Opinion
12905-20
03-20-2024
CINDAT MANHATTAN HOTEL PORTFOLIO LLC, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Elizabeth A. Copeland Judge.
Respondent filed First, Second, and Third Requests for Admissions (collectively, Requests for Admissions) on June 30, 2021, November 14, 2022, and December 2, 2022, respectively. Petitioner did not file a written answer or objection to any of the Requests for Admissions within 30 days as required by Rule 90(c), so each matter set forth in the Requests for Admissions was deemed admitted.
All Rule references are to the Tax Court Rules of Practice and Procedure.
On February 6, 2023, Petitioner filed a Motion to Withdraw or Modify the Deemed Admitted Admissions Pursuant to Rule 90(f). On March 8, 2023, we denied the latter Motion without prejudice. On February 16, 2024, Petitioner filed a renewed Motion to Withdraw or Modify the Deemed Admitted Admissions Pursuant to Rule 90(f) (Motion to Withdraw), renewing its request to withdraw certain of its deemed admissions. Petitioner contends that "additional facts and items of proposed evidence have come about, and therefore Petitioner should not be subject to deemed admitted Admissions that are inconsistent with the evidence."
I. Rule 90(f) Overview
Rule 90(f) provides in relevant part:
Any matter admitted under this Rule is conclusively established unless the Court on motion permits withdrawal or modification of the admission. Subject to any other Court orders, withdrawal or modification may be permitted if the presentation of the merits of the case will be promoted thereby, and the party who obtained the admission fails to satisfy the Court that the withdrawal or modification
will prejudice that party in prosecuting the case or defending on the merits.
The first precondition to withdrawal of a deemed admission is that presentation of the merits of the case will be promoted, which we have interpreted "as requiring the moving party to indicate in his moving papers facts which tend to refute the substantive deemed admissions. . . . This can be accomplished by indicating facts or proposed evidence contrary to or inconsistent with those set forth in substantive deemed admissions." New v. Commissioner, 92 T.C. 1146, 1149 (1989) (quoting Chapoteau v. Commissioner, T.C. Memo. 1989-37, 56 T.C.M. (CCH) 1145, 1146-47). We also have stated that "the movant must show facts that tend to establish that an admission was erroneous. The bare assertion that admissions will be refuted is insufficient; the movant must demonstrate that a trial would serve the presentation of competing evidence." Om Prakash, M.D., P.C. v. Commissioner, T.C. Memo. 1990-106, 59 T.C.M. (CCH) 5, 8 (citations omitted). We may deny a taxpayer's motion to withdraw deemed admissions when it claims it has insufficient information to admit or deny facts of which it has personal knowledge. Wells v. Commissioner, T.C. Memo. 1996-147, 71 T.C.M. (CCH) 2543, 2548.
The second precondition to withdrawal of a deemed admission is that the party who obtained the admission will not be prejudiced. We have held that "[a] party will be prejudiced by the withdrawal of admissions if he has relied on them and will suffer delay, added expense, and additional effort because of the withdrawal." Morrison v. Commissioner, 81 T.C. 644, 649 (1983). We should not lightly weigh the burdens of establishing admissions for a party who properly uses Rule 90 to advance litigation initiated by the opposing party. Morrison, 81 T.C. at 648. But neither should we find prejudice merely because the party who obtained the admissions would need to pursue its case on the merits. Id. at 648-49. As we stated in Boso v. Commissioner, T.C. Memo. 1995-228, 69 T.C.M. (CCH) 2711, 2714 (quoting Brook Vill. N. Assoc. v. Gen. Elec. Co., 686 F.2d 66, 70 (1st Cir. 1982)):
The prejudice contemplated by the Rule is not simply that the party who initially obtained the admission will now have to convince the fact finder of its truth. Rather, it relates to the difficulty a party may face in proving its case, for instance, where a key witness is now unavailable or there is a "sudden need to obtain evidence with respect to the questions previously answered by the admissions."
II. Analysis of Petitioner's Requests for Withdrawal
Eleven of the deemed admissions that Petitioner seeks to withdraw each state that Petitioner did not make or receive certain payments. Petitioner asserts that it did in fact make or receive these payments but that the payments were made or received on its behalf by another entity. We understand Petitioner to be arguing that these 11 deemed admissions are misleading due to the ambiguity of the verbs "make," "transfer," and "receive." However, Petitioner has not indicated any facts or evidence showing that it made or received the payments at issue directly, rather than through some other entity or entities on its behalf. Therefore, we will deny Petitioner's request to withdraw these admissions, but with the understanding that the verbs "make," "transfer," and "receive" are to be understood as referring only to making, transferring, and receiving by Petitioner directly from its own account, rather than by other entities on its behalf.
Specifically, we refer to (1) paragraph 2 of Respondent's First Request for Admissions, (2) paragraphs 9-13, 17, 18 and 26 of Respondent's Second Request for Admissions, and (3) paragraphs 15 and 16 of Respondent's Third Request for Admissions.
For five of the deemed admissions, we agree with Petitioner that they could be misleading or inaccurate because they can be construed as calling for a legal conclusion as to the matter that is the heart of this controversy, whether a bona fide loan was made. For example, the references to Petitioner not making "any interest payments" in 2016 through 2019 could be misleading even with the qualification that such payments were not "directly" made. Respondent will not be prejudiced by the withdrawal of these admissions, because he has been on notice of their potential withdrawal since the Court's Order denying without prejudice Petitioner's previous Motion to Withdraw. We will grant Petitioner's Motion as to paragraphs 14, 19 and 20 of Respondent's Second Request for Admissions and paragraphs 11 and 14 of Respondent's Third Request for Admissions and deem them withdrawn.
Specifically, we refer to (1) paragraph 14, 19 and 20 of Respondent's Second Request for Admissions, and (2) paragraphs 11 and 14 of Respondent's Third Request for Admissions.
Another deemed admission that Petitioner seeks to withdraw states that "Petitioner did not have sufficient cash to make loan payments." Petitioner asserts that a partnership of which it was a partner periodically owed cash distributions to Petitioner and that this partnership paid Petitioner's interest payments on Petitioner's behalf instead of making the cash distributions to Petitioner. However, Petitioner does not contend that it ever personally held sufficient cash to make the loan payments required of it. Therefore, we will deny Petitioner's request to withdraw this admission, but with the understanding that the verb "have" is to be understood as referring only to personally holding cash rather than being entitled to it.
Specifically, we refer to paragraph 12 of Respondent's Third Request for Admissions.
Five of the deemed admissions that Petitioner seeks to withdraw each state that Mr. Gang Peng either "had discretion to direct payments" between certain entities or "had control over" certain entities. Petitioner has attached to its Motion to Withdraw various organizational documents indicating that Mr. Gang Peng did not have unilateral authority over any of the entities in question (perhaps other than Cindat Greenwich Street Ltd., prior to March 1, 2016). We are satisfied that these organizational documents tend to establish that the admissions are erroneous (other than as to Mr. Gang Peng's control over Cindat Greenwich Street Ltd., prior to March 1, 2016). As indicated above, Respondent will not be prejudiced by the withdrawal of these admissions, because he has been on notice of their potential withdrawal. We will grant Petitioner's Motion as to paragraphs 1, 2, 3, 5 and 6 of Respondent's Third Request for Admissions and deem them withdrawn.
Specifically, we refer to paragraphs 1, 2, 3, 5, and 6 of Respondent's Third Request for Admissions.
Upon due consideration, it is
ORDERED that Petitioner's Motion to Withdraw or Modify the Deemed Admitted Admissions Pursuant to Rule 90(f), filed February 16, 2024, is granted in part and denied in part, as set forth above.