also appropriate in cases where the facts controlling the application of a rule of law are undisputed, and

the parties merely raise questions of law, “the resolution of which does not involve disputed ‘material’

facts.” Delbon Radiology v. Turlock Diagnostic Ctr., 839 F. Supp. 1388, 1391 (E.D. Cal. 1993);

William W. Schwarzer, A. Wallace Tashima & James M. Wagstaffe, Federal Civil Procedure Before

Trial § 14:207 (The Rutter Group 2006). 

In judging evidence at the summary judgment stage, the Court does not make credibility

determinations or weigh conflicting evidence, and draws all inferences in the light most favorable to the

non-moving party. See T.W. Electric, 809 F.2d at 630-31 (citing Matsushita Elec. Indus. Co., Ltd. v.

Zenith Radio Corp., 475 U.S. 574 (1986)); Ting v. United States, 927 F.2d 1504, 1509 (9th Cir. 1991).

The evidence presented by the parties must be admissible. See Fed. R. Civ. P. 56(e). Conclusory,

speculative testimony in affidavits and moving papers is insufficient to raise genuine issues of fact and

defeat summary judgment. See Thornhill Publ’g Co., Inc. v. GTE Corp., 594 F.2d 730, 738 (9th Cir.

1979). 

DISCUSSION

1. Plaintiff’s claim for a refund of the first three installments is untimely under 

I.R.C. § 6511

The Internal Revenue Code provides in pertinent part: “Claim for credit or refund of an

overpayment of any tax . . . shall be filed by the taxpayer within 3 years from the time the return was

filed or 2 years from the time the tax was paid, whichever of such periods expires the later . . . .” I.R.C.

§ 6511(a). Additionally, “[i]f the claim was not filed within such 3-year period, the amount of the credit

or refund shall not exceed the portion of the tax paid during the 2 years immediately preceding the filing

of the claim.” Id. at § 6511(b)(2)(B). Defendant asserts that the initial three installments were paid by

plaintiff more than two years prior to the filing of the refund claim and thus recovery of these payments

is barred by the statute of limitations. Plaintiff does not contest the timing of the installments, but rather

argues that the installments were merely deposits—not taxes “paid” for the purposes of I.R.C.

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§ 6511—and that the statute of limitations under § 6511 was not triggered until October 22, 2003 when

the IRS rejected plaintiff’s refund claim.

Plaintiff relies principally on Rosenman v. United States, 323 U.S. 658, 65 S. Ct. 536 (1945),

for the proposition that advance payments deposited into a “suspense” account do not constitute tax

“payments” for the purposes of the statute of limitations under the Internal Revenue Code. The facts

of Rosenman, however, are distinguishable. In that case, petitioner executors disputed the tax amount

legally due and only delivered an estimated tax payment to the Collector of Internal Revenue under

protest to avoid penalties and interest. Id. at 659–60, 65 S. Ct. at 537. The check was then deposited

in a suspense account to be held until formal tax assessment was made. Id. at 660, 65 St. Ct. at 537.

The Supreme Court explained that petitioner’s advance payment was not a tax “payment” for the

purposes of the statute of limitations under the Internal Revenue Code, but rather an advance of

estimated taxes as per “an interim arrangement to cover whatever contingencies the future might

define.” Id. at 662, 65 S. Ct. at 538. Such advances, the Court noted, are merely

payments in escrow. They are set aside . . . in special suspense accounts established for

depositing money received when no assessment is then outstanding against the taxpayer.

The receipt by the Government of moneys under such an arrangement carries no more

significance than would the giving of a surety bond. Money in these accounts is held not

as taxes duly collected are held but as a deposit made in the nature of a cash bond for the

payment of taxes thereafter found to be due.

Id. at 662, 65 S. Ct. at 538. 

In contrast, here plaintiff’s tax installments were paid after the estate had filed a tax return and

the tax due had been assessed. The installments were credited against the assessment and not placed

in any suspense account. The statute of limitations as to a claim for recovery of tax overpayment was

thus triggered when each installment was paid, not on October 22, 2003—the date on which defendant

rejected plaintiff’s refund claim—as plaintiff suggests. By asserting that the statute of limitations was

not triggered until October 22, 2003, plaintiff essentially argues that neither the tax assessment nor the

tax “payment” occurred until the date on which defendant rejected plaintiff’s refund claim. Plaintiff has

offered no authority in support of the assertion that the assessment and payment dates are tied to the date

of the rejection of the claim. To the contrary, the very filing of plaintiff’s refund claim tends to show

that formal assessment and payment had indeed been made, for otherwise there would have been “no

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taxes ‘erroneously or illegally assessed or collected’ for the collection of which [plaintiff] could have

filed a claim for refund.” Id. at 661, 65 S. Ct. at 538. 

“A remittance or amount collected is recognized as a ‘payment’ to the IRS when it discharges

a definite obligation.” Qureshi v. United States IRS, 75 F.3d 494, 496 (9th Cir. 1996). While the

taxpayer in Rosenman paid an advance tax estimate under protest to avoid penalties and interest for

delayed payment, the advance did not discharge a definite obligation at that time and thus did not trigger

the statute of limitations period. Here, however, plaintiff’s tax installments were timely credited against

the estate tax assessment. Plaintiff’s tax installments were therefore payments within the meaning of

I.R.C. § 6511 triggering the statute of limitations as to filing of claims for refund of overpayment.

Accordingly, the Court concludes that plaintiff’s claims as to the first three installments are time barred.

2. The non-issuance of a closing letter does not extend the statute of limitations

Plaintiff argues that because the IRS never issued a closing letter, the Court should extend the

statute of limitations to seek refund. Plaintiff concedes that there is no authority for this proposition.

See Pl’s Oppo. to Motion for Summ. J. at 6:1–2. The Court finds plaintiff’s argument to be without

merit.

Plaintiff additionally argues that defendant cannot be permitted to profit from plaintiff’s

inadvertent error in the initial filing when defendant should have performed an audit and review of the

tax return to correct any such errors. Again, plaintiff’s assertion is unsupported by authority. Whether

a timely audit and review by defendant of plaintiff’s tax return would have disclosed the error is not

relevant; the responsibility for discovering a filing error lies with the taxpayer seeking relief. To avoid

unjust enrichment of either the Government or the taxpayer, Congress has provided a statutory time

within which to file a claim for correction of under or overpayment. Beyond that time, a party’s right

to seek relief for such an error is waived.

3. I.R.C. § 1311 does not authorize adjustment of plaintiff’s estate tax return

The Court also concludes that plaintiff is not entitled to relief for tax filing error under the

mitigation provisions of I.R.C. § 1311. The mitigation provisions require, among the conditions

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necessary for adjustment, “[m]aintenance of an inconsistent position.” I.R.C. § 1311(b)(1); see also

Qureshi, 75 F.3d at 498 (interpreting I.R.C. § 1311 to require that “the [tax] determination be

inconsistent with that made in another year” (quoting Kolom v. United States, 791 F.2d 762, 765 (9th

Cir. 1986)). Because each tax year is considered separately, a temptation exists to take advantage of

limitation periods to assert inconsistent positions between different years. 5-82 Bryan Camp, Federal

Income, Gift and Estate Taxation § 82.01 (Matthew Bender 2006). The mitigation provisions of I.R.C.

§ 1311 operate to protect a party that has relied on the original position. See id.

Here, however, plaintiff has shown no inconsistency among the estate tax assessments justifying

an equitable exemption from the statute of limitations. The tax installments at issue were paid against

the tax liability assessed as of plaintiff’s original estate tax filing in 1996. I.R.C. § 1311 is therefore

inapplicable.

4. The doctrine of equitable recoupment does not permit plaintiff to recover overpayment

that would otherwise be barred by the statute of limitations

Plaintiff similarly argues that the doctrine of equitable recoupment should operate to prevent an

inequitable windfall to the Government. “Equitable recoupment is a doctrine exercised by courts of law

to render fundamental justice and equity in situations where strict adherence to rules of pleading or the

terms of the statutes of limitations would result in unfairness.” 14 Jacob Mertens, Jr., The Law of

Federal Income Taxation § 50:66, 50-128 (West 1999). As the Supreme Court has explained, however,

“a claim of equitable recoupment will lie only where the Government has taxed a single transaction,

item, or taxable event under two inconsistent theories.” United States v. Dalm, 494 U.S. 596, 605 n.5,

110 S. Ct. 1361, 1367 n.5 (1990). Here, the Government has not taxed a single transaction, item, or

taxable event under inconsistent theories. The Government has simply collected and credited plaintiff’s

installments against the same tax liability assessed in 1996. The doctrine of equitable recoupment,

therefore, is also inapplicable.

///

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CONCLUSION

For the foregoing reasons and for good cause shown, the Court hereby GRANTS defendant’s

motion for partial summary judgment. (Docket No. 15).

IT IS SO ORDERED.

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Dated: October 3, 2006 

SUSAN ILLSTON

United States District Judge

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