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Stout v. United States

February 10, 2011

STOUT
v.
UNITED STATES



Name of Assigned Judge Blanche M. Manning Sitting Judge if Other or Magistrate Judge than Assigned Judge

CASE TITLE

DOCKET ENTRY TEXT

For the reasons stated below, the plaintiff's motion to vacate/for leave to amend [30-1] is entered and continued. The court directs the government to file an additional memorandum no later than March 1, 2011, addressing the questions detailed in the text of the order. To the extent that the government believes any other facts or legal principles will assist the court in ruling on the plaintiff's pending motions, it shall include a discussion of those as well. The court will order further briefing as necessary after it reviews the government's memorandum.

O[ For further details see text below.]

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STATEMENT

The court assumes familiarity with the facts of this case and its previous order. Briefly, the plaintiff, administrator of the estate of Ann Cuneo, filed suit against the United States challenging the disallowance of a refund claim for taxes that the plaintiff alleges were wrongfully paid by Cuneo's estate on assets that did not exist. Specifically, the plaintiff asserts that Cuneo was the victim of a fraudulent scheme by stockbroker Frank Gruttadauria, who caused Cuneo and her family to believe that she possessed assets worth several million dollars when in fact they were worth much less. Gruttadauria, in an alleged attempt to conceal his fraud, paid estate taxes (on the assets that apparently did not exist) to the IRS in the amount of $2,536,747.24.

The plaintiff, in July 2002, filed a protective refund claim in an attempt to recover the $2,536,747.24 that the estate has paid in taxes. In a letter with attachments dated June 9, 2008, the IRS notified counsel for the estate that it was disallowing $2,491,965 of the refund claim on the ground that it had been filed beyond the applicable statute of limitations. However, the letter and attachments indicated that $44,781.37 of the claim was being allowed as that amount had been paid within the applicable limitations period. The plaintiff filed suit on June 9, 2010, challenging the IRS' disallowance of the $2,491,965 refund claim. On October 1, 2010, this court granted the government's motion to dismiss the case on the ground that the plaintiff's refund claim was untimely. Specifically, the court rejected the plaintiff's argument that the statute of limitations should have been suspended because Gruttadauria, the errant stockbroker in charge of Cuneo's money, was "financially disabled." The court agreed with the government that the statutory provision allowing for a suspension of the limitations period when an individual is financially disabled, 26 U.S.C. § 6511(h)(1), applies only to the taxpayer herself, not third-party money managers like Gruttadauria. Accordingly, the court entered the October 1, 2010, order granting judgment in favor of the United States.

STATEMENT

On December 13, 2010, the plaintiff filed a motion to vacate the October 1, 2010, order pursuant to Fed. R. Civ. P. 60. The plaintiff's motion to vacate is far from clear; however, it appears that the plaintiff seeks reconsideration of the October 1, 2010, order and for leave to amend the complaint based on events that took place after the October 1, 2010, order was entered. The issue revolves around when the IRS issued a final determination regarding whether it would allow or disallow the plaintiff's refund claim.

IRS Final Determination. Specifically, in late October 2010, after judgment had been entered in this case, the IRS informed counsel for the government that the IRS had ultimately determined to disallow the refund claim in full, including the $44,781 amount (despite its June 9, 2008, allowing the $44,871.37 refund claim amount). Counsel for the government and plaintiff's counsel then discussed the issue over the phone. On November 3, 2010, counsel for the government wrote the plaintiff a letter stating that its answer to paragraph 16 of the complaint in this case was misleading in light of the most recent developments by the IRS.

Paragraph 16 of the complaint alleged as follows:

16. By letter from the IRS dated June 9, 2008, the IRS disallowed Plaintiff's Amended Refund Claim on the basis that it was not timely filed. However, the IRS did permit a refund in the amount of $44781.37 based upon other changes to the Form 706. A true and ...


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