Opinion
33045-21S
02-21-2023
MONIQUE E. FRANCO, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Adam B. Landy Special Trial Judge
This case is calendared for trial at the Court's Phoenix, Arizona, trial session scheduled to commence on March 13, 2023. On October 20, 2021, Ms. Franco timely filed the Petition in this case seeking review of a Notice of Deficiency (notice) issued to her for taxable year 2018 (year in issue). The notice proposes adjustments for unreported income, the disallowance of certain deductions, and the assertion of the civil fraud penalty under section 6663. In the petition, Ms. Franco contests the imposition of the civil fraud penalty on the basis that her spouse and his sister filed an amended tax return without her knowledge or consent. Ms. Franco argues that her signature was forged on this amended tax return which claimed additional deductions and an increased overpayment for the year in issue. Petitioner further seeks innocent spouse relief under section 6015 for the year in issue.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times and all Rule references are to the Tax Court Rules of Practice and Procedure.
On January 24, 2022, the Commissioner filed an Answer denying Ms. Franco's factual allegations and affirmatively alleging the imposition of the civil fraud penalty on the basis that Ms. Franco fraudulently: understated her taxable income; overstated itemized deductions and did not provide documentation to support the claimed deductions; improperly claimed earned income tax credits; overstated income tax withholdings; and made implausible and inconsistent statements on current and past tax return filings. Petitioner did not file a Reply to the Answer. On April 13, 2022, the Commissioner filed a Motion for Entry of Order that Undenied Allegations in Answer be Deemed Admitted Pursuant to Rule 37(c). Petitioner did not file a response to the motion or a Reply to the Court's June 21, 2022, Order. The Commissioner's Rule 37(c) motion was granted on August 19, 2022.
On January 6, 2023, the Commissioner filed a Motion for Summary Judgment, attaching a declaration and exhibits executed by his counsel, contending that there are no genuine issues of material fact, and he is entitled to summary adjudication on all issues, including the civil fraud penalty, based on the deemed admitted factual statements pursuant to Rule 37(c). Ms. Franco failed to file an objection to the motion.
Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Florida Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Either party may move for summary judgment regarding any legal issues in controversy. Rule 121(a). The Court may grant summary judgment only "if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits or declarations, if any, show that there is no genuine dispute as to any material fact and that a decision may be rendered as a matter of law." Rule 121(b); Naftel v. Commissioner, 85 T.C. 527, 529 (1985). As the moving party, the Commissioner bears the burden of demonstrating that there is no genuine dispute of material fact. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judgment, we draw factual inferences and resolve reasonable doubt in Ms. Franco's favor as the nonmoving party. FPL Group, Inc. v. Commissioner, 115 T.C. 554, 559 (2000); Espinoza v. Commissioner, 78 T.C. 412, 416 (1982).
Section 6663 provides that a taxpayer shall be liable for a penalty of 75% of any underpayment of tax attributable to fraud. The burden of proof is on the Commissioner to establish fraud with the intent to evade tax by clear and convincing evidence. See § 7454(a); Rule 142(b); Parks v. Commissioner, 94 T.C. 654, 660 (1990). The Commissioner may satisfy this burden by demonstrating: (1) that Ms. Franco underpaid her taxes for the year at issue; and (2) that some part of the underpayment was due to fraud. See DiLeo v. Commissioner, 96 T.C. 858, 886 (1991). The presence of fraud is a factual question to be determined by examining the entire record. Parks, 94 T.C. at 660.
The Commissioner's motion is denied because there is a factual dispute surrounding fraud, which is a question of fact. Summary judgment is inappropriate when fraudulent intent is a material fact that is genuinely in dispute. See Espinoza, 78 T.C. at 417 ("Ordinarily, summary judgment should not be granted in a case in which intent is an issue."); Shiosaki v. Commissioner, 61 T.C. 861, 864 (1974) ("A conclusion as to the petitioner's intent should not be reached without the benefit of a trial in which [her] demeanor can be observed and [her] credibility can be weighed."). Ms. Franco's contentions that an amended return was filed without her knowledge, that her signature was forged on this amended return, and that she is entitled to innocent spouse relief are material issues of fact that are in dispute. Consequently, the Commissioner's motion cannot be granted.
Upon due consideration of the Commissioner's motion and for cause, it is ORDERED that the Motion for Summary Judgment, filed January 6, 2023, is denied.