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Thompson v. United States

September 29, 2010

MARVEL THOMPSON, PLAINTIFF,
v.
UNITED STATES OF AMERICA, DEFENDANT.



The opinion of the court was delivered by: Harry D. Leinenweber, Judge United States District Court

Hon. Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

Plaintiff Marvel Thompson ("Plaintiff") filed a Complaint seeking review of a jeopardy assessment by the Internal Revenue Service. Plaintiff objects to the Summons issued in the case, requests the return of his filing fee, and seeks judgment on his claim. Plaintiff also seeks judicial notice of certain facts. The Government moves for summary judgment in the case. The Motions are denied and the jeopardy assessment is affirmed.

I. BACKGROUND

A. Procedure and Prior History

This case involves a few different courts and rulings. Plaintiff Marvel Thompson ("Thompson") was arrested in Chicago, Illinois on May 12, 2004 on federal charges, including a conspiracy to sell illegal narcotics. On March 29, 2005, Thompson pled guilty to conspiracy to possess with intent to distribute cocaine and heroin. On April 26, 2007, Judge Elaine E. Bucklo of the Northern District of Illinois sentenced Thompson to 540 months incarceration, a $100 assessment, and a $100,000 fine. United States v. Thompson et al., 04 CR 0464 (N.D. Ill., May 11, 2004). The District Court was affirmed on appeal on September 29, 2009. United States v. White et al., 582 F.3d 787 (7th Cir. 2009). Thompson is currently serving his term of incarceration in Pollock, Louisiana, located within the Western District of Louisiana.

The instant case involves money that was seized at the time of Thompson's arrest. The Federal Bureau of Investigation (the "FBI") seized $320,055.25 in currency from Thompson's home. The sum of $8.775.20 of this money was administratively forfeited to the FBI. The balance is currently in the custody of the U.S. Marshals Service in Chicago. This balance was not forfeited as part of Thompson's criminal case.

On March 4, 2008, Thompson moved for the return of the seized currency, as well as the return of other property seized during his arrest, under Federal Rule of Criminal Procedure 41(g). Thompson properly filed his motion in front of Judge Bucklo, who issued a final ruling on the motion on June 25, 2010. Thompson v. United States, 2010 WL 2573903 (N.D. Ill., June 25, 2010). Judge Bucklo first assessed the outstanding balance of the fine, roughly $98,500, against the seized currency. She ruled that the remaining funds were properly "considered as belonging to Thompson as of March 4, 2008," but the funds would be retained by the United States until Thompson's tax dispute with the Internal Revenue Service (the "IRS") was resolved.

While the Rule 41(g) Motion was pending, the IRS reviewed Thompson's records and found a tax deficiency for the 2004 tax year. Because Judge Bucklo had not yet issued her opinion, the IRS determined that the funds were in jeopardy if they were released from the Government's possession. To protect its interest in the funds, the IRS issued a Notice of Levy to the Marshals Service for $218,797.48. Thompson received a notice of the jeopardy assessment on January 26, 2010, and protested the assessment on February 22. The IRS denied the protest on April 5, and on May 4 Thompson filed the instant suit for a judicial review of the jeopardy assessment in the Western District of Louisiana. Less than two weeks later, Thompson filed a motion which objected to the summons that was issued and requested a return of the filing fee he paid.

The Government had not answered the Complaint as of June 15, 2010, so Thompson moved for something similar to a default judgment against the Government. Thompson based this motion on the statutory requirement that the judicial review of a jeopardy assessment be completed within twenty days. The Government answered the Complaint on June 18 and included defenses of improper service and venue. Judge James T. Trimble, Jr., Senior District Judge of the Western District of Louisiana, denied Thompson's Motion for judgment, found that venue was improper in the Western District of Louisiana but proper in the Northern District of Illinois, and transferred the case to this Court for further proceedings. Although not appearing on the docket, Thompson alleges that he filed a Motion for Reconsideration on July 24, which Judge Trimble denied on August 4. After the transfer, Thompson filed two new motions: (1) a Motion for Judgment which essentially repeated his earlier claims for a default judgment and (2) a Motion for a Decision on his earlier motion regarding the summons and filing fee.

Shortly before this ruling, Thompson filed a Motion to take judicial notice of certain facts and the Government filed a Motion for Summary Judgment. Neither side had the opportunity to respond to these last two motions.

B. Facts for Jeopardy Assessment

The IRS jeopardy assessment determined that Thompson had not filed income tax returns or paid taxes for tax years 2000 through 2004. The IRS considered the $320,055.25 that was seized by the FBI as unreported income for tax year 2004. This resulted in $107,565.00 in taxes owed, $54,175.86 in penalties, and $57,056.62 in interest (computed through February 10, 2010), for a total of $218,797.48 owed for tax year 2004.

The IRS laid out the reason for the jeopardy assessment in the January 26 notice. To determine whether the tax collection was at risk, the IRS used Judge Bucklo's net worth estimate for Thompson from her January 30, 2009 Memorandum Opinion and Order. This estimated that Thompson had $585,000 in total assets and $1,000,000 in debts, for a negative net worth of $415,000. Based on these figures, the IRS agent found that Thompson's financial solvency was imperiled and recommended a jeopardy assessment.

II. LEGAL STANDARD

In reviewing a jeopardy assessment, a district court must determine if the assessment is reasonable under the circumstances and if the amount assessed is appropriate. 26 U.S.C. § 7429(b)(3)(A). "'Reasonable under the circumstances' means something more than 'not arbitrary or capricious' and something less than 'supported by substantial evidence.'" Wellek v. United States, 324 F.Supp.2d 905, 911 (N.D. Ill. 2004).

"[T]he IRS does not have to show that the information it relied upon in making the assessments would be admissible at a trial on the merits and [ ] the government is not required to make its final case against the taxpayer, but only a preliminary showing of reasonableness." Hiley v. United States, 807 F.2d 623, 629 (7th Cir. 1986). The government bears the burden of proving that the assessment is reasonable, while the taxpayer bears the burden of proving that the amount of the assessment is not appropriate.

26 U.S.C. ยง ...


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