Opinion
21889-21 27494-16
01-05-2024
GARY C. GEORGE & ROBIN A. GEORGE, ET AL., Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Travis A. Greaves, Judge.
Currently before the Court is petitioners' Motion for Partial Summary Judgment, filed September 11, 2023, and supplemented on October 26, 2023. Therein petitioners request summary adjudication on the issue of whether George's of Missouri, Inc. (GOMI) performed qualified research as defined by section 41 in tax years 2012, 2013, and 2014. For the reasons set forth below, we deny petitioners' motion.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure.
Background
The following facts are derived from the pleadings, the parties' motion papers, and the exhibits and declarations attached thereto. They are stated solely for purposes of deciding the motion and not as findings of fact in this case. See Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994).
Between 2012 and 2014, petitioners operated a poultry production business through GOMI, an S corporation. During this period, GOMI allegedly performed research to create an improved poultry product. Through GOMI, petitioners claimed a section 41 Credit for Increasing Research Activities (research credits) for certain supply expenses related to the research. Respondent challenged whether petitioners are entitled to the research credits.
On September 11, 2023, petitioners filed a Motion for Partial Summary Judgment on the issue of whether GOMI performed qualified research between 2012 and 2014, attaching over 15,000 pages of exhibits. On September 27, 2023, we ordered petitioners to supplement their motion to sufficiently support the factual assertions in their motion. Petitioners supplemented their motion on October 26, 2023. Respondent filed an Objection to Motion for Partial Summary Judgment on November 17, 2023, contesting the admissibility of the declarations and exhibits offered by petitioners. On December 6, 2023, petitioners filed a Motion for Leave to File a Reply to Objection to Motion for Partial Summary Judgment. We will grant petitioners' Motion for Leave and file the lodged reply as of the date of this order.
On October 9, 2023, petitioners filed a Motion to Seal related to the Motion for Partial Summary Judgment because it included personal identifying information. On December 12, 2023, we granted petitioners' Motion to Seal and ordered petitioners to file a properly redacted version of the Motion for Partial Summary Judgment. Petitioners filed the properly redacted version of the Motion for Partial Summary Judgment on December 21, 2023.
Discussion
The purpose of summary judgment is to expedite litigation and avoid costly, unnecessary, and time-consuming trials. See FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74 (2001). The moving party bears the burden of proving that there is no genuine dispute of material fact and a decision may be rendered as a matter of law. See Rule 121(a); Elec. Arts, Inc. v. Commissioner, 118 T.C. 226, 238 (2002). Furthermore, we construe the facts and draw all inferences in the light most favorable to the nonmoving party to decide whether summary judgment is appropriate. See Bond v. Commissioner, 100 T.C. 32, 36 (1993).
Under Rule 121(c)(1), the moving party must support each assertion that a material fact cannot be genuinely disputed by citing particular materials in the record. The moving party may support their motion with a declaration that is made on personal knowledge, sets out facts that would be admissible in evidence, and shows that the declarant is competent to testify on the matters stated in the declaration. Rule 121(c)(4). The party opposing the motion may object to the admissibility of the supporting evidence. Rule 121(c)(2).
The Federal Rules of Evidence are applicable to Tax Court proceedings. See § 7453; Rule 143(a). Hearsay statements are inadmissible unless an exception applies. Fed.R.Evid. 802. A statement is hearsay if the declarant made the statement outside of the current trial or hearing and the parties offer the statement to prove the truth of the matter asserted. Fed.R.Evid. 801(c). One exception to the rule against hearsay is the business record exception. Under this exception, a record may be admitted if (1) the record was made at or near the time of the act by someone with knowledge, (2) the record was kept in the ordinary course of business, (3) the record was made as a regular practice, and (4) the opponent does not show the source of the information indicates a lack of trustworthiness. Fed.R.Evid. 803(6). A declaration that relies on inadmissible hearsay does not comply with the personal knowledge requirement of Rule 121(c). See Hawk v. Commissioner, T.C. Memo. 2012-259, at *17 (interpreting the predecessor to Rule 121(c)).
Petitioners' Motion for Partial Summary Judgment is primarily supported by citations to the Declaration of Tracy Tedder, the Vice President of Plant Operations and Live Operations for GOMI since 2021. Mr. Tedder asserts in his declaration that he has personal knowledge of the facts contained in the declaration and that he reviewed corporate documents related to the research trials conducted by GOMI. Mr. Tedder's declaration provides scarce citations of the corporate records he consulted for the basis of his knowledge.
Mr. Tedder began his employment at GOMI in 2021, and therefore, he does not have personal knowledge as to the research trials conducted between 2012 and 2014. The majority of Mr. Tedder's statements regarding the conduct of the research trials are not supported with a citation to the record. To the extent that Mr. Tedder's declaration is not supported by a record citation, we will disregard the content for lack of personal knowledge. The lack of evidence regarding the research trial alone would be sufficient to deny petitioners' motion due to a genuine issue of material fact.
Additionally, Mr. Tedder's remaining statements in his declaration also fail to meet the requirements of Rule 121(c). The corporate records cited throughout Mr. Tedder's declaration are hearsay because the records are out-of-court statements offered for the truth of the matter asserted. Mr. Tedder's declaration contains a generic assertion that the records meet the requirements of the business record exception. In their reply, petitioners assert that they need not provide information regarding the admissibility of each exhibit attached to their motion. However, petitioners fail to make even a basic showing of the admissibility of the exhibits. Thus, neither Mr. Tedder's declaration nor any other declaration submitted by petitioners provide sufficient information to determine whether the attached records meet the requirements of the business record exception.
Petitioners have failed to demonstrate that the factual assertions in Mr. Tedder's declaration and the attached exhibits are admissible evidence. Thus, we may not rely on these facts in considering petitioners' motion. The remaining declarations are insufficient to support petitioners' motion. Therefore, we conclude that petitioners' motion is not supported in accordance with Rule 121(c).
Upon due consideration, it is
ORDERED that petitioners' Motion for Leave to File Reply to Objection to Motion for Partial Summary Judgment, filed December 6, 2023, is granted and petitioners' Reply to Objection to Motion for Partial Summary Judgment, lodged December 6, 2023, shall be filed as of the date of service of this Order. It is further ORDERED that petitioners' Motion for Partial Summary Judgment, as supplemented, is denied.