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[79-1 USTC ¶9154]Harlin J. Wall, Appellant v. United States of America

(CA-3), U. S. Court of Appeals, 3rd Circuit, No. 77-2512, 592 F2d 154, 1/5/79 , Vac'g and rem'g unreported DC decision

[Code Sec. 6672 and Rule 50(b), Federal Rules of Civil Procedure]

Civil penalties: Failure to collect and pay over taxes: Post-trial relief: Propriety of.--In litigation involving liability for failure to collect and pay over withheld taxes, the court ordered reinstated the judgment to which the parties had stipulated (liability for $14,288.17). The lower court had incorrectly granted the motion of the government for judgment notwithstanding the verdict--the theory of that motion differed from the theory of the government's earlier motion for a directed verdict and thus deprived the taxpayer of any apportunity to rebut the theory. The lower court properly denied the motion of the taxpayer for a new trial as he proffered no legally adequate reasons why evidence of negotiations with the government should have been admitted.

Thomas C. Murcko, David L. Ketter, Kirkpatrick, Lockhart, Johnson & Hutchison, 1500 Oliver Bldg., Pittsburgh, Pa. 15222, for appellant. S. John Cottone, United States Attorney, Scranton, Pa. 18501, M. Carr Ferguson Assistant Attorney General, Gilbert E. Andrews, William A. Friedlander, Karl P. Fryzel, Department of Justice, Washington, D. C. 20530, for appellee.

Before GIBBONS and WEISS, Circuit Judges, and DUMBAULD, District Judge. ^*

Opinion of the Court

GIBBONS, Circuit Judge:

This appeal requires us to unravel a procedural web in which the parties became hopelessly, and we find somewhat helplessly, entangled. We vacate the order dated August 29, 1977 , granting the United States judgment notwithstanding the verdict and reinstate a final judgment entered on a verdict on special interrogatories and a stipulation as to amount, dated June 20, 1977 . The result is to vacate a judgment entered in favor of the government for $179,752.06, the amount of the demand in its counterclaim, and to reinstate a judgment in favor of the government for $14,288.17, the amount which it stipulated was due under the jury's verdict on special interrogatories.

[Background]

The plaintiff-appellant is Harlin J. Wall. On November 10, 1975 , the Commissioner of Internal Revenue made an assessment against Wall, pursuant to §§ 6671 and 6672 of the Internal Revenue Code, 26 U. S. C. §§ 6671, 6672, for penalties in the amount of the tax which should have been withheld from the wages of employees of three corporations and paid over to the government. The assessments were as follows:

                                                                  Amount which

                                                                   should have

                                              For quarter        been withheld

Corporation                                        ending        and paid over

General Housing Industries, Inc. .         
Sept. 30, 1972
          $ 50,399.12

Con-Co., Inc. ....................          
June 30, 1972
            67,045.32

..................................         
Sept. 30, 1972
            40,599.10

Highland Construction Corp. ......          
June 30, 1972
            12,890.84

..................................         
Sept. 30, 1972
             8,817.68

Total ............................                                 $179,752.06

Wall paid $500 in partial satisfaction of the assessment and made a timely claim for refund, which was denied on February 24, 1976 . On June 1, 1976 , he filed a suit in the district court for refund of the $500, in order to litigate his contentions (1) that during the quarters in question he was not a "person required to collect, truthfully account for, and pay over" withholding taxes for the named corporations, within the meaning of §§ 6671(b) and 6672, and (2) that he did not willfully fail to collect or account for such taxes.

Before the government was served with the complaint, the district court, sua sponte entered "Order #1" fixing a pretrial conference date on January 4, 1977 , a date for drawing a jury on January 5, 1977 , and a date for completion of discovery on December 21, 1976 . The court also entered, sua sponte "Other #2", a twenty page document setting forth the practice and procedure governing the case.

The government filed an answer on August 3, 1976 , and on a consent motion obtained leave to file a counterclaim and third-party complaint on September 23, 1976 . The counterclaim sought to enforce the assessment against Wall. The third-party complaint was against Gene Gorrell, who was alleged to be liable to the United States for withheld taxes in the amount of $250,647.73 and, moreover, liable to the United States for any refund it might owe to Wall. The government attempted to serve Gorrell in West Virginia , but did not locate him. For this and other reasons it moved, on November 30, 1976 , for an extension of the discovery period and a continuance of the scheduled pretrial conference and trial. That motion was denied on December 6, 1976 . By the time of the scheduled pretrial conference, defendant Gorrell had not been located and served, and the government's motion to dismiss the third-party complaint without prejudice was granted. A jury was drawn as scheduled on January 5, 1977 , and the trial commenced on February 17, 1977 .

Wall offered testimony tending to show that he had a passive role in the businesses in question, and that the missing Mr. Gorrell was the officer responsible for withholding and paying taxes. The government offered no testimony, but cross-examined Wall's witnesses and introduced several exhibits in evidence. The case was submitted to the jury on special verdict interrogatories which the jury answered as follows:

1. Was the Plaintiff, Harlin J. Wall, a person responsible for collecting, truthfully accounting for, and paying over the income and Social Security taxes withheld from the wages of employees of Con-Co., Inc. and Highland Construction Corporation during the second calendar quarter of 1972? Answer: No.

4. Was the Plaintiff, Harlin J. Wall, a person responsible for collecting, truthfully accounting for, and paying over the income and Social Security taxes withheld from the wages of employees of General Housing Industries, Inc., Con-Co., Inc., and Highland Construction Corporation during the third calendar quarter of 1972? Answer: Yes.

5. If your answer to the preceding question is "yes", was Mr. Wall's failure to collect, account for, and pay over the withheld taxes willful during the period July 1, 1972 to July 9, 1972 ? Answer: No.

6. If your answer to Question 4 is "yes", was Mr. Wall's failure to collect, account for, and pay over the withheld taxes willful during the period July 10, 1972 to August 9, 1972 ? Answer: No.

7. If your answer to Question 4 is "yes", was Mr. Wall's failure to collect, account for, and pay over the withheld taxes willful during the period August 10, 1972 to September 6, 1972 ? Answer: Yes.

8. If your answer to Question 4 is "yes", was Mr. Wall's failure to collect, account for, and pay over the withheld taxes willful during the period September 7, 1972 to September 30, 1972 ? Answer: Yes.

Thus, the jury found that Wall did not become a person responsible for collecting and accounting for withheld taxes until July 1, 1972 , and that his failure to collect and account for such taxes was not willful prior to August 10, 1972 .

Since no special verdict interrogatories were submitted as to the amounts which should have been withheld and paid over, no judgment could be entered on the verdict. The court, on February 23, 1977 , entered an order:

1. If the parties can agree upon the amount of tax due [on the verdict], they shall certify the same to the Court by April 18, 1977 so that judgment in a monetary amount may be entered.

2. If the parties cannot agree by April 18, 1977 upon the amount of the tax due, they shall notify the Court and the case will be tried in Lewisburg, in June, 1977 as to the monetary amounts involved by the same jury.

On April 19, 1977 , the court directed the Clerk to notify the jurors that the trial would reconvene in June, 1977. However, before the case was reached for completion of the trial, the following stipulation was filed:

Counsel for plaintiff and defendant in this action do hereby agree and stipulate that the amount of taxes (income and FICA) withheld by the subject corporations from the earnings paid to their employees from August 10, 1972 to September 30, 1972 , and not paid over to the government is $24,326.51.

The plaintiff has made payments in the total amount of $11,998.00 to the defendant in partial satisfaction of the penalty assessments made against him. Therefore, the net amount of the judgment to be entered against plaintiff in accordance with the jury's verdict (including statutory interest to June 16, 1977 ) is $14,288.17. It is thus agreed that the Court may enter judgment for the defendant in the amount of $14,288.17, plus interest after judgment as provided by law.

On June 20, 1977 , the Court directed entry of judgment in accordance with the stipulation, and on that same day a final judgment was entered in favor of the United States and against Wall in the amount of $14,288.17 plus interest. There is nothing in the record amounting to a finding as to the amount due under the verdict. A judgment for any specific amount thus rests entirely upon the stipulation quoted above.

On June 29, 1977 , the government filed a motion for judgment notwithstanding the verdict, asking that the Court "set aside so much of the jury's verdict as was rendered in favor of the plaintiff and to enter judgment against the plaintiff and in favor of the defendant in the full amount of the defendant's counterclaim." The date of service of this motion does not appear of record. On June 28, 1977 , as established in a proof of service filed in the cause, Wall served by mail a motion for a judgment notwithstanding the verdict or alternatively for a new trial. Although served by mail on June 28, 1977 , and mailed to the district court the same day, this motion was not marked filed by the Clerk until July 1, 1977 . Oddly, the proof of service, mailed to the Clerk on July 29, was also marked filed on July 1, 1977 .

Neither the government's motion nor Wall's was ever listed for argument. On August 29, 1977 , the district court, without informing either party of his intention to do so, ruled on both motions. The Court held: (1) the government's motion for judgment notwithstanding the verdict, governed by the time limit in Fed. R. Civ. P. 50(b), was timely, because it was filed within ten days of the entry of the June 20, 1977 judgment; (2) Wall's motion for judgment notwithstanding the verdict, although served within ten days of the June 20, 1977 judgment, was not filed until the eleventh day, and was thus untimely; (3) Wall's motion for a new trial, governed by Fed. R. Civ. P. 59(b), was served within ten days of the entry of the June 20, 1977 judgment, and since Rule 59(b) measures the time from service of the motion, the new trial motion was timely; (4) Wall's new trial motion would not be considered for reasons which we quote:

Under paragraph 3.6 of this Court's Order #2 in the above-captioned case dated June 3, 1976 , a brief in support of a post-trial motion is due within 60 days after the last day of the trial. The trial of the liability phase of this case ended on February 18, 1977 so that ordinarily Wall's brief would have been due on April 19, 1977 . However, the need for the scheduled damage trial was obviated by a settlement; had the second proceeding taken place, the time for the filing of briefs would have extended to 60 days after the trial on damages ended. Judgment was entered June 20, 1977 . The Court will interpret its Order to allow a party in this situation to treat the date of judgment as if it were the last day of the trial. Thus, the last day for the filing of Wall's brief on his motion for a new trial was Friday, August 19, 1977 .

Paragraph 3.6 of the practice order provides that failure of a party to file a brief in support of his motion will result in a denial of the motion. Because Wall has failed to file a brief in support of his motion for a new trial, his motion for a new trial will be denied. and (5) the government's motion for judgment notwithstanding the verdict was granted, for reasons which we quote:

Paragraph 3.7 of that same Order states that any party opposing any motion must file his responsive brief within 15 days after the filing of the movant's brief or be deemed to waive opposition to the motion, resulting in the granting of the motion. As of the date of this Order, Wall has not filed his brief in response to the United States ' motion for judgment notwithstanding the verdict. Therefore, in accordance with paragraph 3.7 of Order No. 2 in the above captioned case dated June 3, 1976 the Court will grant the United States ' motion and will order the Clerk to enter a judgment in favor of the United States in the amount of $179,752.06, the full amount of its counterclaim.

It is from the grant of the government's motion for judgment notwithstanding the verdict and the denial of his motion for a judgment notwithstanding the verdict or new trial that Wall appeals. While the United States actually opposed Wall's motion to the district court for reconsideration, its brief and argument on appeal are at best tepid in defending the procedural steps by which it achieved its probably unexpected total victory. The government does contend, however, that, although it may have triumphed for reasons which it does not strongly defend, the judgment in its favor was nevertheless proper.

[Government's Motion]

Our analysis of the trial court's grant of the government's judgment notwithstanding the verdict motion must begin with the provision in Rule 50(b) that

[n]ot later than 10 days after entry of judgment, a party who has moved for a directed verdict may move to have the verdict and any judgment thereon set aside and to have judgment entered in accordance with his motion for a directed verdict. . . .

Until 1963 a Rule 50(b) motion had to be made within ten days of a verdict. In 1963, however, the rule was amended to conform to the time limit for making a new trial motion under Fed. R. Civ. P. 59(b). It is still the rule that a court is without power to enlarge the time for making a Rule 50(b) motion. Fed. R. Civ. P. 6(b). See Johnson v. New York, N. H. & H. R. Co., 344 U. S. 48, 50 (1952); Philhall Corp. v. United States [77-1 USTC ¶9116], 546 F. 2d 210, 213 (6th Cir. 1976). But the government's motion was made within the time permitted by the rule, whether the time is measured from filing or from service. Thus, the district court properly considered it.

There are, however, significant substantive prerequisites to the consideration of such a judgment notwithstanding the verdict motion. It cannot be granted to a party who has failed to make a motion for a directed verdict. Nor may a party base a motion for a judgment notwithstanding the verdict on a ground not advanced in his motion for a directed verdict. Sulmeyer v. Coca Cola Co., 515 F. 2d 835, 846 n. 17 (5th Cir. 1975), cert. denied, 424 U. S. 934 (1976). Some courts have predicated these limitations upon the second clause of the seventh amendment, which limits the manner in which jury verdicts may be reconsidered. E.g., Mutual Benefit Health & Accident Ass'n v. Thomas, 123 F. 2d 353, 355 (8th Cir. 1941). A more pragmatic reason is that by insisting that a directed verdict motion be made before the jury retires, the court can permit a party to cure possibly technical defects in proof which might otherwise make his case legally insufficient. A motion for judgment notwithstanding that verdict made after trial, in the absence of prior notice of the alleged defect, comes too late for possibly curative action, short of a completely new trial. Thus, whether or not the Constitution compels the rule forbidding a party to advance by judgment notwithstanding the verdict motion a ground not first advanced in a motion for directed verdict, the rule is certainly consistent with the general spirit animating the Federal Rules of Civil Procedure. That spirit suggests avoidance of surprises and tactical victories at the expense of substantive interests.

The government did make a motion for a directed verdict as follows:

MR. LAWLER: Well then I make a motion, your Honor, that this Court enter a directed verdict in favor of the United States on the basis that the Plaintiff has not shown by competent evidence that Mr. Wall was not responsible nor willful with respect to the taxes involved in this case.

THE COURT: We will deny the motion.

To put the motion in context, it must be realized that the court had already drawn up special verdict interrogatories designed solely to determine Wall's liability in each time period, and not the amount of taxes due or the amount of money available in each period for their payment. These latter questions were reserved for subsequent determination only if Wall was held not to have established his lack of responsibility or lack of willfulness. Wall had no occasion to introduce evidence on whether, for example, in the period during which he might be found to be responsible and willful, the corporations had funds with which payment could have been made. Thus, the theory of the government's directed verdict motion was exclusively predicated on Wall's putative failure to establish his lack of responsibility or willfulness.

The government's motion for judgment notwithstanding the verdict, on the other hand, asserted that the grounds for the motion are set forth in an attached memorandum. In that memorandum the government, relying on In re Slodov v. United States [77-1 USTC ¶9328], 552 F. 2d 159 (6th Cir. 1977), a decision published after the verdict and reversed in Slodov v. United States, -- U. S. -- (1978), presented a theory never offered in its motion for a directed verdict. The government now contended that the jury's answers to the interrogatories, properly construed, supported a judgment for the full amount of the government's counterclaim. The government's theory, which it still advances, is that the jury's finding that as of August 10 Wall was both responsible for paying the taxes and willful in failing to do so confers liability on Wall for the full amount of past unpaid taxes, to the extent that funds were available on August 10 or thereafter. A responsible officer coming into possession or control of free corporate assets, according to Slodov v. United States, supra, may not pay them out to other creditors with knowledge of the government's withholding tax claim for a prior period. Since, the government argued, sufficient funds to cover all past unpaid taxes were available after August 10, Wall was liable for the full amount of the government's counterclaim. Thus, the argument concludes, the special verdict interrogatories, if appropriately construed as determining Wall's responsibility and willfulness as of August 10, support a judgment for the government's entire assessment.

There are, however, two difficulties with the government's ostensible judgment notwithstanding the verdict motion. First, it did not really seek to set aside the verdict at all; it merely sought a reinterpretation of the verdict. More critically, the theory advanced in the judgment notwithstanding the verdict motion was never pressed in the motion for a directed verdict. The government attorney may have been aware of the theory and simply assumed that an opportunity to press it would arise later if the case was reconveyed in order to determine the amount due. He may, on the other hand, have been unaware. But, in any event, his failure to press the contention deprived Wall of the opportunity to offer testimony tending to show, for example, that any funds which came into the corporations' hands after August 10, 1972 were encumbered by valid security interests and were therefore unavailable to satisfy the government's assessment.

Moreover, the government's motion cannot be fairly construed as a motion for a new trial. Its memorandum in support of the motion for judgment notwithstanding the verdict makes it clear that it wants the special verdict interrogatories to stand, but to be applied in a manner favorable to it. No trial errors are urged, and no contention is made that the answers to the interregatories are against the weight of the evidence. Thus the district court could not properly have granted relief under rule 59 since no notice was given of any grounds which would support the grant of a new trial in an action at law.

What the government perhaps should have been seeking was relief under Fed. R. Civ. P. 60(b). Until it made a stipulation for judgment, the case was still open and it could have tried and conceivably prevailed on its theory that Wall, though not responsible and willful prior to August 10, 1972 , became liable for taxes withheld in the earlier periods because he permitted payments to creditors in the later period. But the stipulation and resulting judgment foreclosed that contention. Arguably the stipulation was improvident, and it is conceivable that had a motion been made for relief from judgment for mistake, inadvertence, surprise or excusable neglect, the court, after a hearing, might appropriately have granted such relief. But no such motion was made within a year after judgment, and no reason has been advanced to suggest that it should be considered at this late date.

Thus, the trial court granted a motion having no warrant in Rule 50(b), or in any other rule dealing with postjudgment relief, without ever addressing the merits of the request. The sole ground advanced for the grant of the motion is a draconian provision in an sua sponte order dealing with briefing on motions. ¹ The net monetary sanction imposed for a late brief was $165,463.89. The court never, between June 29th when the government's motion was filed, and August 29th when it entered the order appealed from, suggested to counsel for Wall that a brief is opposition to the motion for judgment notwithstanding the verdict was required. Rule 50 imposed no such requirement. Moreover, even the text of paragraph 3.7 of Order #2, quoted in the margin, gives no fair warning that it applies to post-judgment motions. That paragraph is a part of a larger general section 3 captioned "Motions." The first sentence of paragraph 3.1 reads "all motions prior to trial, including motions to dismiss and motions for summary judgment, shall be written. . . ." (emphasis supplied). Nowhere in paragraph 3.7 is there any clear suggestion that the motions referred to therein are other than pretrial motions with which paragraph 3.1 deals. Indeed, the text of paragraph 3.7 principally relates the briefing schedule to the pretrial conference. It would take greater clairvoyance than is likely to be possessed by the average busy trial lawyer to appreciate that paragraph 3.7 meant, when entered sua sponte the day after the complaint was filed, what the court later held it to mean. To insist upon a $165,463.89 sanction for a client because his attorney lacks such clairvoyance seems to us to impose a greater burden on litigants than any rationally perceived necessities of the adversary system require.

We note, too, that although paragraph 3.7 appears in what the court entitles an order, it is certainly not a conventional order; normally an order is the product of notice, opportunity to be heard, and resolution after adversarial presentations. Rather, paragraph 3.7 is part of a standard form entered sua sponte in all civil cases before this district court. Thus, it is in the nature of a local rule. ² The district courts are authorized by statute to adopt such local rules. 28 U. S. C. §2071. The method of adoption is specified in Fed. R. Civ. P. 83. Adoption requires action by a majority of the judges in a district, which did not occur here. In cases not provide for by rule, the district courts may regulate their practice in any manner not inconsistent with the Federal Rules of Civil Procedure. In this instance, by applying paragraph 3.7 of Order #2, the district court acted inconsistently with Rule 50(b), which permits relief from a verdict only to the extent that the motion for such relief relies on the same legal grounds advanced in a motion for directed verdict. The court's authority to regulate practice does not include the authority to increase the relief which can be afforded under Rule 50(b). Even if Rule 83 did not expressly restrict the court's power to develop arcane local rules, since paragraph 3.7 of Order #2 provides a procedure for setting aside jury verdicts unknown to the common law, the seventh amendment would in any event be a formidable barrier.

[Taxpayer's Motions]

Wall also appeals from the denial of his motions for judgment notwithstanding the verdict, and for a new trial. The district court declined to hear the first, because it construed Rule 50(b) to require filing as well as service of a judgment notwithstanding the verdict motion within ten days after the entry of judgment. Wall argues persuasively that Rule 50(b) is silent on the necessity for timely filing rather than timely service, and that especially since the time limits stated in Rule 50(b) are identical to those in Rules 52(b) and 59(b), the measure of compliance should be the same under all three. The government does not suggest any need for filing under one rule and service under the others. We need not decide the question of timeliness of Wall's motion for judgment notwithstanding the verdict, however, since our examination of the record discloses that, timely or not, it could not have been granted. Wall made no motion for a directed verdict.

The new trial motion was served within the time permitted by Rule 59. It set forth in great detail plaintiff's grounds for requesting a new trial. Thus, both the court and Wall's adversary had ample notice of his reasons. As noted above, the trial court denied Wall's new trial motion because, as per paragraph 3.6 of Order #2, the motion was not followed by a supporting memorandum within sixty days of the entry of judgment. We have the same difficulty with paragraph 3.6 as we indicated with respect to paragraph 3.7. Since the district court itself had to go through an elaborate process of construction in order to find that paragraph 3.6 applied, the problem of notice is, if anything, more severe. Thus, we think the court should have considered the new trial motion, and we proceed to consider the grounds upon which plaintiff relied.

Wall contends, first, that the court erred in excluding evidence of his negotiations with certain Internal Revenue Service agents respecting payment of delinquent withholding taxes. He urges, first, that evidence of these negotiations would tend to negate willfulness in the post-August 10, 1972 period, and, second, that the evidence would support a finding that the Internal Revenue Service was estopped from asserting Wall's §6672 liability. As to willfulness, the proffered evidence would at best tend to show a lack of deviousness or illicit motivation. But willfulness under §6672 requires only that the failure to pay result from a voluntary, conscious and intentional payment to others before the government. Harrington v. United States [74-2 USTC ¶9772], 504 F. 2d 1306, 1315-1316 (1st Cir. 1974); Burden v. United States [73-2 USTC ¶9547], 486 F. 2d 302, 304 (10th Cir. 1973), cert. denied, 416 U. S. 904 (1974); Monday v. United States [70-1 USTC ¶9205], 421 F. 2d 1210, 1215 (7th Cir.), cert. denied, 400 U. S. 821 (1970). Perhaps Wall intended this evidence to demonstrate "reasonable cause" for not paying the withheld taxes; some courts have held that a taxpayer can, in a §6672 case, negate willfulness by showing such reasonable cause. See, e.g. Cash v. Compbell [65-1 USTC ¶9428], 346 F. 2d 670, 672-73 (5th Cir. 1965); Grey Line Co. v. Granquist [56-2 USTC ¶9973], 237 F. 2d 390 (9th Cir. 1956), cert. denied, 353 U. S. 911 (1957). Other courts, however, have expressed doubt that the "reasonable cause" exception is a proper construction of the statute. E.g., Harrington v. United States , supra, 504 F. 2d at 1316. We need not resolve the issue in this case, for we think that Mr. Wall's failure to pay the taxes merely in the hope that things would get better and that he would eventually be able to pay is not the kind of reasonable cause to which the cases in question refer. The proffered evidence tended to show only that Wall had such hope, confided it to the Internal Revenue Service, and was not discouraged from his decision to try to keep the business open. ³

Wall also sought the admission of the negotiations evidence on the ground that it would establish an estoppel against the government's assertion of §6672 liability. A similar estoppel contention was rejected in Monday v. United States , supra, 421 F. 2d at 1217-18. We, too, find it to be without merit. Accordingly, since neither of Wall's reasons for admitting the negotiations evidence is legally meritorious, the court's disposition of the matter was correct.

Wall's second argument for a new trial is that the jury could not on the evidence find that he was responsible and willful for failing to pay taxes for the payroll period ending September 7, 1972 . We have examined the record and conclude that the evidence sufficiently supports the jury's answers to the special verdict interrogatories. The amount due was established by stipulation.

Thus, although the court denied Wall's new trial motion for reasons which were impermissible, the denial of the motion was proper.

The judgment dated August 29, 1977 in favor of the United States for $179,752.06 shall be vacated, and the case remanded to the district court with a direction to reinstate the final judgment of June 20, 1977 in favor of the United States in the amount of $14,288.17. No costs.

^* Edward Dumbauld , United States District Judge for the Western District of Pennsylvania, sitting by designation.

¹ 3.7 Submission of Briefs Opposing Motions.

Any party opposing any motion shall file three copies of a responsive brief with the Clerk, together with any opposing affidavits, depositions, transcripts or other documents, within 15 days after the filing of the movant's brief, provided, however, that if the movant's brief is filed within 30 days of the date set for the final pre-trial conference, the responsive brief shall be filed on a date halfway between the date of filing of the movant's brief and the date of such conference, and provided further that if the date of the pre-trial conference is not a date certain, or if the pre-trial conference has already been held, the responsive brief shall be filed within 10 days after the filing of the movant's brief. Only the original brief need have a cover. Except where alternative motions are filed, each brief shall treat of only one motion. A motion to shorten time may be granted by the court without waiting for a responsive brief. Failure of a respondent to comply with this sub-paragraph or any other briefing schedule set by the court shall constitute a waiver of opposition to such motion and the motion will be granted.

² The difficulty confronting lawyers who are forced to decipher the trial court's local practice rules is well illustrated by the rather opaque language of paragraph 13 of Order #2: Conflict with Rules of Court or Prior Orders.

Should any provision of this order conflict with any Rule of the United States District Court for the Middle District of Pennsylvania or any standing order of this Court or District, such conflicting provision of this order shall control and the Rule of Court or standing order shall be suspended in the above-captioned action to the extent that it conflicts with this order. If any provision of this order conflicts with a prior order in this case, such prior order shall be revoked to the extent that it conflicts with this order.

³ Judge Weis believes that the tendered evidence would have been relevant on the issue of willfulness, but does not find the error to be other than harmless in the unusual circumstances of the case.

[67-1 USTC ¶9329]Carmen L. Lawrence, Plaintiff v. United States of America , Defendant

U. S. District Court, No. Dist. Tex., Dallas Div., Civil Action No. 3-929, 265 FSupp 590, 1/9/67

[1954 Code Secs. 6672, 6901 and 7421]

Transferee liability: 100% penalty for failure to collect and pay over excise taxes: Administrative levy: Injunction.--Since the transferee liability provisions of the Code do not apply to the 100% penalty assessed for failure to withhold and pay over excise taxes where there is neither the liquidation of a corporation or partnership nor the reorganization of a corporation, the Government could not collect the 100% penalty assessment against a deceased taxpayer through a summary administrative levy on property received by his wife as his sole beneficiary. The Government, having no claim on the wife's property until such time as it established its claim against her as provided by Texas probate law in either her capacity as the independent executrix of her husband's estate or as sole beneficiary of his estate, was permanently enjoined from proceeding with its summary administrative levy..

J. J. French, Jr., Locke, Purnell, Boren, Laney & Neely, 1900 Republic Bank Bldg., Dallas, Tex., Philip I. Palmer, Palmer, Green, Palmer & Gilmore, 2130 First Nat'l Bank Bldg., Dallas, Tex., for plaintiff. Leonard S. Goodman, Assistant General Counsel, Interstate Commerce Commission, Washington, D. C., for I. C. C. Kenneth J. Mighell, Assistant United States Attorney, Federal Bldg., Dallas, Tex., Joel P. Kay, Department of Justice, Washington, D. C., 20530, for defendant.

Judgment

TAYLOR, JR., District Judge:

The above numbered cause having been tried before the Court on November 10, 19 66, Plaintiff appearing by her attorneys, Philip I. Palmer and J. J. French, Jr., Defendant appearing by its attorney, Joel P. Kay, and the Court having considered the pleadings, exhibits, briefs, stipulations of counsel, evidence, other orders and matters in the file and having heard testimony of the witnesses and argument of counsel makes the following findings of fact and conclusions of law:

Findings of Fact

1. Plaintiff is a domiciliary of Texas and the widow of F. A. Lawrence, a Texas domiciliary, who died on September 28, 19 60.

2. Jurisdiction of this action is conferred by Section 7426(a) of the Internal Revenue Code of 1954, as amended by The Federal Tax Lien Act of 1966, P. L. 89-719, 80 Stat. 1125, §110.

3. Plaintiff was the Independent Executrix of the Estate of F. A. Lawrence, deceased, and the sole beneficiary under the will of F. A. Lawrence, deceased.

[Suit for Injunction]

4. This action involves a suit for an injunction to restrain the Defendant and its agents from attempting to collect an assessment of Six Thousand One Hundred Thirty and 36/100 Dollars ($6,130.36) against F. A. Lawrence, deceased which was not determined and assessed and sought to be collected by administrative levy against the property of plaintiff until more than four (4) years after the death of F. A. Lawrence.

5. Plaintiff administered the Estate of F. A. Lawrence as Independent Executrix until September 1962, at which time she filed the final Fiduciary Income Tax Return for the Estate of F. A. Lawrence and considering the estate to have been fully administered, Plaintiff transferred all the bank accounts at the Mercantile National Bank in Dallas, Texas to herself as beneficiary under the will of F. A. Lawrence.

6. The assessment against F. A. Lawrence, deceased, was determined on February 5, 19 65 for a 100% penalty assessment under Internal Revenue Code Section 6672 for failure to withhold and pay over excise taxes due the United States Government by the Casa View Country Club for the fourth quarter of 1959 and the third quarter of 1960.

7. Plaintiff and Defendant, by and through their attorneys, entered into stipulations whereby Defendant would attempt no further action to collect the assessment referred to in paragraph no. 4 above until this suit for injunction had been heard and decided by this Court.

[No Claim Against Wife]

8. Defendant has never filed a sworn claim against the Estate of F. A. Lawrence for this assessment with the Plaintiff in her capacity as Independent Executrix.

9. Defendant has never filed a suit, to establish or enforce its claim based on the assessment, against Plaintiff in her capacity as Independent Executrix or as sole beneficiary under the will of F. A. Lawrence.

10. Defendant subsequently on March 31, 19 65 attempted to collect the assessment against F. A. Lawrence, deceased, by levying on Plaintiff's accounts at the Mercantile National Bank in Dallas , Texas .

11. Defendant has never determined an assessment against Plaintiff for the 100% penalty on which the assessment against F. A. Lawrence, deceased, was made on February 5, 19 65, but Defendant did attempt to collect the assessment against F. A. Lawrence, deceased, by summary administrative levy against Plaintiff by Defendant's levy on Plaintiff's bank accounts in the Mercantile National Bank in Dallas, Texas.

12. Plaintiff brought this action on March 31, 19 65 for a permanent injunction to enjoin Defendant from collecting the assessment against F. A. Lawrence, deceased, by a summary administrative levy on Plaintiff's property.

Conclusions of Law

1. Under Texas law, property of a decedent vests in his heirs at law or beneficiaries under his will at the instant of his death.

2. The provisions of Section 6901 of the Internal Revenue Code of 1954 do not apply to the 100% penalty assessment for excise taxes under Section 6672 where there is neither the liquidation of a corporation or partnership nor the reorganization of a corporation.

3. Since the Estate of F. A. Lawrence, deceased, has been closed, Defendant has not followed the provisions of Texas Probate Code to establish and enforce its claim against the Plaintiff as sole beneficiary of the Estate of F. A. Lawrence by filing a suit against the Plaintiff as sole beneficiary.

4. With respect to the accounts in the Mercantile National Bank in Dallas, Texas to whom Defendant served its Notice of Levy, none of these accounts belong to the Estate of F. A. Lawrence, deceased, as all the accounts at the Mercantile National Bank in the name of either F. A. Lawrence or the Estate of F. A. Lawrence have been distributed to the Plaintiff prior to the date of the assessment against "F. A. Lawrence, deceased".

5. Until such time as the Defendant establishes its claim against plaintiff as provided by law in either her capacity as Independent Executrix of the Estate of F. A. Lawrence or as sole beneficiary under the will of F. A. Lawrence, the Defendant has no claim on the property of the Plaintiff and more especially the Plaintiff's bank accounts at the Mercantile National Bank on which the Defendant has previously served a Notice of Levy.

6. The summary administrative levy attempted by the Defendant under the facts presented in this case is not provided for by the Internal Revenue Code or the Texas Probate Code.

THEREFORE, it is ORDERED, ADJUDGED, AND DECREED that Plaintiff is entitled to judgment for a permanent injunction to enjoin the Defendant from attempting to enforce its assessment against F. A. Lawrence, deceased, by a summary administrative levy against Plaintiff's property. Further, it is ordered that Defendant is required to release any claim to the Plaintiff's funds in the Mercantile National Bank in Dallas, Texas, which the Defendant may still have impressed on said funds by virtue of his Notice of Levy served on March 31, 19 65, on the Mercantile National Bank to enforce Defendant's alleged claim against F. A. Lawrence, deceased.

[67-1 USTC ¶9329]Carmen L. Lawrence, Plaintiff v. United States of America , Defendant

Judgment

TAYLOR, JR., District Judge:

Findings of Fact

1. Plaintiff is a domiciliary of Texas and the widow of F. A. Lawrence, a Texas domiciliary, who died on September 28, 19 60.

2. Jurisdiction of this action is conferred by Section 7426(a) of the Internal Revenue Code of 1954, as amended by The Federal Tax Lien Act of 1966, P. L. 89-719, 80 Stat. 1125, §110.

3. Plaintiff was the Independent Executrix of the Estate of F. A. Lawrence, deceased, and the sole beneficiary under the will of F. A. Lawrence, deceased.

[Suit for Injunction]

[No Claim Against Wife]

8. Defendant has never filed a sworn claim against the Estate of F. A. Lawrence for this assessment with the Plaintiff in her capacity as Independent Executrix.

Conclusions of Law

1. Under Texas law, property of a decedent vests in his heirs at law or beneficiaries under his will at the instant of his death.

6. The summary administrative levy attempted by the Defendant under the facts presented in this case is not provided for by the Internal Revenue Code or the Texas Probate Code.

Joseph V. Stuart, Plaintiff-Appellant v. United States , Defendant-Third-Party-Plaintiff-Appellee, Frank lin O'Dell, Third-Party Defendant.

U.S. Court of Appeals, 1st Circuit; 02-1702, 337 F3d 31, July 24, 2003.

Affirming a DC Mass. decision, 2002-1 USTC ¶50,237.

[ Code Sec. 6672]

Penalties, civil: Failure to collect and pay over tax: Assessment of penalty. --

The district court properly granted partial judgment in favor of the IRS with respect to assessments against an individual who sought a refund of taxes and penalties for unpaid trust fund taxes of a company. The IRS presented certificates of assessments, which constituted presumptive proof of a valid assessment, that the taxpayer failed to rebut. He unsuccessfully contended that the assessments lacked foundation because they were based on substitute returns, and offered no records or corroborating evidence that the substitute returns were based upon an unreasonably high figure.

[ Code Sec. 6672]

Penalties, civil: Failure to collect and pay over tax: Jury trial: Willfulness: Responsible person: Control of funds: Knowledge of nonpayment: Paying other creditors before IRS . --

The First Circuit affirmed special jury verdicts that an individual could be held liable for a company's debt. The taxpayer was a responsible person with respect to the company's unpaid employment taxes and the trust fund recovery penalty, and his failure to pay over the taxes was willful. The "effective power" and "significant control" tests for the responsible person prong of liability constituted a proper standard of proof, despite the taxpayer's argument that he had a tenuous and indirect formal connection to the business. There was evidence that the taxpayer retained managerial control of the company and had knowledge of nonpayment of the employment taxes. Moreover, he failed to show that he investigated or corrected mismanagement of funds that allowed other creditors to be paid ahead of the IRS . Thus, the district court did not abuse its discretion in denying a new trial.

David E. Neitlich, for plaintiff-appellant. Eileen J. O'Connor, Assistant Attorney General, Bethany B. Hauser, Department of Justice, Teresa E. McLaughlin, for appellee.

Before: Boudin, Chief Circuit Judge, and Torruella and Howard, Circuit Judges.

TORRUELLA, Circuit Judge: Plaintiff-appellant Joseph Stuart ("Stuart" or "Taxpayer") brought suit in district court seeking a refund of federal taxes and penalties he paid to the Internal Revenue Service for the unpaid trust fund taxes of Buyers Business Network ("BBN"). The district court granted partial judgment in favor of the IRS with regard to the correctness of the amounts of the assessments at issue. The remaining issue of whether Stuart could be held liable for BBN's debt was then tried to a jury, which rendered special verdicts finding for the IRS on all counts. Stuart appeals. After careful consideration, we affirm.

I. BACKGROUND

A. Entities at Issue

Stuart is an experienced businessman who held interests in numerous operations, including dry cleaning, jewelry, insurance, restaurant, and publishing businesses. In 1984, he semi-retired, and in 1989, after he had a heart attack, he transferred his assets to his wife.

In 1992, Stuart advised his family on the creation of Maynard Mall Realty Trust ("MMRT") to purchase the physical plant of the Maynard Mall in Massachusetts . Local building contractor Thomas Sheridan was the trustee, with Sheridan and three of Stuart's children as beneficiaries. Stuart also advised his wife and children in forming Combined Financial, Inc., a corporation which held interests in a number of businesses located within the Maynard Mall and provided financing for some of these businesses. Stuart's son Greg was originally the president of Combined Financial, but Stuart became president at some point before the end of the fourth quarter in 1993, the first of the four quarters involved in the suit.

BBN was a Maynard Mall tenant. BBN brokered the exchange of goods and services between small and medium-sized businesses in return for a commission. Frank lin O'Dell, BBN's president, previously operated a barter company called Bottomline Business Exchange of New Hampshire (" BBX New Hampshire") with Ralph Butts. Steve Lichtman and Kevin Dowd had been operating another barter business in Medford and then at the Maynard Mall known as Bottomline Business Exchange of Medford (" BBX Medford"). In December, 1992, O'Dell and Butts agreed with Lichtman, Dowd, and Combined Financial to consolidate BBX New Hampshire and BBX Medford at the Maynard Mall as BBN, an 80 percent subsidiary of Combined Financial. The four men owned equal shares of the remaining 20 percent.

In 1993, O'Dell learned that former BBX Medford had been in serious financial trouble when it entered the merger, and he told Stuart of the problem. O'Dell and Stuart held a meeting with Lichtman and Dowd, and a new agreement was executed on March 5, 1993. Among other things, the new agreement eliminated Lichtman and Dowd from BBN ownership and authorized Combined Financial to intervene in BBN's financial affairs under certain circumstances, such as if BBN was fiscally imbalanced or mismanaged.

Stuart became a signatory on BBN's bank account on November 22, 1993, at which time BBN owed Combined Financial over $400,000. Two signatures were required on any check for more than $250, and all ten checks Stuart signed for more than $250 were countersigned by either O'Dell or Robert Minka, Combined Financial's comptroller.

B. Assessments

BBN filed form 941 --"Employer's Quarterly Federal Tax Returns" --for the fourth quarter of 1993 and the first quarter of 1994. These returns were signed by O'Dell as BBN's president. The 1993 return shows total wages paid of $67,745.49, with taxes due of $16,551.04; the 1994 return shows total wages paid of $42,302.50, with taxes due of $10,639.41. By 1997, unpaid balances of assessment of trust fund taxes (payroll taxes) remained --$11,597.97 for the fourth quarter of 1993 and $7,403.23 for the first quarter of 1996. The IRS then made assessments of $19,001.20 against Stuart and O'Dell because the IRS found that they had sufficient control over BBN's finances to be held personally responsible for BBN's withholding tax liability under I.R.C. §6672 (2000).

BBN did not file a return for the second or third quarters of 1994. For the missing quarters, the IRS used BBN's past returns to prepare substitute returns under I.R.C. §6020(b), based on an estimated payroll of $42,492.91. The IRS then made assessments of $23,498.58 against Stuart and O'Dell. The IRS retained and applied against the assessments overpayment credits which the IRS owed Stuart and O'Dell, resulting in the balance due on the assessment being reduced to $730.94.

C. Litigation Below

The IRS denied Stuart's claim for a refund of the penalties he paid to the IRS , leading Stuart to bring suit in federal district court. The Government counterclaimed for the balance of assessments due and impleaded O'Dell. At the close of discovery, the Government moved for partial summary judgment regarding the amounts assessed. Stuart also moved for summary judgment, contending that the assessment for the second and third quarters of 1994 was invalid because the amounts of the tax liabilities for those quarters was estimated. In response, the Government submitted Certificates of Assessments and Payments as proof that the assessments were presumptively valid. The Government also filed a motion in limine to exclude testimony of IRS personnel regarding the validity of the substitute returns.

The district court denied Stuart's motion for summary judgment and granted the Government's motion for partial summary judgment and its motion in limine. The issue of whether Stuart was a responsible person who willfully failed to remit the trust fund taxes to the IRS went to trial. The jury returned special verdicts for the Government on all counts, finding Stuart both responsible and willful as to all four tax quarters at issue. Stuart then filed a motion for a new trial. The district court denied the motion, and Stuart appeals.

II. CHALLENGE TO AMOUNTS ASSESSED

A. Standard of Review

We review the district court's legal interpretations de novo; we "overturn its factual findings only if they are clearly erroneous." Interex v. Comm'r [ 2003-1 USTC ¶50,272], 321 F.3d 55, 58 (1st Cir. 2003).

B. Analysis

Stuart contends that the district court erred by favoring IRS assessments with a presumption of correctness because the underlying substitute returns were without factual foundation, constructed based upon an irrational theory, unauthorized, and facially inconsistent.

Stuart's argument is without legal support. The IRS presented Certificates of Assessments and Payments for the fourth quarter of 1993 and the first three quarters of 1994, which are "presumptive proof of a valid assessment." Geiselman v. United States [ 92-1 USTC ¶50,200], 961 F.2d 1, 6 (1st Cir. 1992) ( per curiam). This presumption places the burden of proof on Stuart to show that the IRS 's determination is invalid. Helvering v. Taylor [ 35-1 USTC ¶9044], 293 U.S. 507, 515 (1935); accord Interex v. Comm'r [ 2003-1 USTC ¶50,272], 321 F.3d at 58. A determination is invalid if it is "without rational foundation and excessive." United States v. Janis [ 76-2 USTC ¶16,229], 428 U.S. 433, 441 (1976) ((finding that a naked assessment made without any foundation cannot be used to calculate an assessment because it was "without rational foundation and excessive and not properly subject to the usual rule with respect to the burden of proof in tax cases") (citations omitted)); accord Interex v. Comm'r [ 2003-1 USTC ¶50,272], 321 F.3d at 58.

Stuart did not carry his burden. Instead of presenting credible evidence that the assessments were without foundation, Stuart asserts only that the assessments are without foundation simply because they are based on substitute returns. However, taxpayers have a duty to maintain adequate records for tax reporting purposes. I.R.C. §6001. Where a taxpayer fails to keep such records, "the government, in attempting to establish a violation of the income tax law, may reconstruct a taxpayer's taxable base by any reasonable method." United States v. Morse [ 74-1 USTC ¶9228], 491 F.2d 149, 151 (1st Cir. 1974); accord Cracchiola v. Comm'r [ 81-1 USTC ¶9410], 643 F.2d 1383, 1385 (9th Cir. 1981); United States v. Firtel [ 71-2 USTC ¶16,002], 446 F.2d 1005, 1006-07 (5th Cir. 1971) ( per curiam). Here, the substitute returns were based upon a figure slightly lower than the payroll figures submitted by BBN for the last quarters for which it did file a return. Stuart argues that these amounts may be high because the payroll of a failing business may decline before the business ceases all operations. Stuart's assertion may well be correct, but he has not produced any records or other corroborating evidence to show that this actually occurred at BBN. Consequently, Stuart has failed to demonstrate that the Certificates of Assessments and Payments were not reasonable.

III . ATTACK ON JURY VERDICTS

A. Taxpayer Responsibility

The Internal Revenue Code ("Code") requires employers to withhold federal social security and income taxes from the wages of their employees and to remit the amounts withheld to the United States . I.R.C. §§3102(a), 3402(b). "The Code [] imposes personal liability not only upon employers but upon their officers and agents who are responsible for collecting, accounting for, and paying over to the government the taxes withheld." Thomsen v. United States [ 89-2 USTC ¶9575], 887 F.2d 12, 14 (1st Cir. 1989); see I.R.C. §6672(a). When a person required to collect, account for, and pay over trust fund taxes willfully fails to do so, he is liable for a penalty equal to the total amount of the unpaid taxes. I.R.C. §6672(a).

The taxpayer bears the burden of proving both that he was not a responsible person and that his failure to pay over the taxes was not willful. See Caterino v. United States [ 86-1 USTC ¶9452], 794 F.2d 1, 5 (1st Cir. 1986). There may be more than one responsible person. Harrington v. United States [ 74-2 USTC ¶9772], 504 F.2d 1306, 1312 (1st Cir. 1974). "Courts have explicitly given the word `responsible' a broad interpretation." Caterino [ 86-1 USTC ¶9452], 794 F.2d at 5 (citation omitted). The controlling inquiry in determining whether the taxpayer should be held "responsible" is whether the person possessed sufficient control over corporate affairs to avoid the default. Vinick v. Comm'r [ 97-1 USTC ¶50,333], 110 F.3d 168, 172 (1st Cir. 1997). "In deciding whether an assessed individual is a `responsible person' under 26 U.S.C. §6672(a)[], federal courts typically consider various indicia of responsibility, such as the holding of corporate office, the authority to disburse corporate funds, stock ownership, and the ability to hire and fire employees." Adams v. Coveney, 162 F.3d 23, 26 n.1 (1st Cir. 1998).

"Willfulness for purpose of section 6672 means no more than knowledge that taxes are due and withheld and conscious disregard of the obligation to remit them." Caterino [ 86-1 USTC ¶9452], 794 F.2d at 6. "Evil motive and specific intent are not necessary elements," id., and "delegation will not relieve one of responsibility," Harrington [ 74-2 USTC ¶9772], 504 F.2d at 1311. A responsible person acts willfully if, after becoming aware that the trust fund taxes are not being paid, knows that other creditors are receiving payment or acts in "reckless disregard of a known or obvious risk" that trust funds may not be remitted to the government. Thomsen [ 89-2 USTC ¶9575], 887 F.2d at 17-18.

Stuart states that the standard "effective power" or "significant control" tests for the "responsible person" prong of section 6672 liability are faulty "because there is no limit to the number of degrees of removal which the power and control tests may bridge," leading to Stuart being held personally liable when he has only a very tenuous and indirect formal connection to BBN.

We reject as unfounded Stuart's attack on the standard tests used to determine section 6672 liability. As discussed above, the court's analysis looks beyond titles to ascertain whether the employee had substantial control over corporate finances. Vinick [ 97-1 USTC ¶50,333], 110 F.3d at 172. In determining the employee's amount of control, courts eschew a mechanical system and consider a multitude of factors to prevent holding an employee liable where she did not have power to avoid the default. See Caterino [ 86-1 USTC ¶9452], 794 F.2d at 5.

B. Sufficiency of the Evidence

Stuart contends that the jury had insufficient evidence to find him a "responsible person" who acted willfully in not remitting the payroll tax. Stuart did not move for a judgment as a matter of law at the close of the evidence. "When a litigant has foregone a timely motion for judgment as a matter of law, the court of appeals normally will not consider the legal sufficiency of the evidence." Faigin v. Kelly, 184 F.3d 67, 76 (1st Cir. 1999); see also 9A Wright & Miller §2536 (2003) (noting "[i]t is thoroughly established that the sufficiency of the evidence is not reviewable on appeal unless a motion for judgment as a matter of law was made in the trial court"). We will only review the insufficiency of the evidence in a case of "plain error apparent on the face of the record that, if not noticed, would result in a manifest miscarriage of justice" or where "the verdict is totally without legal support." 9A Wright & Miller §2536; see Faigin, 184 F.3d at 76 (stating "the court of appeals retains a modicum of residual discretion to inquire whether the record reflects an absolute dearth of evidentiary support for the jury's verdict").

In the case before us, not only is plain error absent, the record contains ample evidence to support jury findings of willfulness and responsibility under the Code. Consequently, we dismiss Stuart's sufficiency of the evidence arguments.

C. Attack on Verdict

Stuart preserved his right to seek relief from the verdict by making a motion for a new trial, which the trial court denied. We review a denial for a motion for a new trial under an abuse of discretion standard, in which "[w]e reverse only if the verdict is so seriously mistaken, so clearly against the law or the evidence, as to constitute a miscarriage of justice." Transamerica Premier Ins. Co. v. Ober, 107 F.3d 925, 929 (1st Cir. 1997). (quotation marks and citation omitted). We review the district court's denial of a new trial for abuse of discretion, and view the evidence in the light most favorable to the nonmoving party. Id.

The jury's verdicts were not against the great weight of evidence. In fact, there was substantial evidence from which the jury could infer that under the Code Stuart was a responsible person who acted willfully in failing to remit the payroll taxes.

For example, while Stuart was not an officer, director or shareholder of BBN, the jury could have inferred Stuart had the requisite control of BBN because Combined Financial was BBN's 80% shareholder, and Stuart served as president and then as a director of Combined Financial. The jury also could have considered Stuart to be the true owner of Combined Financial and the Maynard Mall. Although Stuart transferred his assets to his wife and children, there was evidence that he retained actual control. For example, he made the decision to buy the Maynard Mall building and testified that his wife, the formal owner of Combined Financial's interest in BBN, was unaware of who owned stock in Combined Financial.

The jury could also have inferred that Stuart exerted significant managerial control over BBN's affairs. While Stuart claimed little involvement in BBN's operations, O'Dell testified Stuart was at the Maynard Mall five to six days per week and attended regular Monday meetings. Stuart was involved in the negotiation of the new BBN Agreement, which gave Combined Financial the power to direct BBN's financial affairs if the business was not properly managed.

As to willfulness, the jury could have inferred that Stuart acted willfully in not ensuring that BBN's taxes were paid by coupling Minka's testimony that Stuart knew the payroll taxes had not been paid with Stuart's failure to show that he investigated or corrected the mismanagement. Alternatively, the jury could have inferred willfulness from testimony that Stuart knew that other creditors, such as Combined Financial and Maynard Mall, were being paid even though the payroll taxes had not been paid. Consequently, we find that the district court did not abuse its discretion in denying Stuart a new trial. ¹

IV. CONCLUSION

For the reasons stated above, we affirm.

¹ Stuart argued in part below that the verdict was against the clear weight of the evidence because of the district court's allegedly erroneous and prejudicial ruling granting the Government's motion in limine to exclude testimony of IRS personnel regarding the validity of the substitute returns. However, Stuart forfeits his opportunity to appeal this issue because he failed to make an attempt to develop this argument in his brief. Twomey v. Delta Airlines Pilots Pension Plan, 328 F.3d 27, 33 n.4 (noting that issues alluded to perfunctorily without any developed argument are deemed waived on appeal).

[2002-1 USTC ¶50,166] In re Lewis M. Smallwood, Sylvia J. Smallwood, Debtors

U.S. Bankruptcy Court, West. Dist. Ark. , Fort Smith Div., 01-70143, 1/3/2002

[Code Secs. 6672 and 6871 ]

Trust fund recovery penalty: Assessment: Notice: Certificate of assessment.--

The government met its burden of proof in establishing that a trust fund recovery penalty was properly assessed against married debtors who objected to the government's proof of claim filed in the debtors' bankruptcy case. An authentic certificate of assessment was presumptive proof of a valid assessment of the debtors' tax liability. Additionally, the government presented prima facie evidence that proper notice was given. The certificate of assessment was presumptive proof of proper notice.

[Code Secs. 6871 and 7122 ]

Offer in compromise: Acceptance of offer: Certificate of assessment.--

Married debtors' tender of a check to the government did not constitute an offer in compromise that would have discharged their tax liability. The government and the debtors agreed that an offer to compromise the tax liability of the debtors was never accepted in writing by an authorized official. Moreover, a certificate of assessment reflected that the debtors' offer in compromise was rejected.

[Code Sec. 7402 ]

Burden of proof: Summary judgment.--

Married debtors, who objected to the government's proof of claim filed in their bankruptcy case and to whom the burden of proof shifted upon the government's satisfaction of its burden of proof, failed to submit any evidence that would show a genuine issue of material fact. Thus, the government's motion for summary judgment was granted.

Kenneth W. Cowan, for debtors. Andrew T. Pribe, for U.S. John T. Lee, trustee.

ORDER GRANTING UNITED STATES OF AMERICA 'S MOTION FOR SUMMARY JUDGMENT

FUSSELL, Bankruptcy Judge:

Pending before the Court is the United States 's motion for summary judgment filed on October 1, 2001 , regarding the debtors' objection to the claim of the Department of Treasury/Internal Revenue Service [ IRS ]. The debtors responded to the United States 's motion for summary judgment on October 29, 2001 . For the reasons stated below, the Court grants the United States 's motion and overrules the debtors' objection to the claim of the IRS .

PROCEDURAL HISTORY

The debtors filed their chapter 7 bankruptcy petition on February 8, 2001. On May 30, 2001 , the debtors filed a general unsecured proof of claim on behalf of the IRS in the amount of $198,723.67 plus interest for the "Trust Fund portion of withholding taxes for Border City Foods." ¹ On June 11, 2001 , the trustee, John Terry Lee, filed his objection to that claim on the grounds that (1) there was no showing that an assessment of individual liability had been made by the IRS and (2) the debt appeared settled through accord and satisfaction because the debtors tendered an offer in compromise and the IRS deposited the debtors' check. On June 18, 2001, the debtors filed an amended Proof of Claim on behalf of the IRS . The amended claim stated that the IRS 's claim was an unsecured priority claim, not a general unsecured claim. On June 26, 2001, the trustee filed his objection to the amended claim for the same reasons stated in his earlier objection.

On June 29, 2001, the Department of Treasury/Internal Revenue Service filed its own proof of claim in the amount of $207,699.46, also providing that the claim was an unsecured priority claim. On September 13, 2001, the debtors objected to the IRS 's claim for the same reasons the trustee had objected to the earlier claims filed by the debtors on behalf of the IRS . On October 12, 2001, the trustee withdrew his objections to the IRS 's claims as moot.

JURISDICTION

This Court has jurisdiction over this matter pursuant to 28 U.S.C. §1334 and 28 U.S.C. §157, and it is a core proceeding pursuant to 28 U.S.C. §157(b)(2)(B). The following findings constitute findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052.

SUMMARY JUDGMENT

Federal Rule of Civil Procedure 56 provides that summary judgment shall be rendered if the pleadings, depositions, answers to interrogatories, admissions, and affidavits show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. ² The burden is on the movant to establish the absence of a material fact and identify portions of the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then shifts to the non-moving party, who must then "go beyond the pleadings and by her own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file,' designate 'specific facts showing that there is a genuine issue for trial.' " Id. at 324 (quoting Fed. R. Civ. P. 56(e)). In ruling on a summary judgment motion, the court views the facts in the light most favorable to the non-moving party and allows that party the benefit of all reasonable inferences to be drawn from the evidence. Ferguson v. Cape Girardeau Cty., 88 F.3d 647, 649-50 (8th Cir. 1996).

The IRS has a dual burden of establishing the nonexistence of a genuine issue of material fact. The initial burden is the burden of production, which shifts to the debtors if satisfied by the IRS . The second, and ultimate, burden is the burden of persuasion, which remains with the IRS . Celotex Corp., 477 U.S. at 330 (J. Brennan, dissenting) (citing 10A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure §2727, p.121 (2d ed. 1983)). The initial burden may be discharged by the IRS showing there is an absence of evidence to support the debtors' case. Id. at 325. Before shifting that burden, however, the Court needs to determine if the IRS has met its burden of persuasion as to the issues presented.

ISSUES PRESENTED

To determine whether the IRS is entitled to summary judgment regarding the debtors' objection to the claim of the IRS , the Court must decide two issues: (1) whether the debtor, Lewis Smallwood, was properly assessed a trust fund recovery penalty pursuant to 26 U.S.C. §6672, and (2) whether the debtors' tender of $86,470.00 to the IRS discharged any liability in accord and satisfaction.

POSITIONS OF THE PARTIES

In its " United States of America 's Statement of Undisputed Material Facts in Support of Its Motion for Summary Judgment," the IRS submitted a statement of alleged undisputed material facts. Each of the alleged facts were supported by either an attached Exhibit A (Certificate of Assessments, Payments, and Other Specified Matters), attached Exhibit B (Declaration of Conrad Jacobsen, Revenue Officer with the IRS ), or a pleading in the Court file. The alleged material facts are as follows:

1. On August 7, 2000 , Lewis Smallwood was assessed $198,723.67 by the Internal Revenue Service pursuant to Section 6672 to the Internal Revenue Code. This assessment is referred to herein as "trust fund recovery penalty."

2. On January 8, 2001 , Debtors submitted an offer in compromise to the Internal Revenue Service's Taxpayer Advocate Service seeking to compromise the trust fund recovery penalty.

3. On or about January 24, 2001 , Debtors delivered to the Taxpayer Advocate Service of the Internal Revenue Service the sum of $86,470 by cashier's check.

4. This check was accompanied by a letter from their attorney, Bruce H. Bethell, which stated:

"I recently submitted Form 656 on behalf of the captioned Taxpayer. With this letter I submitt [sic] a deposit in the amount of $86,470.00, representing the full amount of the Offer previously tendered.

"The enclosed check is tendered on the condition that the Offer in Compromise is accepted. If the Offer is rejected, the enclosed check must be returned to my attention.

"Please contact me if you have further questions regarding the enclosed."

5. The Internal Revenue Service deposited this check.

6. On February 8, 2001 , Debtors filed their petition in bankruptcy initiating these bankruptcy proceedings.

7. On March 22, 2001 , the Trustee, John T. Lee, sent a letter to the Internal Revenue Service demanding the $86,470 payment made by Debtors to the Internal Revenue Service be turned over to him as part of the bankruptcy estate.

8. On or about May 2001, the Internal Revenue Service sent to the Trustee the $86,470 payment in accord with his demand.

9. The offer in compromise submitted by the Debtors in January, 2001, has never been accepted in writing by an authorized official of the United States .

In their "Debtors' Response to United States of America's Motion For Summary Judgment" and "Debtors' Statement of Disputed Material Facts in Response to United States of America's Motion For Summary Judgment," the debtors dispute that on August 7, 2000, Lewis Smallwood was assessed $198,723.67 by the IRS because the United States failed to provide sufficient proof that a notice of balance due (the assessment) was in fact issued to the debtors. The debtors also dispute that a 60 day preliminary notice was mailed or delivered to the debtors in accordance with 26 U.S.C. §6672. ³ (2) Timing of notice.--The mailing of the notice described in paragraph (1) (or, in the case of such a notice delivered in person, such delivery) shall precede any notice and demand of any penalty under subsection (a) by at least 60 days. The debtors did not submit an affidavit or any documents supporting their position, and stated in their response that "they do not dispute any of the matters stated in Mr. Jacobson's [sic] Declaration (i.e. affidavit)." The debtors did not dispute paragraphs two through nine, as set forth above. Finally, in their "Brief in Support of Debtors' Response to United States of America 's Motion For Summary Judgment," the debtors raise the defense of accord and satisfaction as to their tender of $86,470.00 to the IRS . Neither side disputes that the debtor is a person required to collect, account for, and pay over any tax imposed by the Internal Revenue Code, and who willfully failed to do so.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

IRS 's Burdens of Production and Persuasion--Trust Fund Recovery Penalty

The first issue before the Court is whether the debtor, Lewis Smallwood, was properly assessed a trust fund recovery penalty pursuant to 26 U.S.C. §6672. The debtors dispute that the debtors were properly assessed because the IRS failed to provide proof that a notice of balance due (the assessment) was issued to the debtors. However, the IRS attached to its statement of material facts in support of its motion for summary judgment a Certificate of Assessments, Payments, and Other Specified Matters showing that the trust fund recovery penalty was assessed against the debtor Lewis Smallwood on August 7, 2000 . This document shows the taxpayer's name and social security number, the type and amount of tax, and the date of assessment. It was attached to a Form 2866, Certificate of Official Record, attesting to the authenticity of the Certificate of Assessments, Payments, and Other Specified Matters. Form 2866 was under seal and bore the signature of the Field Director of the Submission Processing Unit (Austin). According to Federal Rule of Evidence 902(1), a document bearing a seal purporting to be that of the United States , and a signature purporting to be an attestation, requires no extrinsic evidence of authenticity as a condition precedent to admission. Fed. R. Evid. 902(1); see also United States v. Darveaux, 830 F.2d 124, 126 (8th Cir. 1987). Further, the Certificate of Assessments, Payments, and Other Specified Matters is presumptive proof of a valid assessment. United States v. Chila [89-1 USTC ¶9299], 871 F.2d 1015, 1017-18 (11th Cir. 1989) (quoting United States v. Dixon [87-2 USTC ¶9485], 672 F.Supp. 503 (M.D. Ala. 1987)); see also Hefti v. Internal Revenue Service [93-2 USTC ¶50,591], 8 F.3d 1169, 1172 (7th Cir. 1993). The Court finds that the United States has established that the claimed tax liability was properly assessed against the debtors and has met its burden of production and persuasion in this regard.

The debtors also dispute that a 60 day preliminary notice was mailed or delivered to the debtors in accordance with 26 U.S.C. §6672(b). The debtors argue that absent the 60 day preliminary notice, no trust fund recovery penalty can be imposed under 26 U.S.C. §6672(a). Section 6672(b) states that no penalty shall be imposed under §6672(a) unless the taxpayers are notified that they shall be subject to an assessment of the penalty. The notification shall precede any subsequent notice and demand of the penalty by at least 60 days.

As stated above, a Certificate of Assessments, Payments, and Other Specified Matters is presumptive proof of a valid assessment. The certificate is also presumptive proof that proper notices were given to the taxpayer prior to the assessment in the manner prescribed by the Internal Revenue Code. Hopkins v. Department of Treasury, Internal Revenue Service (In re Hopkins ), 192 B.R. 760, 762 (D. Nev. 1995). This comports with the presumption of regularity discussed by the Eighth Circuit in United States v. Ahrens [76-1 USTC ¶9241], 530 F.2d 781 (8th Cir. 1976). The court stated,

"The presumption of regularity supports the official acts of public officers and, in the absence of clear evidence to the contrary, courts presume that they have properly discharged their official duties."

United States v. Chemical Foundation, Inc., 272 U.S. 1, 14-15, 47 S.Ct. 1, 6, 71 L.Ed. 131 (1926). A corollary to the general rule may be stated as follows:

"*** (A)ll necessary prerequisites to the validity of official action are presumed to have been complied with, and *** where the contrary is asserted it must be affirmatively shown."

Lewis v. United States , 279 U.S. 63, 73, 49 S.Ct. 257, 260, 73 L.Ed. 615 (1929).

Aherns [76-1 USTC ¶9241], 530 F.2d at 785-86.

In the light of the above cases and the presumption of regularity, the Court finds that the United States has presented prima facie evidence that proper notice was given to the debtors prior to the assessment of the §6672(a) trust fund recovery penalty. Hence, the United States has met its burden of production and persuasion as to the first issue. ⁴

IRS 's Burdens of Production and Persuasion--Accord and Satisfaction

The second issue before the Court is whether the debtors' tender of $86,470.00 to the IRS discharged any liability in accord and satisfaction. The debtors assert that when the IRS deposited the check tendered by the debtors' attorney, the IRS accepted the offer in compromise, thereby satisfying their debt under accord and satisfaction. The IRS contends that an offer in compromise is not accepted until the taxpayer is notified in writing by an authorized official of the United States .

Settlement of tax claims is governed by 26 U.S.C. §7122. Under §7122(a), "[t]he Secretary may compromise any civil or criminal case arising under the internal revenue laws. . . ." 26 U.S.C. §7122(a). However, there are formal, exclusive procedures for settling tax claims set forth in the Code of Federal Regulations. See 26 C.F.R. §301.7122-1T (2001). First, an offer to compromise a tax liability "must be submitted according to the procedures, and in the form and manner, prescribed by the Secretary. An offer to compromise a tax liability must be signed by the taxpayer under penalty of perjury and must contain the information prescribed or requested by the Secretary." Id. §301.7122-1T(c)(1). Second, an offer to compromise is not accepted by the IRS until "the IRS issues a written notification of acceptance to the taxpayer or the taxpayer's representative." Id. §301.7122-1T(d)(1). Finally, any monies submitted with an offer to compromise "are considered deposits and will not be applied to the liability until the offer is accepted unless the taxpayer provides written authorization for application of the payments. . . . If an offer is rejected, any amount tendered with the offer, including all installments paid on the offer, will be refunded, without interest." Id. §301.7122-1T(g).

In this case, the parties agree that the offer to compromise the tax liability of the debtors has never been accepted in writing by an authorized official of the United States . In fact, the Certificate of Assessments, Payments, and Other Specified Matters reflects that the debtors' offer in compromise was rejected on June 15, 2001 . Without written authorization from the IRS of acceptance of the offer to compromise, the tax liability cannot be discharged in accord and satisfaction. The United States has met its burden of production and persuasion as to the second issue.

Debtors' Burden of Production

The Court finds that the IRS has met its dual burdens of production and persuasion as to both issues, and the burden of production now shifts to the debtors to present specific facts that would show a genuine issue for trial. The debtors did not submit any affidavits, depositions, answers to interrogatories, or admissions on file to show there is a genuine issue for trial as to either issue before the Court. In fact, the debtors rely on the affidavit of Conrad Jacobsen that was submitted by the IRS .

As to the first issue, the debtors only stated in their response to the IRS 's motion that they disputed an assessment was issued to the debtors. Without evidence to the contrary, the Court finds that a valid assessment was issued to the debtors as evidenced by the Certificate of Assessments, Payments, and Other Specified Matters. Likewise, the debtors produced neither an affidavit from the debtors or any evidence to support their claim that the notice required under §6672(b) was not mailed or delivered to the debtors. Again, without evidence to the contrary, the Court finds that under the presumption of regularity, the 60 day preliminary notice required under §6672(b) was properly mailed or delivered to the debtors prior to the imposition of the §6672(a) penalty.

As to the second issue, the parties agree that the debtors' offer in compromise was never accepted in writing by the IRS as required by 26 U.S.C. §7122, and the Court finds as a matter of law that the tender of $86,470.00 by the debtors did not discharge any liability of the debtors in accord and satisfaction.

CONCLUSION

The last two sentences of Federal Rule of Civil Procedure 56(e) state,

[w]hen a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.

Fed. R. Civ. P. 56(e). These sentences were added "to disapprove a line of cases allowing a party opposing summary judgment to resist a properly made motion by reference only to its pleadings." Celotex Corp., 477 U.S. at 325; see also Webb v. Lawrence Cty., 144 F.3d 1131, 1134 (8th Cir. 1998) ("non-movant cannot simply create a factual dispute; rather, there must be a genuine dispute over those facts that could actually affect the outcome of the lawsuit"). The United States has met its dual burdens of production and persuasion, and the debtors have not responded with any specific facts that would show there is a genuine issue for trial. Under Federal Rule of Civil Procedure 56, summary judgment is appropriate in this case. The Court grants the United States of America 's motion for summary judgment, and the debtors' objection to the Department of Treasury/Internal Revenue Service's claim in the amount of $207,699.46 is overruled.

IT IS SO ORDERED.

¹ Under Fed R. Bankr. P. 3004, if a creditor fails to file a proof of claim, the debtor may do so in the name of the creditor. If the creditor later files a proof of claim, its proof of claim supercedes the proof of claim filed by the debtor on behalf of the creditor.

² Fed R. Civ. P. 56 is made applicable in contested matters pursuant to Fed. R. Bankr. P. 9014, which states, in part, that Fed. R. Bankr. P. 7056 applies in contested matters. Fed. R. Bankr. P. 7056 states that Fed. R. Civ. P. 56 applies in adversary proceedings, and then sets forth Fed. R. Civ. P. 56.

³ 26 U.S.C. §6672 states, in relevant part:

(a) General rule.--Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.

(b) Preliminary notice requirement.--

(1) In general.--No penalty shall be imposed under subsection

(a) unless the Secretary notifies the taxpayer in writing by mail to an address as determined under section 6212(b) or in person that the taxpayer shall be subject to an assessment of such penalty.

⁴ On November 5, 2001, in reply to the debtors' response to the United States 's motion for summary judgment, the IRS submitted an additional affidavit and attached Domestic Return Receipt signed by Ms. Milton Smallwood on January 4, 2000, as additional evidence that notice of the assessment was given to the debtors. The Court did not consider this additional affidavit in finding that the United States met its burden of production and persuasion.

[2001-2 USTC ¶50,749] United States of America , Plaintiff v. M. Robert Ullman, Defendant

U.S. District Court, East. Dist. Pa. , CIV . 01-0272, 10/30/2001, 2001 U.S. Dist. LEXIS 17691.

[Code Secs. 6404 , 6501 and 6502 ]

Assessment and collection: Statute of limitations: Abatements.--An individual who failed to refute the government's prima facie showing that he was a responsible person liable for the trust fund recovery penalty unsuccessfully argued that the government exercised undue delay in assessing his tax liability. The assessment, which was made 23 months after the taxes at issue were due, was timely made within the three-year limitations period under Code Sec. 6501(a) , and the government had 10 years in which to collect the taxes. Additionally, the government did not unduly delay its subsequent abatement of a portion of the assessment because abatements may occur at any time that there remains an unpaid portion of an assessment.

[Code Secs. 3505 and 6672 ]

Trust fund recovery penalty: Prima facie case: Responsible person: Liability of third party: Collection discretion.--A pro se individual unsuccessfully attempted to evade liability for the trust fund recovery penalty. The government established a prima facie case of tax liability against him by virtue of the assessment's presumptive validity, and the individual failed to show that the assessment was incorrect. He could not avoid liability for the penalty on the ground that his company had entered into a Stipulation and Security Agreement with a bank that exposed the bank to liability under Code Sec. 3505 for the delinquent taxes. The IRS was under no duty to collect the withholding taxes from third parties potentially liable for the funds; thus, the individual had no grounds for forcing the IRS to collect the taxes from the bank. B

[Code Sec. 7433 ]

Unauthorized collection activities, damages: Time for filing suit: Installment payments.--An individual failed to refute the IRS 's prima facie showing that he was a responsible person liable for the trust fund recovery penalty. His counterclaim alleging that the IRS engaged in unauthorized collection activities when it (1) included his wife's income for purposes of assessing his ability to pay, (2) failed to reduce the amount of his monthly installment payment following a reduction in his pension, and (3) did not honor an initial installment agreement with a lower monthly payment was dismissed as untimely. The action to enforce liability under Code Sec. 7433 had to be brought within two years after the date on which it accrued, and the record established that the individual was aware of the purportedly improper conduct for seven years before bringing the complaint. Moreover, his contention that the IRS breached a valid contract in rejecting his installment proposal was barred by the six-year limitations period imposed under state ( Pennsylvania ) contract law.
[Code Secs. 6110 , 7402 and 7430 ]

Public inspection of written determinations: Jurisdiction: U.S. Court of Federal Claims: Attorney's fees, award of: Prevailing party.--An argument raised by a responsible person liable for the trust fund recovery penalty that the government violated Code Sec. 6110 when it failed to honor his repeated requests to obtain Chief Counsel written advice and other background documents was dismissed for lack of jurisdiction. His exclusive remedy for such a violation was to bring a civil action against the Treasury Secretary in the U.S. Court of Federal Claims. Further, absent a showing that he had prevailed in the action, he was not entitled to an award of attorney's fees.

Jennifer L. Best, Department of Justice, Washington , D.C. 20530 , for plaintiff. Robert M. Ullman, Reading , Pa. , pro se.

MEMORANDUM

BUCKWALTER, Judge:

The United States filed this action on January 18, 2001 , pursuant to 26 U.S.C. §6672 seeking to reduce to judgment an unpaid tax liability of Defendant M. Robert Ullman, ("Defendant" or "Ullman"). Ullman's tax liability stems from a determination that he was the responsible person for the employee withholding taxes of Canoe Manufacturing Co., Inc. ("Canoe Manufacturing"). Defendant's answer to the United States' complaint includes counterclaims against Internal Revenue Service Commissioner, Charles Rossotti, for certain allegedly unauthorized collection activities in violation of 26 U.S.C. §7433 and for allegedly failing to deliver written advice of the Internal Revenue Service Chief Counsel in violation of 26 U.S.C. §6110(i)(4)(B).

Presently before the Court is the United States ' Motion for Summary Judgment and M. Robert Ullman's Motion for Summary Judgment. For the reasons that follow, the United States ' Motion for Summary Judgment is granted and Defendant's Motion for Summary Judgment is denied. Defendant's counterclaims are denied and dismissed as well.

I. BACKGROUND

On or about February 4, 1991 , an assessment was made against Ullman pursuant to 26 U.S.C. §6672 for the unpaid trust fund employment taxes of Canoe Manufacturing for the first and second quarters of 1989 in the amount of $49,121.51. Prior to this tax assessment, Canoe Manufacturing filed a Petition for Relief seeking reorganization under Chapter 11 of the Bankruptcy Code. As part of the reorganization plan, Canoe Manufacturing entered into a Stipulation and Security Agreement with Meridian Bank in which Meridian Bank consented to Canoe Manufacturing's use of certain cash collateral under explicit terms and conditions in an attempt to keep Canoe Manufacturing a going concern. Ultimately the Chapter 11 Bankruptcy was converted into Chapter 7 liquidation pursuant to a motion by the Internal Revenue Service (" IRS ").

Ullman subsequently agreed to pay his tax liability in installments. He first attempted to negotiate a $400.00 per month payment, which the IRS rejected, contending that Ullman had the ability to make payments of $1,000.00 per month. Eventually, Ullman and the IRS entered into an Installment Agreement which required Ullman to make monthly payments of $600.00.

Throughout the installment negotiation process, Ullman consistently maintained that he was not responsible for the tax debt. Ullman claimed that Meridian Bank maintained third party responsibility for the tax debt, because Meridian Bank controlled funds providing payment for wages of Canoe Manufacturing employees by virtue of the Stipulation and Security Agreement. Ullman also claimed that the IRS had miscalculated his ability to pay monthly installment amounts by including his wife's income in the financial statement analysis and failing to take into account his pension reduction.

Due in part to Ullman's persistence in challenging the tax assessment, the Taxpayer Advocate directed the IRS to abate that portion of the assessment relating to the period in which Ullman no longer had control over Canoe Manufacturing. Therefore, the IRS abated all taxes accruing after the bankruptcy was converted into Chapter 7 liquidation, an amount of $31,308.96. Following the partial abatement, and despite notice and demand for payment, Ullman has refused to pay the remaining amount assessed by the IRS . As of April 30, 2001 , Ullman's total liability on account of the assessment, including penalties and interest, was $112,010.95.

II. LEGAL STANDARD

A motion for summary judgment shall be granted where all of the evidence demonstrates "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). A genuine issue of material fact exists when "a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Id.

If the moving party establishes the absence of a genuine issue of material fact, the burden shifts to the nonmoving party to "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

When considering a motion for summary judgment, a court must view all inferences in a light most favorable to the nonmoving party. See United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). The nonmoving party, however, cannot "rely merely upon bare assertions, conclusory allegations or suspicions" to support its claim. Fireman's Ins. Co. v. Du Fresne, 676 F.2d 965, 969 (3d Cir. 1982). A mere scintilla of evidence in support of the nonmoving party's position will not suffice; there must be evidence on which a jury could reasonably find for the nonmovant. Liberty Lobby, 477 U.S. at 252, 106 S.Ct. at 2512. Therefore, it is plain that "Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). In such a situation, "the moving party is 'entitled to a judgment as a matter of law' because the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Id. at 323 (quoting Fed. R. Civ. P. 56(c)).

III . DISCUSSION

A. Validity of Assessment

The United States ' one-count complaint seeks to reduce to judgment the tax assessment against Ullman plus statutory additions. The United States ' memorandum of law in support of its Motion for Summary Judgment notes that as of April 30, 2001 , Ullman's total liability on account of the assessment was $112,010.95.

"Assessments are generally presumed valid and establish a prima facie case of liability against a taxpayer." Freck v. Internal Revenue Serv. [94-2 USTC ¶50,518], 37 F.3d 986, 992 (3d Cir. 1994) (citing United States v. Janis [76-2 USTC ¶16,229], 428 U.S. 433, 440-42, 96 S.Ct. 3021, 3025-26, 49 L.Ed.2d 1046 (1976) (holding that the presumption of correctness that attaches to the assessment in a refund suit also applies in a civil collection suit instituted by the United States)). Furthermore, in order to avoid all or part of a tax debt, a taxpayer in a collection action has the burden of showing the assessment is incorrect. Janis [76-2 USTC ¶16,229], 428 U.S. at 440-42, 96 S.Ct. at 3025-26.

In an attempt to meet his burden and defeat summary judgment, Ullman argues that the IRS (1) unnecessarily delayed filing the assessment; (2) failed to recognize the third party responsibility of Meridian Bank; (3) failed to honor the Installment Agreement; (4) failed to reduce the monthly payments of the Installment Agreement to reflect a reduction in income; (5) improperly demanded that the income of his wife be included in the financial analysis with respect to Ullman's ability to pay his tax debt in monthly installments; (6) refused to supply requested, written advice of the Chief Counsel; and (7) failed to recognize that Meridian Bank has a prior judgment against Ullman, entitling Meridian Bank priority over any IRS lien.

The Court notes that the alleged undue delay and third party responsibility issues are Ullman's only arguments which could possibly refute the validity of the actual assessment of tax liability. Ullman's arguments pertaining to the Installment Agreement, calculation of monthly payments thereunder, failure to provide written advice of the Chief Counsel, and priority of payments afforded to Meridian Bank have no bearing on the validity of the IRS 's assessment, as these claims only relate to the IRS ' attempts to collect Ullman's tax debt subsequent to its actual assessment. However, these tangential claims will be addressed, infra, as they relate to Defendant's counterclaims.

1. Timeliness of Assessment

Ullman argues that the IRS exercised undue delay in assessing his tax liability. The IRS did not make its assessment for the unpaid trust fund employment taxes for the first and second quarters of 1989, ending March 31, 1989 and June 30, 1989 respectively, until February 4, 1991 , a period of approximately 23 months. The general rule, set forth in 26 U.S.C. §6501(a), provides that any imposition of tax must be assessed within three years after a return is filed. Therefore, because 23 months falls within the 3-year period of limitations, the IRS timely assessed Ullman's tax. The tax may be collected by a proceeding in court if the proceeding is begun within 10 years after the assessment of the tax. 26 U.S.C.A. §6502 (1989 & Supp. 2001). Thus, because the United States filed the instant action on January 18, 2001 , the statute of limitation had not yet expired.

Ullman also complains that the subsequent abatement in the amount of $31,308.96 did not occur until May, 2000, a period just under 10 years from the date of the original assessment. However, 26 U.S.C. §6404 authorizes the IRS to abate an unpaid assessment whenever it:

(1) is excessive in amount, or

(2) is assessed after the expiration of the period of limitation properly applicable thereto, or

(3) is erroneously or illegally assessed.

26 U.S.C.A. §6404(a) (1989 & Supp. 2001). Such abatement is not required within a specified period of time, but may occur at any time there remains an "unpaid portion of the assessment." See 26 U.S.C.A. §6404(a) (1989 & Supp. 2001). Therefore, Ullman's complaints of untimeliness are without merit.

2. Third Party Responsibility

Ullman next supports his assertion that he does not owe any money to the United States by claiming that Meridian Bank is liable for the tax debt pursuant to 26 U.S.C. §3505. Section 3505 provides in pertinent part:

. . . if a lender, surety, or other person supplies funds to or for the account of an employer for the specific purpose of paying wages of the employees of such employer, with actual notice or knowledge . . . that such employer does not intend to or will not be able to make timely payment or deposit of the amounts of tax required . . . to be deducted and withheld by such employer from such wages, such lender, surety, or other person shall be liable in his own person and estate to the United States in a sum equal to the taxes (together with interest) which are not paid over to the United States by such employer with respect to such wages. However, the liability of such lender, surety or other person shall be limited to an amount equal to 25 percent of the amount so supplied to or for the account of such employer for such purpose.

26 U.S.C.A. §3505 (1989). Ullman contends that the Stipulation and Security Agreement between Canoe Manufacturing and Meridian Bank exposes Meridian Bank to Section 3505 liability and that the IRS is therefore under an obligation to collect the tax liability directly from Meridian Bank.

Section 3505 was enacted to provide the government with an alternative source for the collection of unpaid withholding taxes. See Brandt-Airflex Corp. v. Long Island Trust Co., N.A. (In re Brandt-Airflex Corp.) [88-1 USTC ¶9258], 843 F.2d 90, 94 (2d Cir. 1988) (citing S. Rep. No. 1708 (1966)). "It is completely within the discretion of the taxing authority whether or not to initiate collection proceedings against the lender of funds where the employer has defaulted on its tax obligations." In re Brandt-Airflex Corp. [88-1 USTC ¶9258], 843 F.2d at 94. Because the IRS is under no duty to collect withholding taxes from third parties potentially liable for them, there is no conceivable theory under which Ullman could force the IRS to collect such taxes from Meridian Bank. Without commenting on Meridian Bank's liability under Section 3505, to the extent that Ullman's conclusion can be construed as requiring the IRS to pursue Meridian Bank rather then himself, the inference is clearly based on a misinterpretation of Section 3505.

B. Defendant's Counterclaims

1. Unauthorized Collection Activities

Ullman additionally complains that his wife's income was improperly included in the IRS ' assessment of his ability to pay a specified monthly installment amount, that the IRS did not reduce his monthly installment payment despite its knowledge of the reduction of Ullman's pension, and that the IRS did not honor the initial Installment Agreement calling for monthly payments of $400.00. In his counterclaim, Ullman asserts that the above conduct evidences that the IRS recklessly or intentionally, or by reason of negligence engaged in unauthorized collection actions in violation of 26 U.S.C. §7433. Without commenting on the propriety of the IRS ' conduct in connection with the collection of Ullman's tax debt, the Court must dismiss Ullman's Section 7433 claim as time barred.

An action to enforce liability created under Section 7433 may be brought only within two years after the date of the action accrues, i.e., two years after Ullman became aware of the offending conduct. 26 U.S.C.A. §7433(d)(3) (1989 & Supp. 2001). Ullman attaches to his memorandum of law in opposition to the United States ' Motion for Summary Judgment numerous letters written by him exhibiting these exact complaints beginning in 1994. Consequently, because Ullman has been aware of the complained of conduct for seven years, the limitations period on Ullman's Section 7433 claim has expired.

To the extent that Ullman's counterclaim asserts that the IRS breached a valid contract in its 1994 rejection of the proposed $400.00 monthly installment payments, it too is barred by the six year statute of limitations Pennsylvania imposes on contract actions. See 42 PA. Cons. Stat. Ann. §5527.

2. Chief Counsel Advice

Ullman next claims that the IRS violated 26 U.S.C. §6110(i)(4)(B) when it failed to honor Ullman's repeated requests to obtain the Chief Counsel's written advice and other background documents pertaining to his particular dispute. Section 6110 requires certain disclosures in the case of written Chief Counsel advice directed to a particular taxpayer. See 26 U.S.C.A. §6110(i)(4)(B) (1989 & Supp. 2001). Although Section 6110 permits a taxpayer to bring a civil action whenever the IRS fails to follow the procedures set forth in subsection (i)(4)(B), a taxpayer's exclusive remedy is a civil action against the Secretary in the United States Court of Federal Claims. 26 U.S.C.A. §6110(j)(1) (1989 & Supp. 2001). Therefore, this Court does not have jurisdiction to hear Ullman's Section 6110 claim.

3. Attorneys' Fees

Finally, Ullman asserts that he is entitled to attorneys fees pursuant to 26 U.S.C. §7430. However, Ullman has not demonstrated that he is a prevailing party permitting the award of reasonable litigation costs incurred in connection with the instant action. See 26 U.S.C. §7430(c)(4) (1989 & Supp. 2001). Therefore, attorneys' fees are not warranted.

IV. CONCLUSION

Because the United States has established its prima facie case of tax liability against Defendant by virtue of the assessment's presumptive validity, and Ullman has failed to show the IRS ' assessment is incorrect, the United States ' Motion for Summary Judgment is granted. Furthermore, Defendant's counterclaims are denied and dismissed.

An appropriate Order follows.

ORDER

AND NOW , this 30th day of October, 2001 upon consideration of the Plaintiff's Motion for Summary Judgment (Docket No. 7), and Defendant's response thereto (Docket No. 11), it is hereby ORDERED that Plaintiff's request for summary judgment is GRANTED. Defendant's Motion for Summary Judgment (Docket No. 12) is DENIED. Defendant's counterclaims are DENIED and DISMISSED.

The Court finding that good cause exists for granting of said motion, it is further ORDERED that judgment be entered in favor of the United States and against the Defendant, M. Robert Ullman, for trust fund recovery penalty taxes and statutory additions owed by the Defendant for the first and second quarters of 1989 in the amount of $112,010.95, plus statutory additions accruing thereon according to law from May 1, 2001 .

[98-2 USTC ¶50,665] David L. Gongaware, Appellant v. Internal Revenue Service, Gary Gaertner

(CA-3), U.S. Court of Appeals, 3rd Circuit, 97-3568, 7/28/98, 159 F3d 1351, Affirming a District Court decision, 98-1 USTC ¶50,213

[Code Secs. 6203 and 6672 ]

Bankruptcy: Assessments: Corporate officer: Trust fund recovery penalty: Certificate of Assessments and Payments: Presumption of validity.--A vice president's claim that the IRS did not make a valid assessment of the trust fund recovery penalty against him since it failed to produce the summary record of assessments or the input reconciliation sheet was rejected. The Certificate of Assessments and Payments (Form 430) submitted by the IRS correctly identified the vice president, his address, the relevant tax periods and all other pertinent information. The vice president pointed to no irregularities in the certificate and did not offer any evidence to rebut the presumption of validity accorded such documents. The mere fact that the certificate was dated five years after the assessment allegedly was made did not render it unreliable.
[Code Sec. 6203 ]

Bankruptcy: Assessments: Corporate officer: Trust fund recovery penalty: Identification of taxpayer: Social security number.--A bankrupt vice president and 49% shareholder of a corporation was denied an order disallowing an IRS proof of claim for outstanding trust fund recovery penalties relating to his bankrupt company's unpaid employment taxes. Even though the wrong address and social security number appeared on one IRS assessment, those errors did not invalidate the assessment. The supporting records, which clearly denoted him as the person being assessed for the company's unpaid employment taxes, identified the vice president, his social security number, the employer identification number and address, and the relevant tax period. Also, the records established that no other person with that name was employed by the company. BACK REFERENCES: ¶38,514.35 and 40,580.55

John P. Vetica, Jr., 436 Seventh Ave. , Pittsburgh , Pa. 15219 , for appellant. Richard Farber, Thomas J. Clark, Thomas J. Sawyer, Department of Justice, Washington, D.C. 20530, for appellee.

Before: STAPLETON and ROSENN, Circuit Judges, and RESTANI, Judge, United States Court of International Trade. ^*

 Caution: This court has designated this opinion as NOT FOR PUBLICATION. Consult the Rules of the court before citing this case.

MEMORANDUM OPINION OF THE COURT

I.

ROSENN, Circuit Judge:

This case presents a challenge to the validity of two assessments underlying a proof of claim made by the Internal Revenue Service (" IRS ") in Debtor David L. Gongaware's Chapter 13 bankruptcy proceedings. As of April 1986, Gongaware was one of two shareholders in a Pennsylvania corporation known as Triad Manufacturing Company ("Triad"), which manufactured precision machine parts for the United States Department of Defense. Gongaware owned a 49% stake in Triad and was its Vice President of Quality Control, while John H. Guckert owned the remaining 51% and was the corporation's President. As of approximately March 1987, Triad owed the IRS for unpaid employment taxes for the third and fourth quarters of 1986 and the first quarter of 1987. Subsequently, Triad incurred additional employment tax liabilities for the third quarter of 1988 which also went unpaid.

Section 6672 of the Internal Revenue Code provides that a person who is required to collect, truthfully account for, and pay over any tax, and who willfully fails to do so, shall be liable for a penalty equal to the unpaid tax. The IRS determined that both Gongaware and Guckert were liable under §6672 as responsible persons who willfully failed to pay over the income and social security taxes withheld from the paychecks of Triad's employees. Accordingly, in May 1987, the IRS assessed a civil penalty against "Dave Gongaware" and John Guckert as responsible officers of Triad for the unpaid taxes for the third and fourth quarters of 1986 and the first quarter of 1987. After Triad failed to pay its third quarter 1998 employment taxes, the IRS , in October 1990, again assessed a civil penalty against "Dave Gongaware" as a responsible officer of Triad.

The May 1987 assessment form correctly identified the responsible person as "Dave Gongaware;" correctly listed Triad as the relevant employer; provided Triad's correct address and employer identification number; correctly listed the calendar quarters to which the assessment related; and listed under "Related Assessments" Triad's only other shareholder, "John Guckert," at his correct address. The assessment, however, did contain two errors: it showed the wrong address for Gongaware, and transposed Gongaware's and Guckert's social security numbers.

The October 1990 assessment form contained the same information as the May 1987 form, including the same incorrect address. Although the same incorrect social security numbers for Gongaware and Guckert originally were typed on the form, the IRS manually crossed out the incorrect numbers and wrote in the correct numbers by hand before assessing Gongaware.

Subsequently, on July 14, 1995, Gongaware filed a petition under Chapter 13 of the Bankruptcy Code. On or about July 26, 1995, the IRS filed a proof of claim in the bankruptcy proceeding for $61,367.22--the cumulative amount due for the four quarters. After Gongaware filed an objection to the IRS claim, the bankruptcy court sustained his objection in part, and allowed the IRS 's claim, but in the reduced amount of $30,410.30. Gongaware appealed the bankruptcy court's order. When the district court affirmed in part and reversed in part, Gongaware again timely appealed. We affirm. ¹

II.

On appeal, Gongaware raises two issues. First, he argues that the bankruptcy court and district court erred in allowing the IRS 's claim because the 1987 and 1990 assessments failed to sufficiently identify him. Second, as to the 1990 assessment, he argues that even if he was sufficiently identified, the courts incorrectly determined that IRS ever made the assessment in the first place because the IRS failed to introduce any credible evidence regarding the 1990 assessment. Although Gongaware couches his arguments as a legal ones, the bankruptcy court's and district court's findings that he was sufficiently identified and that the 1990 assessment was actually made are solely factual determinations which we review only for clear error. See, e.g., In re Continental Airlines, 134 F.3d 536, 538 (3d Cir. 1998). After carefully reviewing the record, we do not find the courts' determinations were clearly erroneous.

Gongaware claims that the 1987 and 1990 assessments are invalid because the records supporting them contained an incorrect address and social security number. He fails, however, to point us to any authority to support his contention that these errors are per se fatal. To the contrary, the relevant Treasury regulation only requires that the supporting records "provide identification of the taxpayer." See Treas. Reg. §301.6203-1. The regulation does not require any particular item of identification, such as the taxpayer's address or social security number.

The bankruptcy court reasonably found that the supporting records amply identified Gongaware. The supporting records stated his name, "Dave Gongaware;" noted that the taxes pertained to Triad, of which he was Vice-President, in which he owned a 49% stake, and was one of only two shareholders. Further, the records gave Triad's correct employer identification number and address; identified the correct calendar quarters during which Triad incurred the liabilities; and included Gongaware's social security number, although erroneously transposed with and shown as Triad's co-owner Guckert's on the 1987 assessment form. Furthermore, the evidence established that no other "Dave Gongaware" was employed by Triad. Thus, the supporting records clearly selected and identified Gongaware as the person being assessed for Triad's unpaid employment taxes.

Gongaware also claims that the bankruptcy court erred in finding that the IRS made the 1990 assessment in the first instance. He contends that because the IRS failed to produce the summary record of assessments or the input reconciliation sheet with respect to the 1990 assessment, and in light of the abovementioned deficiencies in the 1990 assessment form, the IRS failed to prove that the 1990 assessment ever was made. Gongaware further argues that the only other document produced by the IRS , the Certificate of Assessments and Payments, is unreliable and of no probative value because it is dated October 30, 1995 , five years after the assessment allegedly was made. This argument, however, is without merit, and in fact, contrary to Gongaware's disingenuous portrayal, is in complete opposition to the bankruptcy court's express ruling on this issue.

As the bankruptcy court acknowledged, courts routinely hold that a Certificate of Assessments and Payments constitutes proof of a valid assessment. See, e.g., Taylor v. Internal Revenue Serv. [95-2 USTC ¶50,578], 69 F.3d 411, 418 (10th Cir. 1995); Hefti v. Internal Revenue Serv. [93-2 USTC ¶50,591], 8 F.3d 1169, 1172 (7th Cir. 1993); Gentry v. United States, 962 F.2d 555, 557-58 (6th Cir. 1992); Geiselman v. United States [92-1 USTC ¶50,200], 961 F.2d 1, 5-6 (1st Cir. 1992). Here, the Certificate of Assessments and Payments correctly identified Gongaware, his address, the relevant tax periods, and all other pertinent information. Gongaware points us to no irregularities in the certificate and offers no evidence to rebut this presumption of validity. Furthermore, as discussed above, the 1990 assessment form adequately identified him.

Thus, we conclude that Gongaware had failed to show any error in the bankruptcy court's factual determinations that the 1987 and 1990 assessments sufficiently identified him and that the IRS in fact made the 1990 assessment.

III .

Accordingly, the judgment and order of the district court will be affirmed. Costs taxed against the Appellant.

JUDGMENT

This cause came on to be heard on the record from the United States District Court for the Western District of Pennsylvania and was submitted under Third Circuit LAR 341.(a) on July 21, 1998 .

After consideration of all contentions raised by the appellant, it is

ADJUDGED and ORDERED that the judgment of the district court be and is hereby affirmed. Costs taxed against the Appellant.

^* The Honorable Jane A. Restani, Judge of the United States Court of International Trade, sitting by designation.

¹ The bankruptcy court had jurisdiction over the chapter 13 proceedings pursuant to 28 U.S.C. §§151, 157, & 1334. The district court had jurisdiction over the appeal from the bankruptcy court's final judgment and order pursuant to 28 U.S.C. §158, and this Court has jurisdiction over the district court's final judgment and order pursuant to 28 U.S.C. §§158 & 1291.

[97-1 USTC ¶50,107] David A. Stettler and LaDean Stettler, Plaintiffs v. United States of America, Defendant and Counterclaim Plaintiff v. David A. Stettler, Lane S. Howell, and John T. Dunlop, Counterclaim Defendants

U.S. District Court, Dist. Utah , No. Div., 94-NC-0136-S, 11/14/96 , 994 FSupp 1364

[Code Sec. 6672 ]

Trust fund recovery penalty: Officer: Responsible person: Willfulness.--The president of a company who was also a shareholder and a director was liable for the trust fund recovery penalty because he was a responsible person who willfully failed to pay over the company's withholding taxes. The president had some control over the company's financial affairs, including the ability to hire and fire employees, access to the books and records, and the authority to direct disbursements of funds. Further, he acknowledged that he had the authority to make certain that the company's taxes were paid. Moreover, he knew of the unpaid tax liability yet allowed the company to continue operations, and he directed payment to suppliers and other creditors before paying over the taxes.

[Code Secs. 6203 and 6672 ]

Assessment: Trust fund recovery penalty: Validity: Form 4340.--The IRS followed proper procedures when it assessed the trust fund recovery penalty against a company president, and, thus, the assessments were valid. There was no evidence that the president made a Code Sec. 6203 request for a Form 4340, Certificate of Assessments and Payments, or that the IRS failed to comply with the request. Further, the IRS provided the president with a Summary of Record of Assessments and a Form 4340, which provided the president with the information required by Code Sec. 6203 and Reg. §301.6203-1 .

W.K. Jackson, 311 S. State St. , Salt Lake City , Utah 84111 , for plaintiff. Scott M. Matheson, Jr., United States Attorney, Salt Lake City , Utah , Kirk C. Lusty, William F. Colgin, Jr., Department of Justice, Washington , D.C. 20530 , for defendant. Lane S. Howell, 4340 S. Lynn Lane, Salt Lake City, Utah 84124, pro se. Douglas J. Parry, Parry, Murry & Ward, 60 E. South Temple, Salt Lake City, Utah 84111, for third-party-defendant.

MEMORANDUM DECISION

I. INTRODUCTION

SAM , District Judge:

Before the court are cross motions for summary judgment. By its motion counterclaim plaintiff United States of America seeks judgment against counterclaim defendant Lane S. Howell ("Howell") in the amount of $38,996.71, plus interest, for the unpaid trust fund recovery penalty assessed against Howell arising under section 6672 of the Internal Revenue Code, 26 U.S.C. §6672, for his willful failure to collect, truthfully account for and pay over the withheld income and FICA taxes of Northern Outfitters, Inc. ("Northern") for the fourth quarter of 1990. Howell, by his motion, seeks judgment that he is not liable as asserted by the United States , recovery of penalties paid by him and release of tax liens filed against the residence of his wife.

II. SUMMARY JUDGMENT STANDARD

Under Fed. R. Civ. P. 56, summary judgment is proper only when the pleadings, affidavits, depositions or admissions establish there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law. The burden of establishing the nonexistence of a genuine issue of material fact is on the moving party. ¹ E.g., Celotex Corp. v. Catrett, 477 U.S. 317 (1986). This burden has two distinct components: an initial burden of production on the moving party, which burden when satisfied shifts to the nonmoving party, and an ultimate burden of persuasion, which always remains on the moving party. See 10A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure §2727 (2d ed. 1983).

When summary judgment is sought, the movant bears the initial responsibility of informing the court of the basis for his motion and identifying those portions of the record and affidavits, if any, he believes demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. In a case where a party moves for summary judgment on an issue on which he would not bear the burden of persuasion at trial, his initial burden of production may be satisfied by showing the court there is an absence of evidence in the record to support the nonmovant's case. ² Id. , 477 U.S. at 323. "[T]here can be no issue as to any material fact ... [when] a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id.

Once the moving party has met this initial burden of production, the burden shifts to the nonmoving party to designate "specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e); Celotex, 477 U.S. at 324.

If the defendant in a run-of-the-mill civil case moves for summary judgment ... based on the lack of proof of a material fact, the judge must ask himself not whether he thinks the evidence unmistakably favors one side or the other, but whether a fair-minded jury could return a verdict for the plaintiff on the evidence presented. The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff. The judge's inquiry, therefore, unavoidably asks whether reasonable jurors could find by a preponderance of the evidence that the plaintiff is entitled to a verdict....

Liberty Lobby, 477 U.S. at 252. The central inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. If the nonmoving party cannot muster sufficient evidence to make out a triable issue of fact on his claim, a trial would be useless and the moving party is entitled to summary judgment as a matter of law. Id. , 477 U.S. 242.

III . DISCUSSION

It is uncontroverted that during the fourth quarter of 1990, Northern failed to withhold FICA contributions and federal income taxes from its employees' wages and/or to remit the same to the Internal Revenue Service (" IRS "). Section 6672 of the Internal Revenue Code provides that when a person required to collect, account for, and pay over withholding taxes willfully fails to do so, he is personally liable for a penalty equal to the amount of the unpaid taxes. Section 6672 imposes liability on an individual if two requirements are met: (1) the person must be a "responsible person" and (2) the person must act "willfully" in not paying over the taxes. Muck v. United States [93-2 USTC ¶50,592], 3 F.3d 1378, 1360 (10th Cir. 1993); Burden v. United States [73-2 USTC ¶9547], 486 F.2d 302, 304 (10th Cir. 1973), cert. denied, 416 U.S. 904 (1974). On February 9, 1994 , a delegate of the Secretary of the Treasurer made an assessment against Howell of the liability arising under §6672 of the Internal Revenue Code in the amount of $38,996.71 for his willful failure to collect, truthfully account for, and pay over the withheld income and FICA taxes of Northern for the fourth quarter of 1990.

Assessment

Howell claims that the IRS failed to follow proper assessment procedures as required by Internal Revenue Code sections 6203, 6303 and Treasury Regulation 302.6203 -1 and, thus, no valid assessment was made against him.

Section 6303 of the Internal Revenue Code, 26 U.S.C. §6303, governing notice and demand for unpaid taxes applies to administrative proceedings for collection of taxes and does not preclude a civil action to collect unpaid taxes. United States v. McCallum [92-2 USTC ¶50,448], 970 F.2d 66 (5th Cir. 1992). The action before the court is civil in nature.

Section 6203 of the Internal Revenue Code, 26 U.S.C.A. §6203, provides as follows:

The assessment shall be made by recording the liability of the taxpayer in the office of the Secretary [of the Treasurer] in accordance with rules or regulations prescribed by the Secretary. Upon request of the taxpayer, the Secretary shall furnish the taxpayer a copy of the record of the assessment.

The Treasury regulations further elaborate:

The assessment shall be made by an assessment officer signing the summary record of assessment. The summary record, through supporting records, shall provide identification of the taxpayer, the character of the liability assessed, the taxable period, if applicable, and the amount of the assessment.... The date of the assessment is the date the summary record is signed by an assessment officer. If the taxpayer requests a copy of the record of assessment, he shall be furnished a copy of the pertinent parts of the assessment which set forth the name of the taxpayer, the date of assessment, the character of the liability assessed, the taxable period, if applicable, and the amounts assessed.

26 C.F.R. §301.6203-1.

Howell appears to complain that the Form 4340 Certificate of Assessments and Payments was not timely provided pursuant to a §6203 request until he filed his motion for summary judgment and that the information provided him by the IRS pursuant to a Freedom of Information Act request was inadequate to establish a valid assessment. However, Howell has presented no viable evidence that he made a §6203 request nor that the IRS failed to comply. He, therefore, has failed to carry his burden of proof on the issue. The record before the court reflects that the IRS provided Howell with a Summary of Record of Assessments dated February 9, 1994 , and a Form 4340, Certificate of Assessments and Payments for Lane S. Howell dated May 29, 1996 . "The notice required by the Regulations mandates that the supporting documents identify the taxpayer, establish the nature of the tax liabilities, the period of those liabilities, the date of assessment, and the amount to be assessed. See 26 C.F.R. §301.6203-1." Gentry v. United States [92-1 USTC ¶50,225], 962 F.2d 555, 557 (6th Cir. 1992). The Regulations do not require the information be in any exact or specific form. Id. It appears to the court that the Form 4340, Certificate of Assessments and Payments provides the information required by I.R.C. §6203 and Treas. Reg. §301.6203-1. "Certificates of assessments and payments are generally regarded as being sufficient proof, in the absence of evidence to the contrary, of the adequacy and propriety of notices and assessment that have been made. Id.

Responsible person

The corporate officer or employee is responsible "if he or she has significant, though not necessarily exclusive, authority in the 'general management and fiscal decision of the corporation'." Denbo v. United States [93-1 USTC ¶50,177], 988 F.2d 1029, 1032 (10th Cir. 1993) (quoting Kizzier v. United States [79-1 USTC ¶9373], 598 F.2d 1128, 1132 (8th Cir. 1989); Muck v. United States [93-2 USTC ¶50,592], 3 F.3d 1378, 1381 (10th Cir. 1993). "Indicia of responsibility include the holding of corporate office, control over financial affairs, the authority to disburse corporate funds, stock ownership, and the ability to hire and fire employees." Denbo [93-1 USTC ¶50,177], 988 F.2d at 1032; Jay v. United States [89-1 USTC ¶9134], 865 F.2d 1175, 1179 (10th Cir. 1989). A person in control of a corporation is under a duty to pay over the unpaid withholding taxes along with the return showing the taxes due. 26 U.S.C. 6151(a); Brown v. United States [79-1 USTC ¶9285], 591 F.2d 1136, 1140 (5th Cir. 1979). A person who fails to do so is the responsible person for the purposes of a trust fund recovery penalty assessed under §6672. Id.

Howell was employed by Bonnevest, Inc. ("Bonnevest") as a consultant during the period of January 1990 through February 1992. Bonnevest was a related company to Northern. Howell also was president of Northern from February through May of 1990. He was a director of Northern from the spring of 1990 until February 1992. At some point in mid January, 1991, Howell resumed his position as president of Northern and continued in that position until February of 1992. When Howell resumed his position as president in January of 1991, he was aware of Northern's unpaid taxes and exercised some control over the financial affairs of Northern including the authority to direct the funds of Northern, although he states that he did not participate in the day to day activities of Northern. Northern filed its Form 941 for the third quarter of 1991 when due on January 31, 1991 , but without payment. Northern continued to pay other creditors. During the month of January 1991, a total of $93,000 was deposited in Northern's payroll account.

Howell asserts that he had no authority, association or control over the business operations of Northern during the period of June through December 1990 and into January 1991, including no responsibility for or control over Northern's bank accounts. He acknowledges that from mid to late January 1991 he assumed the title of president of Northern to assist in evaluating the necessity of filing a petition in bankruptcy, but that existing management continued to operate the business.

However, the record reflects and Howell admits, that from approximately mid January 1991 until February 1992, he again served as president of Northern, that he was a director of Northern, and that he had some financial control over the financial affairs of Northern, including the ability to hire and fire employees, access to the books and records, and the authority to direct disbursements of funds. He provided guidance as to which creditors to pay and which creditors not to pay. He specifically acknowledges that, when he again became acting president in mid January 1991, he had authority to make sure that Northern's taxes were paid. The court, therefore, concludes that Howell was a responsible person on January 31, 1991 when the 1990 fourth quarter return was filed without payment. "That [Howell] was not a responsible person at the time that the portion of the liability accrued does not relieve him from responsibility for paying over the tax when it became due." Saderup v. United States, 80-2 USTC ¶9526 (D. Utah 1980); Brown v. United States [79-1 USTC ¶9285], 591 F.2d 1136 (5th Cir. 1979).

Willfulness

Willfulness within the meaning of §6672 is shown by a " 'voluntary, conscious and intentional decision to prefer other creditors over the government' " Denbo [93-1 USTC ¶50,177], 988 F.2d at 1033, quoting Burden [73-2 USTC ¶9547], 486 F.2d at 304. See also Smith v. United States [90-1 USTC ¶50,134], 894 F.2d 1549, 1553 (11th Cir. 1990) ("[t]he willfulness requirement of section 6672 is satisfied if there is evidence that the responsible officer had knowledge of payments to other creditors after he was aware of the failure to remit withholding taxes"). "Proof of willfulness does not require proof of bad motive.... It is the burden of the responsible person to show that he did not willfully fail to remit taxes." Muck [93-2 USTC ¶50,592], 3 F.3d at 1381.

Howell acknowledges that, when he resumed the presidency of Northern in mid January, 1991, he was aware that taxes for the fourth quarter of 1990 were unpaid. He admits that he "directed Bret Woods of Northern's management to set up a payment plan with the IRS , and to insure that all current payroll taxes were remitted promptly." Affidavit of Lane S. Howell, ¶13. Howell also acknowledges that the 1990 fourth quarter taxes were not paid in full, while other creditors received payment. In short, the record reflects that Howell knew of the unpaid tax liability yet allowed Northern to continue operations and that he directed payment to suppliers and other creditors, thus, avoiding payment of taxes due on January 31, 1991 . Therefore, the court concludes that Howell acted wilfully for purposes of §6672.

IV. CONCLUSION

For the foregoing reasons, the court finds that Howell was a responsible person who wilfully failed to collect, truthfully account for, or pay over the taxes withheld from the employees of Northern for the quarter ending December 31, 1990. Accordingly, the United States ' motion for summary judgment is GRANTED. Howell's motion for summary judgment is DENIED.

¹ Whether a fact is material is determined by looking to relevant substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986).

² In his dissent in Celotex, Justice Brennan discussed the mechanics for discharging the initial burden of production when the moving party seeks summary judgment on the ground the nonmoving party--who will bear the burden of persuasion at trial--has no evidence:

Plainly, a conclusory assertion that the nonmoving party has no evidence is insufficient. Such a 'burden' of production is no burden at all and would simply permit summary judgment procedure to be converted into a tool for harassment. Rather, as the Court confirms, a party who moves for summary judgment on the ground that the nonmoving party has no evidence must affirmatively show the absence of evidence in the record. This may require the moving party to depose the nonmoving party's witnesses or to establish the inadequacy of documentary evidence. If there is literally no evidence in the record, the moving party may demonstrate this by reviewing for the court the admissions, interrogatories and other exchanges between the parties that are in the record. Either way, however, the moving party must affirmatively demonstrate that there is no evidence in the record to support a judgment for the nonmoving party.

477 U.S. at 323 (citations omitted).

[91-2 USTC ¶50,532] United States of America , Plaintiff v. Arthur P. Tranakos, et al., Defendants

U.S. District Court, No. Dist. Ga., Atlanta Div., CIV . 1:88-cv-1437-MHS, 10/9/91

[Code Secs. 6203 , 6501 , 6502 , 6503 , 6672 ]

Assessment: Income taxes: Employment taxes: Statute of limitations: Transfers from taxpayer.--The IRS followed proper assessment procedures and summary judgment was entered for unpaid income taxes and employment taxes, plus penalties, interest and statutory additions. The assessment was valid although the government did not produce the relevant Form 23-Cs, but merely produced Certificates of Assessment, which are presumed to be accurate. Further, the assessments were timely because they were made within 60 days after the Tax Court entered a stipulated decision of the taxpayer and the IRS . The taxpayer's wife was denied summary judgment because the undisputed facts did not establish that transfers from the taxpayer to her were not fraudulent. Also, the taxpayer's offer in compromise suspended the statute of limitations with regard to his employment tax liabilities. The wife was, however, granted summary judgment concerning her husband's tax liabilities for tax quarters after which the complaint alleged that transfers had been made to her.

ORDER

SHOOB, District Judge:

This matter is presently before the Court on the Government's motion for partial summary judgment and defendant Sarah B. Tranakos's motion for summary judgment. For the reasons stated below, the Court will grant the Government's motion and grant in part and deny in part defendant's motion.

DISCUSSION

1. Summary Judgment Standard

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment shall be rendered if "there is no genuine issue as to any material fact . . . and the moving party is entitled to judgment as a matter of law." In ruling on a motion for summary judgment, a court must consider the evidence in the light most favorable to the nonmoving party and resolve all reasonable doubts in favor of the nonmoving party. Rollins v. TechSouth, Inc., 833 F.2d 1525, 1528 (11th Cir. 1987); Barnes v. Southwest Forest Industries, Inc., 814 F.2d 607, 609 (11th Cir. 1987).

The initial burden is on the party moving for summary judgment to demonstrate that the nonmoving party lacks evidence to support an essential element of its claim. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the moving party has met its burden, the party opposing the motion must present evidence that creates a genuine issue of material fact. Id. However, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson, 477 U.S. at 248 (emphasis in original). A dispute is "genuine" "if the evidence is such that a reasonable jury could return a verdict for the moving party." Id. A fact is "material" if it is "identified by the controlling substantive law as an essential element of the nonmoving party's case." Id. Thus, "if the evidence is merely colorable or is not significantly probative, summary judgment may be granted." Id. at 249-50 (citations omitted); see Barnes, 814 F.2d at 609 (equating standards for granting summary judgments and directed verdicts).

2. Plaintiff United States of America 's Motion For Partial Summary Judgment

A. Background

On June 16, 1981, August 17, 1981, and October 7, 1982, Arthur P. Tranakos ("Mr. Tranakos") filed income tax returns for, respectively, the years 1975, 1976, 1977, and 1978. On November 19, 1985, the United States Tax Court entered the stipulated decision of Mr. Tranakos and the Internal Revenue Service (" IRS "), finding that Mr. Tranakos owed $95,833.23 for unpaid income taxes and penalties for the years 1975, 1976, 1977, and 1978. See Arthur P. Tranakos v. Commissioner of Internal Revenue, Docket No. 39796-84. Copies of four Certificates of Assessments and Payments, certified as true and correct transcripts by an IRS officer, reflect that Mr. Tranakos was assessed for unpaid income taxes, plus interest and delinquency and negligence penalties, for the years 1975, 1976, 1977, and 1978 on February 25, 1986, and assessed fees and costs on various dates thereafter. The amounts assessed totaled $186,686.05, and, as of January 31, 1990, statutory interest totaled $90,818.89. Copies of five Certificates of Assessments and Payments, also certified as true and correct transcripts by an IRS officer, reflect that Mr. Tranakos was assessed $12,097.51 for unpaid employment taxes, penalties, and interest for the tax quarters 8503, 8506, 8606, 8609, and 8612. A payment in the amount of $1,707.39 was applied on October 28, 1987, against Mr. Tranakos's tax liability for the tax quarter 8503. As of January 31, 1990, statutory interest totaled $4,948.34. The Government now moves for partial summary judgment on Count I of the Complaint to the extent that it alleges that it is entitled to judgment against defendant Mr. Tranakos for unpaid income taxes, penalties, and interest for the years 1975, 1976, 1977, and 1978 in the amount of $277,504.94, as of January 31, 1990 , plus statutory additions thereafter, and unpaid employment taxes for the tax quarters 8503, 8506, 8606, 8609, and 8612 in the amount of $15,338.46, as of January 31, 1990 , plus statutory additions thereafter.

B. Discussion

Mr. Tranakos does not challenge the income and employment tax liability determinations of the IRS . Instead, he contends that the IRS did not follow the assessment procedures established in 26 U.S.C. §6203 and 26 C.F.R. 301.6203 -1. ¹ Mr. Tranakos correctly notes that the basis of tax liability is the assessment and that, in order for a tax deficiency to be assessed against a taxpayer, an assessment officer must sign and date a Form 23-C. Mr. Tranakos rests his argument on the Government's failure to produce copies of or originals of the relevant Form 23-Cs. He contends that the aforementioned Certificates of Assessments and Payments that were produced by the Government do not establish that the assessments were made in the manner prescribed by the statute and regulations.

This precise argument was considered and rejected by the Court of Appeals in United States v. Chila [89-1 USTC ¶9299 ], 871 F.2d 1015 (11th Cir. 1989), cert. denied, 110 S.Ct. 498 (1989). The Court concluded that a Certificate of Assessment is presumptive proof of a valid assessment. Id. at 1017-18 (citing United States v. Dixon [87-2 USTC ¶9485 ], 672 F.Supp. 503, 505-06 (M.D.Ala. 1987), aff'd per curiam, 849 F.2d 1478 (11th Cir. 1988)). See also Brafman v. United States [67-2 USTC ¶12,494 ], 384 F.2d 863, 867 (5th Cir. 1967); United States v. Miller [63-2 USTC ¶12,155 ], 318 F.2d 637, 639 (7th Cir. 1963); Egbert v. United States [91-1 USTC ¶50,048 ], 752 F.Supp. 1010, 1019 (D.Wyo. 1990), aff'd per curiam, 940 F.2d 1539 (10th Cir. 1991); Rossi v. United States, 755 F.Supp. 314, 318 (D.Or. 1990); United States v. Posner [76-1 USTC ¶9224 ], 405 F.Supp. 934, 937 (D.Md. 1975). Accordingly, since Mr. Tranakos has presented no countervailing proof to overcome the accuracy of the challenged Certificates, "the Court is satisfied that the Government has established that the claimed tax liabilit[ies were] properly assessed against [Mr. Tranakos]." Chila [89-1 USTC ¶9299 ], 871 F.2d at 1018 (quoting Dixon [87-2 USTC ¶9485 ], 672 F.Supp. at 506).

Mr. Tranakos also argues that because the assessments for unpaid income taxes for the years 1975, 1976, 1977, and 1978 were made on February 25, 1986, more than three years after each of the four tax returns was filed, the assessments were barred by the applicable statute of limitations. The Court disagrees. Although 26 U.S.C. §6501(a) provides that the limitations period for filing a tax assessment runs for three years from the date the tax return was filed, 26 U.S.C. §6503(a)(1) suspends the three-year limitations period until the decision of the tax court becomes "final" and for 60 days thereafter. In Sherry Frontenac, Inc. v. United States [89-1 USTC ¶9245 ], 868 F.2d 420 (11th Cir. 1989), after reviewing the applicable statutes, the Court of Appeals concluded that stipulated tax decisions are "final" 90 days after the tax court decision is entered. Id. at 424; see also Pesko v. United States [90-2 USTC ¶50,568 ], 918 F.2d 1581 (Fed. Cir. 1990). The stipulated decision in Arthur P. Tranakos v. Commissioner of Internal Revenue was entered on November 19, 1985, and thus became final 90 days later, on or about February 17, 1986. Therefore, the February 25, 1986, assessments were timely since they were made within 60 days after the tax decision became final.

3. Defendant Sarah B. Tranakos's Motion For Summary Judgment

A. Background

In Count II of the Complaint, the Government contends that Mr. Tranakos fraudulently transferred funds to his wife, defendant Sarah B. Tranakos ("Ms. Tranakos"), during the years 1980 through 1985 at a time when he was indebted to the Government for unpaid income and employment taxes. The Government contends that it is entitled to judgment against Ms. Tranakos as the "transferee" of her husband in the amount of $272,156.47, plus interest. The Government predicates Ms. Tranakos's liability on O.C.G.A. §18-2-22 (1991). ² See Commissioner of Internal Revenue v. Stern [58-2 USTC ¶9594 ], 357 U.S. 39 (1958); United States v. Ressler [77-1 USTC ¶9459 ], 433 F.Supp. 459, 463 (S.D.Fla. 1977), aff'd, [78-2 USTC ¶9571 ], 576 F.2d 560 (5th Cir. 1978), cert. denied, 440 U.S. 929 (1979). Ms. Tranakos now moves for summary judgment on Count II.

B. Discussion

Ms. Tranakos argues that she is entitled to summary judgment because the undisputed facts establish that the transfers from A. Tranakos to her were not "fraudulent" within the meaning of O.C.G.A. §18-2-22. The Court finds, however, that when viewed in the light most favorable to the Government, the evidence cited by the Government puts into issue numerous material facts, most notably, facts bearing upon the applicability of §18-2-22(2). For example, the evidence arguably establishes that, from 1980 through June 1985, during a time when Mr. Tranakos was indebted to the United States for, among other things, unpaid taxes for the years 1975, 1976, 1977, and 1978, (1) Mr. Tranakos deposited receipts from his legal practice into bank accounts opened in the names of The Snuggery, Inc., Treetop, Inc., and Georgia Professional Building and wrote checks on these accounts payable to Ms. Tranakos; (2) Ms. Tranakos deposited these checks into her own account and wrote checks on this account to pay mortgage and other "household" expenses; and (3) Ms. Tranakos knew that the checks were not drawn on A. Tranakos's personal account, that the checks were the major source of the deposits into her account, and that she had not signed a joint tax return with Mr. Tranakos for three or four years. From this and other evidence cited by the Government, the Court concludes that a reasonable juror could find that Ms. Tranakos knew or should have known that the transfers to her from A. Tranakos were made with the "intention to delay or defraud [Mr. Tranakos's] creditors." ³ O.C.G.A. §18-2-22(2).

Ms. Tranakos also argues that "certain" statutes of limitations bar "part" of the relief sought by the Government. First, she contends that since Georgia limits the right to set aside fraudulent conveyances to seven years, the Government is barred from recovering any transfer to her from Mr. Tranakos that occurred prior to July 5, 1981 , that is, seven years before the Complaint was filed. As the Government points out, however, the federal statute of limitations applies and that statute, 26 U.S.C. §6502(a)(1) , provides that a suit to collect taxes must be commenced within six years after the assessment of the tax. See United States v. Updike [2 USTC ¶533 ], 281 U.S. 489 (1930). As set out in the Certificates of Assessments and Payments produced by the Government, the assessments of Mr. Tranakos's unpaid income taxes were made on February 25, 1986. Thus, with regard to Mr. Tranakos's unpaid income taxes for the years 1975, 1976, 1977, and 1978, this action, which was commenced on July 5, 1988 , is not barred by §6502(a)(1) .

Second, Ms. Tranakos contends that since Mr. Tranakos's so-called §6672 tax liabilities for the tax quarter 7912 were assessed on April 20, 1981 , and May 3, 1982 , the Government's suit to collect such taxes is barred by 26 U.S.C. §6502(a)(2) . However, as the relevant Certificate of Assessments and Payments produced by the Government indicates, an "offer in compromise" was submitted by Mr. Tranakos to the Government and remained pending from November 1, 1984, to September 5, 1988, when it was rejected. Thus, since by its terms the offer suspends the statute of limitations for the period in which it was pending and one year thereafter, this action, with regard to Mr. Tranakos's §6672 tax liabilities for the tax quarter 7912, is not barred by §6502(a)(1) . ⁴

Third and last, Ms. Tranakos contends that Mr. Tranakos's so-called §941 tax liabilities for the tax quarters 8506, 8606, 8609, and 8612 cannot provide a basis for recovery against her as a transferee because the Complaint does not allege that transfers were made to her during these time periods but instead alleges that transfers were made to her during the years 1981 through 1985. Apparently, the Government recognizes that Ms. Tranakos cannot be held liable as a transferee for her husband's §941 tax liabilities for the tax quarters 8606, 8609, and 8612. See Plaintiff's Response to Defendant's Motion for Summary Judgment, p. 5. The Government argues, however--and the Court concurs--that Ms. Tranakos can be held liable for her husband's tax liabilities for the tax quarter 8506, which runs from April 1, 1985 , through June 30, 1985 , because the Complaint alleges that transfers were made to her until June 1985.

CONCLUSION

For the reasons stated above, the Court GRANTS plaintiff United States of America's motion for partial summary judgment on Count I of the Complaint [#36-1] and DIRECTS the Clerk to enter judgment against defendant Arthur P. Tranakos and in favor of the United States of America in the amount of $277,504.94 for unpaid income taxes, penalties, and interest as of January 31, 1990 , plus statutory additions thereafter, and $15,338.46 for unpaid employment taxes as of January 31, 1990 , plus statutory additions thereafter. The Court DIRECTS plaintiff to submit a statement outlining the "statutory additions" that have accrued since January 31, 1990. In addition, the Court GRANTS IN PART and DENIES IN PART defendant Sarah B. Tranakos's motion for summary judgment [#38-1]. To the extent that the Government seeks to hold Sarah B. Tranakos liable as a transferee for Arthur P. Tranakos's §941 tax liabilities for the tax quarters 8606, 8609, and 8612, the Court GRANTS her motion for summary judgment.

¹ 26 U.S.C. §6203 provides that "[t]he assessment shall be made by recording the liability of the taxpayer in the office of the Secretary in accordance with rules or regulations prescribed by the Secretary. Upon request of the taxpayer, the Secretary shall furnish the taxpayer a copy of the record of the assessment." 26 C.F.R. §301.6203-1 provides, in pertinent part, that "[t]he assessment shall be made by an assessment officer signing the summary record of assessment. The summary record through supporting records shall provide identification of the taxpayer, the character of the liability assessed, the taxable period, if applicable, and the amount of the assessment. . . . The date of the assessment is the date the summary record is signed by an assessment officer . . . ." Apparently, the summary record is a "Form 23-C" within the IRS .

² O.C.G.A. §18-2-22 provides:

The following acts by debtors shall be fraudulent in law against creditors and others and as to them shall be null and void:

(1) Every assignment or transfer by a debtor, insolvent at the time, of real or personal property or choses in action of any description to any person, either in trust or for the benefit of or on behalf of creditors, where any trust or benefit is reserved to the assignor or any person for him;

(2) Every conveyance of real or personal estate, by writing or otherwise, and every bond, suit, judgment and execution, or contract of any description had or made with intention to delay or defraud creditors, where such intention is known to the taking party; a bona fide purchaser on a valuable consideration, where the taking party is without notice or ground for reasonable suspicion of said intent of the debtor, shall be valid; and

(3) Every voluntary deed or conveyance, not for valuable consideration, made by a debtor who is insolvent at the time of the conveyance.

³ Ms. Tranakos also argues that even if the conveyances were "fraudulent" within the meaning of O.C.G.A. §18-2-22, under Georgia law, the Government is prohibited from recovering a personal money judgment against her. It is apparent from the Court's review of Georgia law, however, that a creditor can obtain a personal money judgment against a transferee pursuant to §18-2-22. See Kessler v. Veal, 182 Ga.App. 444 (1987), aff'd in part, rev'd in part, 257 Ga. 677 (1987); Jones v. Spindel, 239 Ga. 68 (1977).

⁴ Ms. Tranakos contends that since the offer in compromise produced by the Government is not a copy of the actual offer in compromise submitted by Mr. Tranakos but simply a copy of the form (Form 656) that is made available to the public, it cannot be considered evidence of the terms of the offer submitted by Mr. Tranakos. The Court disagrees. There is no dispute that an offer in compromise was submitted on November 1, 1984, and was rejected on September 5, 1988. Absent evidence from Ms. Tranakos that Mr. Tranakos's offer was not submitted on Form 656 and did not contain the terms challenged by Ms. Tranakos, the Court will consider Form 656 as evidence of the challenged terms.