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O'BRYANT v. U.S.

January 25, 1994

RAYMOND E. O'BRYANT AND DOROTHY J. O'BRYANT, PLAINTIFFS,
v.
UNITED STATES OF AMERICA, DEFENDANT.



The opinion of the court was delivered by: McDADE, District Judge.

ORDER

On November 12, 1990, the IRS made an assessment of $9,438 against Plaintiffs, Raymond E. O'Bryant and Dorothy J. O'Bryant, ["Plaintiffs"], for federal income taxes due in 1989.*fn1 Because Plaintiffs have not paid their total 1989 income tax liability, Defendant, the United States of America, has filed a Federal Tax Lien which continues to encumber their real property, and title to that property cannot be quieted until the 1989 assessment is satisfied.

Before the Court are Cross-Motions for Summary Judgment on Count II of the United States' Counterclaim. In Count II, the United States seeks to reduce the 1989 assessment to judgment. Conversely, Plaintiffs seek an order by the Court directing the IRS to either apply certain overpayments made by Plaintiffs to offset their liability for the 1989 assessment or to issue a refund for the amounts overpaid.

The Court has jurisdiction over the United States' Counterclaim pursuant to 28 U.S.C. § 1346(c) and 26 U.S.C. § 7402(a). The United States contends, however, that the Court does not have jurisdiction under the Code either to order the IRS to apply the overpayments made by Plaintiffs to their 1989 assessment or to maintain Plaintiffs' suit for a refund.

After review of the Code, the case law, and the pleadings, the Court finds that it has jurisdiction over only one of Plaintiffs' claims, namely, that Plaintiffs' November 19, 1991 payment should be refunded. For the reasons which follow, the Court finds that although Plaintiffs are entitled to a refund of their November 19, 1991 payment, the 1989 assessment should be reduced to judgment. Thus, the United States' Motion for Summary Judgment is granted in part and denied in part, and Plaintiffs' Motion for Summary Judgment is granted in part and denied in part.*fn2

BACKGROUND

On August 13, 1993, this Court granted summary judgment in favor of Plaintiffs, holding that Plaintiffs satisfied their 1984 tax liability by payment in 1987. The Court also granted Plaintiffs' Motion to Dismiss Count I of the United States' Counterclaim, but denied their Motion to Dismiss Count II, which alleged that Plaintiffs remained liable for a 1989 tax assessment. The Court then ordered Plaintiffs to answer Count II. The facts relevant to the Court's August 13, 1993 decision are also relevant here and are as follows.

On October 18, 1985, Plaintiffs filed their income tax return for 1984. On November 25, 1985, the IRS made an assessment totalling $22,593.20 for taxes owed by Plaintiffs in 1984. On August 6, 1987, Plaintiffs paid to the IRS the sum of $27,999.93, representing full payment of all tax, interest, and penalties then due. The IRS, however, mistakenly credited the August 6, 1987 payment twice to Plaintiffs' account for 1984, creating what appeared to be an overpayment and generating a refund of $28,925.39 ($27,999.93 plus $925.46 in accrued interest), which was sent to Plaintiffs by check dated January 1, 1988, from the United States Treasury. Sometime later in 1988, the IRS discovered its error and demanded repayment of the refunded amount plus accrued interest, totalling $31,354.84.

After discovery of its error, the IRS did not make a new assessment for 1984, but rather claimed that the original assessment for 1984 remained outstanding. The United States apparently formed this belief because the amount originally paid by Plaintiffs was erroneously refunded, leaving the government without an actual payment for 1984. Meanwhile, Plaintiffs made the following payments which the IRS applied to the 1984 assessment:

"Overpayments"

Date              Amount Reason
April 15, 1988        $840.00            1987 income tax
                                          refund applied
April 3, 1989         $5,000.00          Payment by Plaintiffs
April 15, 1989        $1,117.00          1988 income tax
                                  ...

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