Opinion ID: 815525
Heading Depth: 2
Heading Rank: 1

Heading: The Stockers’ Alleged Overpayment of Taxes

Text: This suit arises from the claim of Plaintiffs/Appellants Robert W. Stocker, II and Laurel A. Stocker that they overpaid their federal taxes for the 2003 tax year. After securing two extensions, the Stockers filed their initial 2003 federal income tax return on October 15, 2004. A few years later, in March of 2007, the IRS settled an audit of 1 For the benefit of our younger readers, “The $64,000 Question” was one of the earliest and most popular of the television game shows broadcast in the 1950s. It became embroiled in the game show scandals of the late 1950s, and was cancelled in 1958. No. 11-1890 Stocker, et al. v. United States Page 3 Windward Communications II, a “flow-through entity” in which the Stockers had invested and lost money. In light of this development, the certified public accountant who prepared the Stockers’ tax returns, Michael Flintoff, determined that the Stockers had overpaid their 2003 federal taxes in the amount of $64,058.00. B. The Preparation and Mailing of the Stockers’ Amended 2003 Return To assist the Stockers in securing the refund he believed they were owed, Mr. Flintoff prepared an amended 2003 federal tax return for Mr. Stocker to mail. He also prepared an amended state return for the 2003 tax year, as well as the Stockers’ 2006 federal and state tax returns. Each of these returns was due on October 15, 2007, with the Stockers having secured an extension of the due date for their 2006 returns, and with federal law dictating that any claim for a refund of the Stockers’ 2003 taxes had to be filed within three years of the October 15, 2004 filing of their initial 2003 return. See 26 U.S.C. § 6511(a). On October 15, 2007, Mr. Flintoff’s office manager, Karrin Fennell, prepared postage prepaid, certified mail, return receipt requested envelopes for the Stockers’ amended 2003 federal and state tax returns, as well as ordinary postage prepaid envelopes for the Stockers’ 2006 federal and state returns. Mr. Stocker drove to his tax preparer’s office that afternoon to collect and sign the 2003 and 2006 returns, and was advised by both Mr. Flintoff and Ms. Fennell that all four returns were due and had to be mailed that same day. Ms. Fennell, however, mistakenly retained the customer copies of the certified mail receipts for the Stockers’ 2003 amended returns, rather than giving these copies to Mr. Stocker so that he could present them at the post office as he mailed the returns. Mr. Stocker testified that upon receiving the four tax returns and accompanying envelopes, he proceeded to the post office and timely mailed all four returns on the day he received them, October 15, 2007. By using certified mail for the 2003 amended returns, Mr. Stocker ordinarily would have been able to obtain date-stamped receipts from the post office reflecting that he mailed the returns that day. He explained, however, that he was unable to get any such date-stamped receipts, due to Ms. Fennell’s No. 11-1890 Stocker, et al. v. United States Page 4 failure to give him the customer copies of the certified mail receipts while he was at his tax preparer’s office. The record discloses that the Stockers’ amended 2003 state tax return and 2006 state return were timely received by the Michigan Department of Treasury, and the Stockers received the refund sought in their amended 2003 state return. In addition, the IRS has acknowledged the timely receipt of the Stockers’ 2006 federal tax return. As for the Stockers’ amended 2003 federal tax return, however, the IRS claims that it did not receive this return until October 25, 2007, ten days after the date Mr. Stocker testified that he mailed the return. In addition, the agency’s records reflect that the envelope containing the Stockers’ amended 2003 federal return bore a postmark date of October 19, 2007.2 The IRS concedes, however, that it did not retain the envelope in which the Stockers’ amended 2003 return was sent. Moreover, although the Stockers requested a return receipt when they mailed their amended 2003 federal return, the portion of the return-receipt card that is to be completed by the recipient upon delivery was left blank when it was returned to the Stockers’ tax preparer. (See Certified Mail Receipt, R.22-3, Page ID# 239.) C. The IRS’s Rejection of the Stockers’ Claim for a Refund On November 27, 2007, the IRS sent the Stockers a notice disallowing the refund claimed in their amended 2003 federal tax return, citing the return’s untimely postmark past the October 15, 2007 deadline. On June 23, 2008, Mr. Flintoff submitted a written request for the IRS to reconsider its rejection of the Stockers’ claim for a refund, but the IRS denied this request on September 26, 2008. 2 An IRS representative, Ericka Watford, testified that the postmark date and date of receipt as reflected in the agency’s records are derived from dates that were stamped onto the face of the Stockers’ amended 2003 return by a clerk who is responsible for opening and sorting returns. The amended return, for example, bears a stamp stating “ENVELOPE POST MARKED OCT 19 2007.” (Form 1040X, Amended 2003 Federal Tax Return, R.26-4, Page ID# 291.) No. 11-1890 Stocker, et al. v. United States Page 5 D. Procedural History The Stockers commenced this action on October 15, 2009, challenging the IRS’s denial of their request for a refund of a portion of their 2003 federal tax payment. In their complaint, the Stockers alleged that their amended 2003 federal return was timely filed on October 15, 2007. The Government answered by denying that the Stockers’ amended 2003 return was timely filed, and it asserted the three-year statute of limitations codified at 26 U.S.C. § 6511 as an affirmative defense. The Stockers later moved for summary judgment, arguing that their amended 2003 federal tax return was properly mailed on October 15, 2007. In support of this contention, the Stockers pointed to evidence in the record reflecting the timely mailing of their amended 2003 return, including the testimony of Mr. Stocker and the evidence that the other three returns mailed contemporaneously with the amended 2003 federal return were deemed by the federal and state taxing authorities to be timely sent and received. The Stockers also requested that the district court draw an adverse inference of timely filing against the Government as a spoliation sanction, in light of the IRS’s failure to retain the postmarked envelope in which the Stockers had mailed their amended 2003 return. The Government opposed the Stockers’ motion, and also moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(1) and (2), arguing that the district court lacked subject matter jurisdiction and that the Stockers’ suit was barred by sovereign immunity due to the Stockers’ failure to file their amended 2003 return within the three-year period for doing so. The district court agreed with the Government and held that it lacked jurisdiction over the case, and it therefore denied the Stockers’ summary judgment motion as moot. This appeal followed. No. 11-1890 Stocker, et al. v. United States Page 6