United States District Court, N.D. Illinois, Eastern Division
THOMAS A. ROSINSKI JR., Plaintiff,
UNITED STATES OF AMERICA, Defendant.
OPINION AND ORDER
JOAN H. LEFKOW, District Judge.
Plaintiff Thomas Rosinski Jr. filed a complaint against the United States of America ("defendant") under 26 U.S.C. § 7422 seeking recovery of income taxes paid. (Dkt. 1 ("Compl.").) Defendant moves for summary judgment pursuant to Federal Rule of Civil Procedure 56. (Dkt. 13.) For the reasons stated below, the motion is granted.
Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). To determine whether any genuine fact issue exists, the court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed.R.Civ.P. 56(c). In doing so, the court must view the facts in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Scott v. Harris , 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). The court may not weigh conflicting evidence or make credibility determinations. Omnicare, Inc. v. UnitedHealth Grp., Inc. , 629 F.3d 697, 704 (7th Cir. 2011).
The party seeking summary judgment bears the initial burden of proving there is no genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In response, the non-moving party cannot rest on bare pleadings alone but must designate specific material facts showing that there is a genuine issue for trial. Id. at 324; Insolia v. Philip Morris Inc. , 216 F.3d 596, 598 (7th Cir. 2000). If a claim or defense is factually unsupported, it should be disposed of on summary judgment. Celotex , 477 U.S. at 323-24.
When Rosinski filed his original tax returns for the tax years 2002, 2003 and 2004, he claimed itemized deductions for investment interest in the amounts of $209, 139, $108, 571 and $58, 249, respectively. (Dkt. 17 ("Pl.'s L.R. 56.1") ¶ 2.) The IRS disallowed these deductions, resulting in an increase in the amount Rosinski owed in taxes as well as penalties. (Id. ¶ 3.) On May 8, 2005, Rosinski filed a petition with the United States Tax Court, seeking redetermination of the IRS's decision. (Dkt. 13-1 ("Def.'s L.R. 56.1") ¶ 5.) The tax court's decision, which was issued March 21, 2007, found that there were deficiencies in his income tax of $54, 420, $33, 991 and $19, 222 for tax years 2002, 2003 and 2004 respectively. (Id. ¶ 6.) The tax court's decision was based on a stipulated agreement between Rosinski and the IRS. (Pl.'s L.R. 56.1 ¶ 6.) Pursuant to the stipulated agreement, Rosinski paid the income tax due for the tax years 2002-2004 plus resulting interest. (Id. )
In October 2007, Rosinski retained a new attorney to assist him with tax filings for his corporation, R-K Press Brake Dies, Inc. ("R-K"), as well as his individual tax returns. (Id. ¶ 6.) According to his new attorney, Rosinski had overpaid his taxes for the year 2004 as a result of underestimating the loan interest deduction available to R-K and failing to claim an allowed amortization deduction. (Id. ¶ 7.) This resulted in a substantial reduction in R-K's Schedule K-1 Ordinary Business Income, resulting in a corresponding reduction in Rosinki's personal income. In March 2008, Rosinski filed an amended return (Form 1040X) seeking a $57, 731 refund for the tax year 2004. (Def.'s L.R. 56.1 ¶ 7.) The changes included an increase in interest expense of $38, 239 and an amortized deduction of $208, 504. (Pl.'s L.R. 56.1 ¶ 14.)
Following his filing of the amended return, Rosinski received notice of an audit to review both R-K's and Rosinski's personal tax filings for the years 2004-2007, including the 2004 1040X amended return. (Id. ¶ 17.) On June 4, 2009, Rosinski received a determination that he had overpaid his 2004 taxes by $13, 468 and should receive a penalty reduction of $2, 693.60 resulting in a total refund due of $16, 161. (Id. ¶ 18.) The IRS also concluded that Rosinski owed $160, 059.80, $84, 503.31 and $108, 511.99 for the years 2005, 2006 and 2007, respectively. (Id. ) The IRS rejected the amortization deduction for all the tax years. (Id. ¶21). On August 29, 2009, Rosinski appealed this determination. (Id. ¶ 20.) Ultimately, he prevailed in the tax court and the amortization deduction was allowed for the years 2005, 2006 and 2007. (Id. ¶ 36.)
On July 12, 2012, the Commissioner of Internal Revenue sent Rosinski a Form 3363 which reiterated that $13, 468 of his 2004 claimed refund would be allowed and $44, 263 disallowed. (Def.'s L.R. 56.1 ¶ 8.) On April 18, 2014, Rosinski filed his complaint in this court seeking an income tax refund of $44, 263 for the year 2004. (Dkt. 1.)
The United States moves for summary judgment pursuant to Rule 56 on the grounds that Rosinski's action is barred by the doctrine of res judicata. The U.S. argues that because Rosinski previously litigated to a final decision his tax liability for 2004, the case is barred. Final judgment on the merits precludes parties from relitigating issues that either were or could have been raised in the prior action. Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980). The purposes of res judicata are to minimize "the expense and vexation" of multiple lawsuits, conserve judicial resources and create certainty by minimizing inconsistencies in court decisions. Montana v. United States, 440 U.S. 147, 153-54, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979). There are three requirements for res judicata : 1) identity of parties (or their privies), 2) identity of the causes of action, and 3) a final judgment on the merits. Prochotsky v. Baker & McKenzie, 966 F.2d 333, 334 (7th Cir. 1992). All three of the requirements are met in this case.
I. Identity of the parties
It is undisputed that there is identity of parties in the two cases at issue. The prior case was brought by Rosinski, the plaintiff here, against the IRS, an agency of ...