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Moran v. United States

February 25, 2010


The opinion of the court was delivered by: Joe Billy Mcdade United States District Judge


Before the Court is the Motion for Summary Judgment filed by Defendant, United States of America, on June 18, 2009 (Doc. 14). For the reasons set forth below, the Motion is GRANTED.


Plaintiffs seek a refund of tax penalties that they paid to the Internal Revenue Service (IRS) for tax years 1994, 1995, 1996, and 2002. Plaintiffs were penalized for failing to pay income taxes or estimated taxes for those years. (Defendant's Statement of Undisputed Material Facts (hereinafter "UMF") 2 and 3). The total amount of tax penalties assessed and paid for those years is $4,473.27.*fn1 (UMF 4). Plaintiffs paid this amount on October 22, 2004. (UMF 6). It appears, from documents attached to the Complaint, that at some point, Plaintiffs sought an abatement of the assessed penalties. (Doc. 1-2, pp. 3-6). It also appears that Plaintiffs engaged in an administrative appeals process that ultimately resulted in a May 23, 2006 rejection of their claim that the tax penalties should be abated.*fn2

(Doc. 1-2, p. 35). Before the IRS, Plaintiffs argued (in a January 19, 2005 letter) that financial hardship, among other things, prevented the timely payment of their income taxes. (Doc. 1-2, pp. 1-2). Plaintiff's filed their Complaint with this Court on November 21, 2007. (Doc. 1).

Plaintiffs have not disputed any of the material facts presented by Defendant nor have Plaintiffs submitted any additional facts to support their claims. See Local Rule 7.1(D)(2)(b)(2) and (b)(4). Thus, Plaintiffs have presented no facts to support their claim that are compliant with the Local Rules.


Summary judgment should be granted where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show 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). The moving party has the responsibility of informing the Court as to portions of the record that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The movant may meet this burden by demonstrating "that there is an absence of evidence to support the nonmoving party's case." Id. at 325.

Once the movant has met its burden, to survive summary judgment the "non-movant must show through specific evidence that a triable issue of fact remains on issues on which [s]he bears the burden of proof at trial." Warsco v. Preferred Tech. Group, 258 F.3d 557, 563 (7th Cir. 2001); See also Celotex Corp., 477 U.S. at 322-24. "The non-movant may not rest upon mere allegations in the pleadings or upon conclusory statements in affidavits; it must go beyond the pleadings and support its contentions with proper documentary evidence." Chemsource, Inc. v. Hub Group, Inc., 106 F.3d 1358, 1361 (7th Cir. 1997).

This Court must nonetheless "view the record and all inferences drawn from it in the light most favorable to the [non-moving party]." Holland v. Jefferson Nat. Life Ins. Co., 883 F.2d 1307, 1312 (7th Cir. 1989). In doing so, this Court is not "required to draw every conceivable inference from the record -- only those inferences that are reasonable." Bank Leumi Le-Isreal, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir. 1991). Therefore, if the record before the court "could not lead a rational trier of fact to find for the non-moving party," then no genuine issue of material fact exists and, the moving party is entitled to judgment as a matter of law. McClendon v. Indiana Sugars, Inc., 108 F.3d 789, 796 (7th Cir. 1997) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). However, in ruling on a motion for summary judgment, the court may not weigh the evidence or resolve issues of fact; disputed facts must be left for resolution at trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986).

There appears to be no dispute that Plaintiffs failed to timely pay their properly assessed taxes for 1994, 1995, 1996 and 2002 and that they were assessed penalties for this failure pursuant to section 6651 of the Internal Revenue Code. 26 U.S.C. § 6651(a)(2). The Code provides, however, that penalties need not be paid if the failure to pay taxes "is due to reasonable cause and not due to willful neglect." Id. "Generally the taxpayer bears the burden of proof when disputing tax liabilities with the IRS." Matter of Carlson, 126 F.3d 915, 921 (7th Cir. 1997) (citing Helvering v. Taylor, 293 U.S. 507, 515 (1935)). In Carlson, the Seventh Circuit noted that "reasonable cause" is not defined by the Internal Revenue Code. Id. 126 F.3d at 921. However, Treasury Regulations do provide guidance:

[F]ailure to pay will be considered to be due to reasonable cause to the extent that the taxpayer has made a satisfactory showing that he exercised ordinary business care and prudence in providing for payment of his tax liability and was nevertheless either unable to pay the tax or would suffer an undue hardship ... if he paid on the due date. Id. (quoting 26 C.F.R. § 301.6651-1(c)(1)).

The Court of Appeals further explained:

In considering whether a taxpayer exercised ordinary business care and prudence, a court should consider all facts and circumstances of the taxpayer's situation, including the amount and nature of expenditures in light of income received prior to the date payment was due. A taxpayer exercises ordinary business care and prudence if he makes reasonable efforts to conserve sufficient assets in marketable form to satisfy his tax liability and nevertheless was unable to pay all or a portion of the tax when it became due. "Undue hardship" means more than mere inconvenience. It must be ...

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