Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-03967/USCOURTS-cand-3_05-cv-03967-5/pdf.json

Parties Involved:
Richard O. Stevens
Plaintiff
United States of America
Defendant

Document Text:

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

RICHARD O. STEVENS, Trustee of The

Gloria S. Stevens Trust, and Named

Executor of the Gloria S. Keesey

Stevens Estate,

Plaintiff,

v.

UNITED STATES OF AMERICA, 

 Defendant. 

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

No. 05-03967 SC

MEMORANDUM OF

DECISION; FINDINGS OF

FACT AND CONCLUSIONS

OF LAW

I. INTRODUCTION

Plaintiff Richard O. Stevens, Trustee of the Gloria S.

Stevens Trust, and Named Executor of Gloria S. Keesey Stevens's

Estate ("Plaintiff" or "Stevens"), filed this action against

Defendant United States of America ("Defendant" or "Government"),

under 26 U.S.C. §§ 7422 and 6511, claiming a refund of $65,481.99

in overpaid estate taxes. See Compl., Docket No. 1.

On August 20, 2007, the parties tried the case before this

Court. Having fully considered the evidence and testimony offered

at trial and the arguments of counsel, the Court by this

Memorandum of Decision issues its Findings of Fact and Conclusions

of Law pursuant to Rule 52(a) of the Federal Rules of Civil

Procedure. For the reasons set forth below, the Court concludes

Case 3:05-cv-03967-SC Document 43 Filed 09/04/07 Page 1 of 11
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 2

that Plaintiff is entitled to recover damages in the amount of

$65,481.89 plus interest.

II. FINDINGS OF FACT

1. Plaintiff's mother, Gloria Stevens, died on February 16, 

 1998. 

2. The estate tax return for Gloria Stevens was due on 

November 16, 1998.

3. On November 16, 1998, Plaintiff submitted to the I.R.S. a 

 completed Form 4768 Application for Extension of Time to 

 file a Return, along with a check for $162,109.58. See 

 Ex. 2.

4. At the time Plaintiff submitted the payment of 

$162,109.58, he did not know the exact amount due, but 

believed this payment to be significantly in excess of 

what the estate owed.

5. The I.R.S. granted Plaintiff an extension to file the 

estate tax return until May 16, 1999, and an extension to 

pay the estate tax until November 16, 1999.

6. On May 13, 1999, Plaintiff's wife Joan Stevens spoke by 

 telephone with Mr. Richmond, I.R.S. employee number 

04163. Mrs. Stevens told Mr. Richmond that when the 

estate paid its taxes on November 16, 1998, it had 

overpaid and expected a refund. Mr. Richmond told Mrs. 

Stevens that if the estate had already paid the full tax 

due, it would not suffer any penalties for filing the tax 

return late, and that the estate should send a written 

Case 3:05-cv-03967-SC Document 43 Filed 09/04/07 Page 2 of 11
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 3

request for additional time to file if necessary. Mrs. 

Stevens took notes during this conversation. See Ex. 1.

7. Plaintiff received a notice from the I.R.S. dated 

September 13, 1999, which stated that the Form 706 estate 

tax return on the Gloria Stevens Estate was overdue; that 

the estate had a credit balance of $162,109; and stated, 

"Please explain how you want us to handle your credit." 

See Ex. 3. Plaintiff received an identical notice two 

months later dated November 8, 1999. See Ex. 4. 

8. Between November 8, 1999, and January 28, 2002, Plaintiff 

 did not communicate with the I.R.S. or file the estate 

 tax return.

9. On January 28, 2002, I.R.S. Revenue Officer Nancy Wong 

 sent Plaintiff a letter requesting a meeting to discuss 

the estate's failure to file a tax return. See Ex. 8.

10. Plaintiff called Officer Wong to discuss the return on 

 February 11, 2002 and April 25, 2002. During these 

telephone calls, Plaintiff said he believed the estate 

had overpaid its taxes and was expecting a refund. He 

explained the family circumstances which had prevented 

him from filing. Finally, Mr. Stevens requested 

additional time to file the return. Officer Wong agreed 

to wait for the return until May 31, 2002.

11. On May 29, 2002, Plaintiff sent a letter to Officer Wong 

 requesting additional time to file the estate tax return 

 because of a recent death in the family. See Ex. 5.

12. In response to the May 29 letter, Officer Wong sent 

Case 3:05-cv-03967-SC Document 43 Filed 09/04/07 Page 3 of 11
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 4

 Plaintiff a post card dated June 6, 2002, on which she 

wrote, "I will wait for Form 706 until 7/31/02." Ex. 6.

13. Plaintiff completed the Form 706 estate tax return on 

 July 30, 2002, requesting a refund of $65,481.89 in 

overpaid taxes. Ex. 7. Plaintiff sent the return by 

certified mail on July 31, 2002. See Ex. 9.

14. The I.R.S. received the return on August 1, 2002.

III. CONCLUSIONS OF LAW

A. Jurisdiction

The Court has jurisdiction over this action pursuant to 28

U.S.C. § 1346(a)(1), which provides the district courts with

original jurisdiction over any "civil action against the United

States for the recovery of any internal-revenue tax alleged to

have been erroneously or illegally assessed or collected, or any

penalty claimed 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."

B. Informal Claim Doctrine

In United States v. Kales, the Supreme Court articulated the

basic rule which henceforth came to be known as the "informal

claim doctrine":

[A] notice fairly advising the Commissioner of the

nature of the taxpayer's claim, which the Commissioner

could reject because too general or because it does not

comply with formal requirements of the statute and

regulations, will nevertheless be treated as a claim,

where formal defects and lack of specificity have been

remedied by amendment filed after the lapse of the

statutory period.

Case 3:05-cv-03967-SC Document 43 Filed 09/04/07 Page 4 of 11
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 5

314 U.S. 186, 194 (1941); see also Commissioner v. Lundy, 516 U.S.

235, 250 (1996) ("even a claim that does not comply with federal

regulations might suffice to toll the limitations periods under

the Tax Code.").

This Court previously adopted a four-part test from Pala,

Inc. Employees Profit Sharing Plan & Trust Agreement v. United

States, 234 F.3d 873 (5th Cir. 2000) ("Pala"), for determining the

adequacy of an informal claim. See Docket No. 16, at 12. Under

Pala, an informal claim is sufficient if it: 1) "is filed within

the statutory period;" 2) "puts the I.R.S. on notice that the

taxpayer believes an erroneous tax has been assessed;" and 3)

"describes the tax and year with sufficient particularity to allow

the I.R.S. to undertake an investigation." Pala, 234 F.3d at 877. 

Finally, while "an informal claim may include oral communications,

it must have a written component." Id. These factors are a means

of answering the central question, whether "the Commissioner knew,

or should have known, that a claim was being made." Id.

C. Discussion

Determination of whether Plaintiff's communications with the

I.R.S. amount to an informal claim will resolve whether

Plaintiff's claim for refund was timely. Pursuant to Internal

Revenue Code section 6511(a), a taxpayer must make a claim for

refund within 2 years of paying a tax, or within 3 years of filing

a return, whichever is later. See I.R.C. § 6511(a). The statute

also limits how much a taxpayer may recover based on how long

after the purported overpayment the taxpayer files a claim for

refund:

Case 3:05-cv-03967-SC Document 43 Filed 09/04/07 Page 5 of 11
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1The parties dispute how the Court should apply I.R.C. §

6511(a) to determine whether or not Plaintiff's refund claim was

timely. Plaintiff would have the Court look back from the time the

estate tax return was filed. The Government would have the Court

look forward from the time the estate actually paid the tax. The

Court does not need to decide this issue, however, as the

Government concedes that under either interpretation of the

statute, Plaintiff's claim for refund was timely filed if it

satisfies the third Pala element.

6

If the claim was filed by the taxpayer during the 3-year

period prescribed in subsection (a), the amount of the

credit or refund shall not exceed the portion of the tax

paid within the period, immediately preceding the filing

of the claim, equal to 3 years plus the period of any

extension of time for filing the return. 

I.R.C. § 6511(b)(2)(A). The I.R.S. granted Plaintiff a six-month

extension to file the estate tax return. Thus, under section

6511(b)(2)(A), Plaintiff could file a claim for refund of taxes

paid within three and a half years preceding the claim. 

The Government concedes that, taken together, Plaintiff's

oral communications with I.R.S. Officers Richmond and Wong, as

well as Plaintiff's May 29, 2002 letter to Officer Wong, satisfy

three of the four Pala elements. The Government only disputes

whether this set of communications "describes the tax and year

with sufficient particularity to allow the I.R.S. to undertake an

investigation." Pala, 234 F.3d at 877.1

That the I.R.S. was aware of the tax year for which Plaintiff

sought a refund is clear. The date of Gloria Stevens's death was

recited on Plaintiff's Form 4768 Request for Extension. See Ex.

2. In January of 2002, it was the I.R.S. that contacted Plaintiff

about the delinquent 706 estate tax return. See Ex. 3. If the

I.R.S. was unaware of the tax year in question, it could not have

Case 3:05-cv-03967-SC Document 43 Filed 09/04/07 Page 6 of 11
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 7

known that Plaintiff was delinquent in filing. Two telephone

calls followed the I.R.S.'s letter to Plaintiff, during which

Plaintiff and Officer Wong discussed the details of Plaintiff's

family situation, including the fact that Plaintiff believed the

estate had overpaid its tax due in 1998, and the reasons the

estate had done so. Plaintiff's May 29, 2002 letter was a followup to these conversations, and in context, the tax year was

described. See Ex. 5. Although the letter does not recite the

precise words "estate tax return for tax year 1998," it does

reference "the death tax return for . . . Gloria Keesey Stevens." 

Id. An informal claim does not require a precise description of

the relevant year if the year can be determined from the context. 

See e.g., Pala, 234 F.3d at 878 ("The fact that PALA's letter does

not specifically mention the year 1991 is irrelevant. . . ."). 

Given that the I.R.S. knew when Gloria Stevens died, Plaintiff's

telephone calls and written communications to the I.R.S. were

sufficient to put the I.R.S. on notice that Plaintiff was seeking

a refund for the 1998 tax year.

Plaintiff's communications also described the tax with

sufficient particularity to put the I.R.S. on notice of the claim. 

The Government argues that there should be an extremely high bar

for an informal claim, requiring a taxpayer to identify the amount

of the refund and the basis for the claim. The authority the

Government cites for this elevated standard is unavailing. The

Government's cases all pre-date the ruling in Pala, which this

Case 3:05-cv-03967-SC Document 43 Filed 09/04/07 Page 7 of 11
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2The Pala court supported its formulation of the informal

claim doctrine with substantial authority. See Pala, 234 F.3d at

877 n.13, n.14 (citing Kales, 314 U.S. at 194-95; Gustin v. United

States, 876 F.2d 485, 488 (5th Cir. 1989); Bauer v. United States, 594 F.2d 44, 46 (5th Cir. 1979)). However, it is the Pala ruling

that this Court adopted in the first summary judgment order. See

Docket No. 16. Thus, to the extent that the Government's authority

diverges from or is more demanding than Pala, it is inapposite.

8

Court adopted.2 Further, Government's the cases are easily

distinguishable. For example, Young v. United States, 609 F.

Supp. 512 (N.D. Tex. 1985), provides no guidance on application of

the informal claim doctrine. The taxpayer in Young had sent its

written notice of a claim to the Department of Justice instead of

the I.R.S., so the Commissioner was not on notice of the claim. 

Id. The Young court did not address the sufficiency of the

contents of the letter. Here, the Government does not dispute

that Plaintiff spoke with and sent a letter to the I.R.S. The

taxpayer's informal claim in Martin v. United States, 833 F.2d 655

(7th Cir. 1988), is similarly distinguishable. One of the

communications upon which the Martin taxpayer relied actually

conceded that he owed more, and could not possibly have indicated

his claim for refund. Id. at 659-660. In the other letter, the

taxpayer merely "reserved the right" to file a claim, rather than

actually asserting the claim. Id. at 660. In Miller v. United

States, 949 F.2d 708, 711 (4th Cir. 1991), the only communication

the taxpayer relied on for his informal claim was a tax return he

filed claiming no tax due. Id. at 711. Miller filed that return

two years prior to paying the tax, so the return could not have

informed the I.R.S. of his refund claim. Id. Here, Plaintiff

paid the tax due before filing the return, and in every

Case 3:05-cv-03967-SC Document 43 Filed 09/04/07 Page 8 of 11
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 9

communication with the I.R.S. following payment, Plaintiff

indicated his belief that he was entitled to a refund. In the

Government's last case, APG 3, Inc. v. United States, 32 F. Supp.

2d 451 (S.D. Tex. 1988), the written communication the taxpayer

relied on as a refund claim was a letter to the I.R.S. requesting

abatement of a penalty the I.R.S. had imposed for failing to file

W-2 forms for the taxpayer's employees. Id. at 454-55. The

letter made only oblique references to the tax for which the

taxpayer sought a refund and did not say that he was entitled to a

refund. Id. 

Relying on Miller, the Government also argues that the

Plaintiff's communications with Officer Wong were insufficient to

establish the claim because they would not have allowed the I.R.S.

to conduct an investigation of Plaintiff's refund claim. In

Miller, the Fourth Circuit held that the written portion of the

informal claim must be sufficiently specific to "pin-point the

area of dispute, thereby facilitating an examination of the claim

if appropriate." 949 F.2d at 711. Miller offers no guidance for

when an examination of the claim might be "appropriate." Nor does

the Government, other than asserting in its trial brief that an

investigation was "clearly appropriate." Docket No. 35, at 6. 

Because Plaintiff had discussed the refund with the I.R.S. and

informed Officer Wong that a detailed return would be forthcoming,

an investigation prior to the filing of the estate tax return

would not have been appropriate.

The Court finds that Plaintiff's communications with Officer

Wong sufficiently described the 1998 estate tax to establish an

Case 3:05-cv-03967-SC Document 43 Filed 09/04/07 Page 9 of 11
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 10

informal claim. Plaintiff's May 29, 2002 letter not only

references the specific year, as noted above, but also identifies

the specific tax (the estate tax paid for decedent Gloria Keesey

Stevens), and states plainly, "Please remember that we have

already made substantial prepayment on account and anticipate

receiving a refund." Ex. 5. Plaintiff did not indicate that he

expected to file a refund, or that he reserved the right to do so;

rather, he said that he expected to receive money back from the

Government on taxes already paid. 

The Court concludes that Plaintiff's telephone calls and

written communications with the I.R.S. clearly satisfy the

informal claim doctrine as formulated in Pala. This outcome also

furthers the policy goals of the doctrine described in the Court's

first summary judgment order. See Docket No. 16, at 10-11 (citing

BCS Fin. Corp. v. United States, 118 F.3d 522, 524-526 (7th Cir.

1997); Commissioner v. Ewing, 439 F.3d 1009, 1015 (9th Cir.

2006)). Plaintiff communicated with the I.R.S. numerous times

throughout the statutory period and received extensions of the

filing deadline. Given Plaintiff's intentional overpayment from

the outset, which was intended to prevent prejudice to the

Government, the delayed filing of the formal refund claim is

precisely the sort of harmless non-compliance the informal claim

doctrine is intended to excuse.

IV. CONCLUSION

For the foregoing reasons, the Court finds that Plaintiff's

communications with the I.R.S. from 1998 to 2002 establish an

Case 3:05-cv-03967-SC Document 43 Filed 09/04/07 Page 10 of 11
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 11

informal claim for refund of taxes paid. The Court therefore

AWARDS Plaintiff $65,481.89, plus pre-judgment interest.

The parties dispute the date on which such interest began to

accrue. The Court therefore ORDERS each party to submit a brief

of no more than three (3) pages arguing its position on whether

the interest began to accrue when the estate paid its taxes on

November 16, 1998, or when the estate filed its return and formal

claim for refund on August 1, 2002. The parties shall submit

these briefs no later than Monday, September 10, 2007. Each party

shall attach to its brief calculations for a total recovery of

damages plus interest, based on the date that party believes the

interest began to accrue.

IT IS SO ORDERED.

Dated: September 4, 2007

 

UNITED STATES DISTRICT JUDGE

Case 3:05-cv-03967-SC Document 43 Filed 09/04/07 Page 11 of 11