Opinion
Civil Action No. CV-02-3955 (DGT).
February 4, 2004
MEMORANDUM ORDER
Pro se plaintiff Irwin Sternberg ("Sternberg" or "plaintiff") brought this action against the Internal Revenue Service ("IRS" or "defendant"), seeking a refund of taxes he paid for the 1997 tax year, and a release from taxes still owed for that year. On June 12, 2003, defendant's motion to dismiss for lack of jurisdiction was denied. Defendant then moved on June 25, 2003 to dismiss the complaint for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). By court order dated December 2, 2003, defendant's motion to dismiss was converted to a Rule 56 motion for summary judgment pursuant to Fed.R.Civ.P. 12(c). For the reasons set forth below, defendant's motion is granted.
The court's order ordered the IRS to comply with Local Civil Rule 12.1's directive to serve and file a notice required by Local Civil Rule 56.2 (Notice to Pro Se Litigants Opposing Motions to Dismiss or for Judgment on the Pleadings Treated as Motions for Summary Judgment). Although no such notice was served on Sternberg and filed with this court, it appears that the objective of the Rule was nonetheless met. Based on Sternberg's submissions dated January 15, 2004, it is apparent that he understood the documentation submitted by the IRS on January 6, 2004 and the consequences of failing to rebut such evidence. Because this omission was not fatal to Sternberg's case, the court will proceed to evaluate the merits of the IRS's summary judgment motion. See, e.g., Moon v. Amherst Records, Inc., No. 96 Civ. 8108, 2000 WL 1041666, at *2 n. 2 (S.D.N.Y. July 27, 2000) (addressing merits of summary judgment motion despite defendants' failure to serve pro se plaintiff with a Local Civil Rule 56.2 Notice because plaintiff was not prejudiced in any way.)
Background
In 1990, Sternberg retired from the Harris Company. See Pltf's Aff. in Opp. to Def's Mot. ("Pltf's Aff.") Ex. 1D. In July 1990, Sternberg received a lump-sum distribution of $147,512 from his employer's section 401(k) plan and rolled over this distribution into an Individual Retirement Account ("IRA") within the statutory 60-day period. Id.In 1997, Sternberg withdrew from his IRA $211,007 — the original rollover of $147,512 plus deferred earnings from 1990 to 1997. Id. His tax return for the 1997 tax year showed a tax liability of $40,956, primarily the result of a withdrawal of the $211,007 from his IRA. See Form 1040, annexed to letter of David M. Steiner ("Steiner Letter") dated 1/6/04.
Sometime thereafter, Sternberg re-read the printed instructions accompanying IRS Form 1040 and "became aware of IRS Publication 590 and Form 8606 which were to be used in the determination of taxable distributions from Individual Retirement Accounts." Compl. at 1. On this Form 8606 ("Nondeductible IRAs"), Sternberg treated the original rollover of $147,512 as a nondeductible contribution to his IRA. See Pltf's Aff. Ex. 1B. After following the remaining instructions on Form 8606, Sternberg calculated his taxable IRA distribution for 1997 as being $83,347, not $211,007. Id. Based on this new number, Sternberg then filed an amended Form 1040 tax return in June 2000 which reported a total tax assessment of only $1,819 for the 1997 tax year. Id. Ex. 1C. Accordingly, Sternberg claimed that the IRS owed him $36,741 in overpaid taxes. Id. Ex. 1A.
By letter dated August 9, 2000, the IRS disallowed Sternberg's amended tax return on the grounds that, under I.R.C. § 408(d), the IRA distribution taken in 1997 was fully taxable. Id. Ex. 1D. Sternberg appealed the decision, contending that, under IRS Publication 590, the 401(k) money that had been rolled over into his IRA in 1990 was "not only nondeduct[i]ble, but contributed, by any definition," thereby making his 1997 tax liability only $1,819. See Letters from Irwin Sternberg dated 9/26/00 and 12/13/00, annexed to Steiner Letter. By letter dated February 8, 2001, the IRS Appeals Office disallowed Sternberg's requested adjustment, finding that Sternberg's contention was without merit. See Letter from Robert A. Rosenblatt dated 2/8/01. annexed to Steiner Letter. On July 1, 2002, Sternberg filed the instant suit.
Discussion
On a motion for summary judgment, the moving party bears the burden of showing the absence of a genuine issue of material fact. See B.F. Goodrich v. Betkoski, 99 F.3d 505, 521 (2d Cir. 1996). "[A]ll inferences from the underlying facts must be drawn in the non-movant's favor." Id. Once the moving party has met its burden, "[t]he non-movant may defeat summary judgment only by producing specific facts showing that there is a genuine issue of material fact for trial." Samuels v. Mockry, 77 F.3d 34, 35 (2d Cir. 1996). The court's function is to determine whether genuine issues of fact exist, not to decide them: "`Its duty, in short, is confined at this point to issue-finding; it does not extend to issue-resolution.'" B.F. Goodrich, 99 F.3d at 522 (quoting Gallo v. Prudential Residential Svcs., 22 F.3d 1219, 1224 (2d Cir. 1994)).
There is no genuine issue of fact with respect to Sternberg's tax liability. Both parties agree that Sternberg rolled over $147,512 from his employer's 401(k) into an IRA in 1990 without having to pay tax on the 401(k) distribution. Both parties also agree that, in 1997, Sternberg received a distribution of $211,007 (the original rollover plus earnings from 1990 to 1997) from the IRA, and reported the distribution as taxable on his 1997 tax return. Under the Internal Revenue Code, if "any amount . . . distributed from an individual retirement or individual retirement annuity" is paid to the owner of the annuity, and the entire amount is then or rolled over into an individual retirement account within 60 days, the amount distributed is not subject to income tax at that time. 26 U.S.C. § 402(c); 26 C.F.R. § 1,408 4(b). IRS Publication 575 also makes clear that an individual who withdraws cash from a qualified retirement plan can defer tax on the distribution by rolling it over to another qualified retirement plan or a traditional IRA. See IRS Publication 575 at 25 (2003). Ultimately, however, "any amount actually paid or distributed . . . from an individual retirement account . . . shall be included in the gross income of the payee or distributee for the taxable year in which the payment or distribution is received." 26 C.F.R. § 1.408-4(a)(1).
Furthermore, IRS Form 8606 and the accompanying instructions in IRS Publication 590 are not statutory exceptions to this rule, as these pertain to "nondeductible contributions" to an IRA — i.e., annual contributions to an IRA which are ineligible for a deduction on that year's tax return. See IRS Publication 590 at 16 (2003). Here, Sternberg has erroneously characterized his $147,512 rollover in 1990 as a nondeductible contribution to his IRA, when the relevant statutes, regulations, and publications establish that the rollover only deferred the taxes that he would have owed had he elected to keep the 401(k) distribution.
Conclusion
For the foregoing reasons, defendant's motion for summary judgment is granted in its entirety. The Clerk of the Court is directed to close the case.SO ORDERED.