Opinion
32212-15 21530-16 2241-18
10-05-2023
DENNIS M. CURTIN, ET AL., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Ronald L. Buch Judge
Before us is Mr. Curtin's Motion for Judgment on the Pleadings, filed July 27, 2023, in which he argues that, because it is undisputed that he was a bona fide resident of the United States Virgin Islands in 2013, that he cannot, as a matter of law, be liable for the Net Investment Income Tax (NIIT) under section 1411. But the Commissioner disputes, and disputed in his answer, that Mr. Curtin was a bona fide resident of the USVI in 2013. As a result, we will deny Mr. Curtin's motion.
Background
Mr. Curtin filed a tax return with the Virgin Island Bureau of Internal Revenue (VIBIR) for 2013. The Commissioner mailed a notice of deficiency to Mr. Curtin, in which the Commissioner determined a tax deficiency of $2,660,747 plus additions to tax for failure to file, failure to pay, and failure to make estimated tax payments. The notice of deficiency included the following passage:
17.b. Net investment income Tax
Due to the adjustments in this notice for the taxable year ended December 31, 2013, it is determined that you are subject to the net investment income tax under section 1411 of the Internal Revenue Code. Accordingly, your tax liability is increased in the amount of $5,726.00 for the taxable year ended December 31, 2013. See Exhibit J.
Exhibit J shows how that increase in the tax liability was calculated.
Mr. Curtin filed a petition challenging the Commissioner's determination. In his petition, Mr. Curtin makes several assertions regarding his status as a bona fide USVI resident for 2013. We will quote them at length.
5. The determination of the tax set forth in the Notice of Deficiency is based upon the following errors, as described in the Form 5278 issued by the
Commissioner:
a. That Petitioner was required to file an income tax return with Respondent for either the tax year ending December 31, 2012 or the tax year ending December 31, 2013 (collectively, the "tax years in question");
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e. That Petitioner was required to make any estimated tax payments to the Respondent during either of the tax years in question;
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j. That Respondent is permitted to issue a notice of deficiency against a bona fide resident of the USVI without regard or reference to the tax return filed by that bona fide resident with the USVI;
k. That Respondent is permitted to assess or collect tax from a bona fide resident of the USVI except and unless that bona fide resident has failed to report an item of income on his or her tax return filed with the BIR;
l. That Respondent can assess a tax against a bona fide resident of the USVI without alleging a deficiency in the tax return filed by that bona fide resident with the BIR;
m. That Petitioner is not permitted to be a bona fide resident of the USVI for the purpose of receiving income tax credits available for bona fide residents of the USVI;
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p. That Respondent can assess a failure to file penalty against a bona fide resident of the USVI who filed an income tax return with the BIR on a timely basis;
q. That Respondent can assess a failure to pay penalty against a bona fide resident of the USVI who filed an income tax return with the BIR on a timely basis;
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6. Petitioner relies upon the following facts:
a. During the tax years in question, Petitioner was a bona fide resident of the USVI.
b. Respondent has never alleged that Petitioner was not a bona fide resident of the USVI during the tax years in question.
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j. Partners in TEAM who are bona fide residents of the USVI are eligible lawfully to claim benefits under the USVI Economic Development Program on their personal income tax return, because TEAM holds a certificate from the Economic Development Commission.
k. The USVI is permitted to allow bona fide residents of the USVI a reduced tax rate on income sourced to the USVI under Section 934(b) of the Internal Revenue Code of 1986, as amended.
With the exception of statement 6.k., the Commissioner denied every one of these statements. (Statement 6.k. is a statement of law that the Commissioner neither admitted nor denied.) With the exception of statement 6.k., the Commissioner denied every statement in the Petition that merely contained the words bona fide resident or a variation thereof. And the specific statement that "Petitioner was a bona fide resident of the USVI," the Commissioner denied.
On July 27, 2023, Mr. Curtin filed a Motion for Judgment on the Pleadings. In his Motion, Mr. Curtin begins,
There is no dispute in this case as to whether the Petitioner was a bona fide resident of the USVI during the 2013 Tax Year. The NOD does not allege that the Petitioner filed his income tax return for the 2013 Tax Year (the Petitioner's "2013 Tax Return") in the wrong location when he filed it with the Virgin Islands Bureau of Internal Revenue (the "BIR") and does not allege that the Petitioner had an income tax filing obligation with the Respondent for the 2013 Tax Year. Because the Respondent does not allege that the Petitioner was required to file his 2013 Tax Return with the Respondent, the Petitioner cannot, as a matter of law, be liable for the NIIT.
Mr. Curtin's Motion continues,
Paragraph 6.a. of the Petition alleges that the Petitioner was a bona fide resident of the USVI for the 2013 Tax Year. While the Respondent's Answer denies this for lack of sufficient information, the Respondent alleges, and the Petitioner admits, that Petitioner's income tax return for the 2013 Tax Year was filed with the Virgin Islands Bureau of Internal Revenue (the "BIR") on or about October 15, 2014. The Respondent does not allege in the NOD or Answer that the Petitioner was required to file an income tax return with the Respondent for the 2013 Tax Year.
And further,
There is no dispute, based on the pleadings that the Petitioner filed his only required 2013 Tax Return with the BIR and he was not required to file any return with the United States.
Rather than confront the standards for judgment on the pleadings, the Commissioner argues that Mr. Curtin is foreclosed from challenging the NIIT and that the standards for summary judgment have not been met.
Discussion
Rule 120(a) permits any party, after the pleadings are closed but within such time as not to delay the trial, to move for judgment on the pleadings, which is based solely on the allegations and information contained in the pleadings and not on any outside matters. Nis Family Trust v. Commissioner, 115 T.C. 523, 537 (2000). The movant must show that the pleadings do not raise a genuine issue of material fact and that he or she is entitled to a judgment as a matter of law. Id.
The pleadings plainly show a genuine issue of material fact as to the issues that are central to Mr. Curtin's Motion. Mr. Curtin's Motion states that there is no dispute as to whether he was a bona fide USVI resident in 2013, but his Petition makes that allegation (para. 6.a.), and the Commissioner denied it. It is plainly in dispute. Mr. Curtin's Motion states that the Commissioner does not allege that Mr. Curtin has a United States return filing obligation, but his Petition makes that same allegation (para. 5.a.), and the Commissioner denied it. It is plainly in dispute.
Not only does Mr. Curtin's Motion misrepresent what the Commissioner admitted and denied, but Mr. Curtin's Motion is inconsistent with his own Petition. In his Motion, Mr. Curtin states that the notice of deficiency does not allege that he had a U.S. return filing obligation. But the very first error Mr. Curtin assigns to the notice of deficiency is that he was required to file a U.S. return (para. 5.a.).
Conclusion
A judgment on the pleadings is appropriate when the pleadings show that there is no genuine dispute between the parties. The dispute between the parties is clear from the pleadings, accordingly, it is
ORDERED that Mr. Curtin's Motion for Judgment on the Pleadings is denied.