Opinion
27415-21
06-13-2023
DANIEL ISAIAH THODY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Travis A. Greaves, Judge.
On January 10, 2023, respondent filed a Motion for Partial Summary Judgment (motion). On May 22, 2023, respondent filed a First Supplement to Motion for Partial Summary Judgment. This motion asks the Court to grant summary judgment as to whether petitioner is liable for an addition to tax under section 6651(f) for fraudulently failing to file tax returns for tax years 2006, 2007, 2008, 2009, and 2010 (years at issue).
Unless otherwise noted, all section references are to the Internal Revenue Code of 1986, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Background
The following background is derived from the pleadings, respondent's motion, as supplemented, and the supporting exhibits attached thereto. We note that the background is stated solely for purposes of ruling on the pending motion and is not a finding of facts.
On February 20, 2013, petitioner was indicted on five counts of criminal tax evasion under section 7201 for failure to file a tax return for each of the years at issue. On November 8, 2013, a jury convicted petitioner on all counts. In a judgment entered on August 21, 2014, the United States District Court for the Western District of Texas sentenced petitioner to a prison term of 90 months, 36 months of supervised release including a prohibition on obtaining any government contract, and payment of restitution. On January 8, 2016, the Fifth Circuit Court of Appeals reversed the sentence handed down by the district court because it did not properly follow the sentencing guidelines. The Fifth Circuit remanded the case directing the district court to reconsider petitioner's prison term and to eliminate the government contract restriction. In a judgment entered on October 14, 2016, the district court re-sentenced petitioner to a term of 90 months, plus 36 months of supervised release and payment of restitution. The Fifth Circuit affirmed this judgment, and it is now final.
Discussion
The purpose of summary judgment is to expedite litigation and avoid costly, unnecessary, and time-consuming trials. Fla. Peach Corp. v Commissioner, 90 T.C. 678,681 (1988). We may grant a motion for summary judgment, or partial summary judgment regarding an issue, when there is no genuine dispute of material fact and a decision may be rendered as a matter of law. Rule 121(a)(2); Elec. Arts, Inc. v. Commissioner, 118 T.C. 226, 238 (2002). A partial summary judgment adjudication may be made even if it does not dispose of all the issues in the case. Rule 121(a)(1); Naftel v. Commissioner, 85 T.C. 527, 529 (1985). Furthermore, "[T]he party opposing summary judgment is to be afforded the benefit of all reasonable doubt, and any inference to be drawn from the underlying facts contained in the record must be viewed in a light most favorable to the nonmoving party." Barnhill v. Commissioner, 155 T.C. 1, 8 (2020) (citing Espinoza v. Commissioner, 78 T.C. 412, 416 (1982)). The nonmoving party "cannot rest upon the mere allegations or denials in his pleadings, but must set forth specific facts showing that there is a genuine dispute for trial." Dahlstrom v. Commissioner, 85 T.C. 812, 820-821 (1985); Rule 121(d).
Section 6651(a)(1) provides for an addition to tax in the case of any failure to file a return by the prescribed filing date unless the taxpayer shows that the delinquency is due to reasonable cause and not due to willful neglect. In the case of a fraudulent failure to file, the addition to tax equals 15% of the amount required to be shown on the delinquent return (reduced for any prepayments or credits under section 6651(b)(1)) for each month or fraction thereof during which the delinquency continues, not to exceed 75% in the aggregate. § 6651(f). Respondent bears the burden of proving fraud by clear and convincing evidence. § 7454(a); Rule 142(b); Clayton v. Commissioner, 102 T.C. 632, 646 (1994); Mohamed v. Commissioner, T.C. Memo. 2013-255, at *18.
Respondent has shown, and petitioner does not dispute, that he failed to file Federal income tax returns for the years at issue. Respondent argues that petitioner is collaterally estopped from contesting that such failure was fraudulent. In support of this argument, respondent relies on petitioner's conviction under section 7201 for knowingly and willingly failing to file an income tax return for the years at issue with the intent to evade and defeat income tax.
It is well-established that a conviction for criminal tax evasion under section 7201 collaterally estops a taxpayer from denying fraudulent intent under section 6663(a) or its predecessor section 6653(b) for the same year. See DiLeo v. Commissioner, 96 T.C. 858 at 885; see also Boettner v. Commissioner, T.C. Memo.1998-359, slip op. at 9-10 (pointing out that the elements of criminal tax evasion under section 7201 are virtually identical to the elements of the civil fraud penalty under former section 6653(b)). Similarly, a conviction under section 7201 based upon failure to file a return will constitute collateral estoppel for the fraudulent failure to file penalty under section 6651(f). See Madge v. Commissioner, T.C. Memo. 2000-370, slip op. at 8-9, aff'd, 23 Fed.Appx. 604 (8th Cir. 2001).
The district court entered a judgment of guilty against petitioner for knowingly and willfully failing to file income tax returns for the years at issue with the intent to evade and defeat income tax. Because this conviction under section 7201 conclusively establishes fraud for the years at issue, petitioner is collaterally estopped from denying that his failure to file tax returns for the years at issue was due to fraud.
Upon due consideration of respondent's motion and for cause, it is
ORDERED that respondent's Motion for Partial Summary Judgment, filed January 10, 2023, and supplemented on May 22, 2023, is granted in that petitioner is collaterally estopped from denying fraud for the years at issue for purposes of section 6651(f).