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ESTATE TAX REFUND SUIT DISMISSED IN PART.

JUN. 20, 2000

Roy E. Kerbo Estate v. IRS

DATED JUN. 20, 2000
DOCUMENT ATTRIBUTES
  • Case Name
    ROY E. KERBO ESTATE, ELTON L. KERBO, PERSONAL REPRESENTATIVE, Plaintiff, v. INTERNAL REVENUE SERVICE, Defendant.
  • Court
    United States District Court for the Western District of Oklahoma
  • Docket
    No. CIV-99-1167-M
  • Judge
    Miles-LaGrange, Vicki
  • Parallel Citation
    86 A.F.T.R.2d (RIA) 2000-5993
    2000 WL 1433634
    2000 U.S. Dist. LEXIS 13203
  • Code Sections
  • Subject Area/Tax Topics
  • Index Terms
    refunds, taxpayer suits
    estate tax, closely held business, payment deferral
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2000-23645 (6 original pages)
  • Tax Analysts Electronic Citation
    2000 TNT 178-9

Roy E. Kerbo Estate v. IRS

                 IN THE UNITED STATES DISTRICT COURT

 

                FOR THE WESTERN DISTRICT OF OKLAHOMA

 

 

                                ORDER

 

 

[1] Before the Court is Defendant's Motion to Dismiss, asserting lack of subject matter jurisdiction and failure to state a claim. Plaintiff has filed his Response and the matter is now at issue.

[2] Plaintiff alleges he is entitled to a refund of federal estate tax and has set out seven specific grounds for relief: 1) Defendant has denied a deduction in the amount of $194,702.92 for inter vivos gifts made by the decedent; 2) Defendant has unreasonably increased the value on two tracts of land owned by decedent; 3) Defendant has denied a deduction of $5,866.23 for administrator's expenses, which should be allowed; 4) Defendant has denied a deduction of $10,091.58 for administration expenses, which should be allowed, 5) Defendant has denied Plaintiff's claim for abatement of interest in the amount of $14,500.00; 6) Defendant should abate any penalties assessed against Plaintiff; 7) Defendant wrongfully denied Plaintiff's section 6166 election.

DISCUSSION

[3] Defendant argues that Plaintiff has named an improper party, stating the proper defendant is the United States. Plaintiff does not object to a substitution of the United States as the defendant. 26 U.S.C. section 7422(f)(2) provides that any suit naming an officer or employee of the Internal Revenue Service shall be amended to substitute the United States as the proper defendant. Therefore, the United States is substituted as the defendant in this case. The clerk of the Court is directed to note the substitution in the appropriate Court records. The parties are directed to reflect the substitution in any future pleadings.

I. SUBJECT MATTER JURISDICTION

[4] Defendant asserts this Court is without jurisdiction to hear Plaintiff's claim due to lack of subject matter jurisdiction. Defendant points to 26 U.S.C. section 7422(a) and Treasury Regulation section 301.6402-2(b)(1) ("Regulation"), which impose certain prerequisites with which a plaintiff must comply prior to filing a lawsuit. Under these rules, a plaintiff must file a claim with the Internal Revenue Service, setting forth the grounds for refund or relief. The Regulation imposes the further duty of submitting the claim under penalty of perjury and setting forth "facts sufficient to apprise the Commissioner of the exact basis" of the claim. Failure to comply with the statute or Regulation divests the District Court of subject matter jurisdiction. True v. United States, 190 F.3d 1165, 1171 (10th Cir. 1999). Defendant utilizes Form 843 as the mechanism of submitting a claim. Plaintiff filed a Form 843, setting forth his claim for refund on May 23, 1992.

[5] Defendant argues Plaintiff's Complaint seeks relief not claimed in his Form 843 and must be dismissed. Specifically, Defendant argues paragraphs III(1), III(2) and III(7) of Plaintiff's Complaint, as set forth supra, are not included on the Form 843 -- Paragraphs III(3)), III(4), III(5) and III(6) were included in the Form 843, but lacked the specificity required. Therefore, Defendant argues Plaintiffs Complaint must be dismissed for lack of subject matter jurisdiction, as a consequence of these failures.

[6] The purpose of the section 7422 requirement is to afford Defendant the opportunity to consider and decide the claim without the time and expense of litigation. Herrington v United States, 416 F.2d 1029, 1031 (10th Cir. 1969). If, despite defects in the Form 843, Defendant had the opportunity to consider the grounds of the claim, the claim will be held adequate under section 7422. Angelus Milling Co. v. Commissioner, 325 U.S. 293, 297-98 (1945). In the event that Defendant considered the merits of the claim asserted, it shall be deemed to have waived the specificity requirements of section 7422 and the Regulation. Martinez v. United States, 595 F.2d 1147, 1148 (9th Cir. 1979); See also, Bethlehem Baking Co. v. United States, 129 F.2d 490, 493 (3d Cir. 1942).

[7] Plaintiff's refund claim has a long history. Between the filing of the Form 843 and the filing of the present Complaint, a number of arguments were offered by Plaintiff and considered by Defendant. Plaintiff repeatedly asserted the very claims stated in the present case. As an example of Defendant's awareness and consideration of the claims raised in Plaintiff's Complaint, Plaintiff submitted a thirty-one page Report of Estate Tax Examination Changes. Review of that document reveals Defendant has carefully considered each contention set forth by Plaintiff in his Complaint. The Court finds Defendant has waived any specificity objections.

[8] Defendant also complains of Plaintiff's failure to "sign under penalty of perjury." Defendant's argument is not well taken. Plaintiff and counsel signed the Form 843 which states "Under penalties of perjury, I declare that I have examined this claim, including accompanying schedules and statements, and to the best of my knowledge and belief it is true, correct, and complete." Plaintiff's Form 843 directed Defendant to the attached letter which set forth his claims. Clearly, Plaintiff's signature on the Form 843 satisfied the Regulation as to that Form and its attachments. Further, as noted earlier, Defendant has considered Plaintiff's claim on the merits. Defendant points to no evidence it ever notified Plaintiff of any shortcoming or inadequacy in his refund claim. Defendant's actions are strikingly similar to the facts in Ford v. United States. "The Commissioner raised no question about the form of the refund claim when it was filed with him and considered it on its merits. It is too late for him now to raise technical objections as to its form." Ford v. United States, 402 F.2d 791, 792 (6th Cir. 1968).

II. FAILURE TO STATE A CLAIM FOR RELIEF

[9] Defendant next objects to Plaintiffs claims for abatement and denial of election under section 6166. As to these claims, Defendant argues Plaintiff has failed to state a claim for relief thus entitling Defendant to dismissal pursuant to Fed.R.Civ.P.12(b)(6). 1

A. ABATEMENT

[10] Defendant argues that to the extent Plaintiff's Complaint seeks abatement of interest, it must fail as a matter of law. Tenth Circuit precedent supports that position. See Selman v. United States, 941 F.2d 1060, 1063-1064 (10th Cir. 1991). Plaintiff does not dispute this argument but states he is merely preserving his right to argue the issue on appeal.

B. SECTION 6166

[11] 26 U.S.C. section 6166 allows certain estates to defer certain taxes for up to five years and then pay them in ten equal installments. Plaintiff's request for a section 6166 election was denied by Defendant and Plaintiff included a claim in his Complaint concerning that denial. Defendant argues Plaintiff has failed to state a claim for relief as the time has passed for any benefit of the section 6166 election. Plaintiff does not dispute Defendant's argument. The plain language of paragraph III(7) of Plaintiff's Complaint seeks the Court's reversal of Defendant's denial of the election. To the extent the Complaint seeks this Court's review of Defendant's denial, Plaintiffs claim must fail as a matter of law. Smith v. Booth, 823 F.2d 94 (5th Cir. 1987). However, in his response brief Plaintiff asserts he is entitled to damages for Defendant's denial of his section 6166 election. Plaintiff offers no authority to support his entitlement to damages and the Court has found none. Further, Plaintiff has not pled any damages. Nevertheless, the Court will allow Plaintiff an opportunity to amend his Complaint to set forth grounds for damages suffered as a result of Defendant's denial of his section 6166 election.

CONCLUSION

[12] For the above reasons, the Court:

(1) SUBSTITUTES the United States as the Defendant in the case at

 

    bar. The Court Clerk is directed to reflect this substitution in

 

    the appropriate court records; and

 

 

(2) GRANTS IN PART AND DENIES IN PART defendant's Motion to Dismiss

 

    [docket no. 12] as follows:

 

 

    (a) The Court DENIES defendant's motion as to the following

 

        claims: (1) defendant's denial of a deduction in the amount

 

        of $194,702.92 for inter vivos gifts made by the decedent;

 

        (2) defendant's unreasonable increase of the value on two

 

        tracts of land owned by decedent; (3) defendant's denial of a

 

        deduction of $5,866.23 for administrator's expenses; and, (4)

 

        defendant's denial of a deduction of $10,091.58 for

 

        administration expenses.

 

 

    (b) The Court GRANTS defendant's motion as to plaintiff's claim

 

        for abatement of interest in the amount of $14,500.00 and

 

        plaintiff's claim for abatement of any penalties assessed

 

        against Plaintiff. The Court therefore DISMISSES these claims

 

        with prejudice to refiling.

 

 

    (c) The Court GRANTS defendant's motion as to plaintiff's claim

 

        for wrongful denial of plaintiff's section 6166 election and

 

        DISMISSES this claim without prejudice to refiling. The Court

 

        will allow plaintiff an opportunity to amend his Complaint to

 

        set forth grounds for damages suffered as a result of

 

        defendant's denial of his section 6166 election.

 

 

[13] Plaintiff is directed to file his Amended Complaint within 15 days of the date of this Order.

[14] IT IS SO ORDERED this day of June, 2000.

                                   Vicki Miles-LaGrange

 

                                   United States District Judge

 

FOOTNOTE

 

 

1 In accordance with Fed.R.Civ.P.12(b) the Court hereby gives notice that no matters outside the pleading were considered by the Court in reaching its decision on these issues.

 

END OF FOOTNOTE
DOCUMENT ATTRIBUTES
  • Case Name
    ROY E. KERBO ESTATE, ELTON L. KERBO, PERSONAL REPRESENTATIVE, Plaintiff, v. INTERNAL REVENUE SERVICE, Defendant.
  • Court
    United States District Court for the Western District of Oklahoma
  • Docket
    No. CIV-99-1167-M
  • Judge
    Miles-LaGrange, Vicki
  • Parallel Citation
    86 A.F.T.R.2d (RIA) 2000-5993
    2000 WL 1433634
    2000 U.S. Dist. LEXIS 13203
  • Code Sections
  • Subject Area/Tax Topics
  • Index Terms
    refunds, taxpayer suits
    estate tax, closely held business, payment deferral
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2000-23645 (6 original pages)
  • Tax Analysts Electronic Citation
    2000 TNT 178-9
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