Opinion
Civil No. H-05-185.
October 26, 2005
MEMORANDUM AND ORDER
Before the Court in this proceeding to establish the federal individual income tax liability of Defendants Robert L. Goldstein and Susan Quick Goldstein, to reduce certain federal individual income tax assessments against Defendants to judgment, and to foreclose the federal tax lien on certain real property owned by Defendants is the United States' Motion for Summary Judgment against Defendants Robert L. Goldstein and Susan Quick Goldstein (Document No. 10). Defendants filed a Response and Opposition to Plaintiff's Motion for Summary Judgment (Document No. 16) and the United States' Reply to Defendants' Opposition to United States' Motion for Summary Judgment (Document No. 17) was subsequently filed in reply to Defendants' response.
On May 25, 2005, pursuant to the parties' unanimous consent, this case was transferred to the undersigned Magistrate Judge for all further proceedings. See Document No. 14.
This case was commenced by the United States at the direction of the Attorney General of the United States of America to reduce certain individual income federal tax assessments against Defendants to judgment and to foreclose the federal tax lien on certain real property owned by Defendants. The property made the basis of this suit (hereinafter referred to as "the property") and the United States' Motion for Summary Judgment is as follows:
5555 Del Monte Drive, #1304, Houston, Texas
Legal Description: All those certain parcels of property and premises consisting of the hereinafter described apartment, parking space, or garage and storage area and the undivided 0.483 percentage ownership interest in the common elements, hereinafter collectively called an apartment unit, located in and being part of that certain condominium apartment project located in Houston, Harris County, Texas, to wit:
Unit 1304 on the 13th level of the south tower, parking space No. 630 and 631 and storage area -146 of the St. James Condominium all according to the declaration and by-laws recorded in Volume 22, Page 1 of the Condominium Records of Harris County, Texas, and the first amendment thereto filed for record in Volume 64, Page 119 of the Condominium Records of Harris County, Texas, and in Volume 106, Page 66 and Volume 115, Page 3 of the Condominium Records of Harris County, Texas.
Defendants attempt to raise several issues which they claim create a genuine issue of material fact. First, Defendants dispute the validity of the IRS transcripts used to establish the 1991 federal individual income tax liabilities of Defendants. Defendants further argue that the statute of limitations for collection expired on December 28, 2002, and thus the United States filed the instant suit too late to recover. Finally, Defendants argue that the federal tax lien filed by the Internal Revenue Service (IRS) on January 3, 2005 is void and prohibited by statute.
The United States notes that tax liability for 1991 is not disputed by Defendants. See Document No. 11. Defendants do not contend in their response that liability is disputed, only that the transcripts do not validly establish such liability. See Document No. 16.
The Court agrees with the United States that the IRS transcript effectively establishes the 1991 federal individual income tax liabilities of Defendants. When a taxpayer fails to produce any evidence to the contrary, official IRS transcripts provide presumptive proof of a valid assessment. See United States v. McCallum, 970 F.2d 66, 71 (5th Cir. 1992). Defendants argue that the transcript fails to specify a tax year. However, it is clear from the Certificate of Official Record certifying the transcript, and the transcript itself, that the 1991 tax year is addressed by the transcript. Therefore, the transcript provided by the IRS establishes the liabilities of Defendants in the amount of $24,682.86 in unpaid assessments (not including interest and accrued penalties).
According to the transcript dated April 26, 2005, Defendants' total liability is $69,286.83 as of May 9, 2005.
Next, the Court finds that the United States timely filed a complaint in the instant suit. Defendants argue that the statute of limitations had expired prior to the time the complaint was filed. The statute of limitations for collection of federal income tax assessments is ten years. 26 U.S.C. § 6502(a). An assessment for the amount of tax due on the 1991 tax return was made against Defendants on December 28, 1992. Despite Defendants' argument that November 18, 1992, should be considered the assessment date, the transcript lists that date as the date the return was received, and December 28, 1992, as the date when taxes were assessed. See McCallum, 970 F.2d at 68 (noting that Treas. Reg. § 301.6203-1 governs when an assessment is made and finding an assessment only when the correct form is signed).
Section 6503 provides for the suspension of the running of period of limitations whenever the Secretary is prohibited from making assessments or collections. The period is tolled during the duration of a bankruptcy proceeding as follows:
(h) Cases under title 11 of the United States Code. — The running of the period of limitations provided in section 6501 or 6502 on the making of assessments or collection shall, in a case under Title 11 of the United States Code, be suspended for the period during which the Secretary is prohibited by reason of such case from making the assessment or from collecting and —(1) for assessment, 60 days thereafter, and
(2) for collection, 6 months thereafter.
§ 6503(h). Defendants filed a Chapter 13 bankruptcy proceeding on January 27, 1993, which was later dismissed on August 25, 1994 (entered on August 26, 1994). Upon the filing of bankruptcy, the United States was prohibited from collecting Defendants' 1991 tax liability by the automatic stay imposed by 11 U.S.C. § 362(a)(6). In addition, under Section 6503(h), the period of limitations was suspended while the bankruptcy proceeding was pending, or for one year and 210 days, plus an additional six months after dismissal of that proceeding. Beginning with an assessment date of December 28, 1992, and adding one year and 210 days, brings the start of the limitations period to August 26, 1994, and by adding the additional six months provided for by statute, the ultimate start of the limitations period began on January 24, 1995. The ten-year statute of limitations prescribed by Section 6502 allows the United States to make collections until January 24, 2005. The United States timely filed its complaint on January 20, 2005, before the running of the statutory period of limitations.
Some courts itemize their suspension of the period of limitations calculations. See United States v. Maxwell, 330 F. Supp. 1253 (N.D. Tex. 1971). For purposes of clarification, this Court will do the same when calculating the correct period of limitations in this case:
December 28, 1992 — December 31, 1992 = 4 days January 1, 1993 — January 27, 1993 (bankruptcy filed) = 26 days February 25, 1995 — December 31, 1995 (dismissal + 6 months) = 309 days January 1, 1996 — December 31, 2004 = 3287 days January 1, 2005 — January 20, 2005 = 19 days
This amounts to a total of 3645 days, and the United States had a total of 3650 days or ten years to file suit. Note for calculation purposes that the following years were leap years: 1992, 1996, 2000, and 2004.
Finally, the Court agrees that the federal tax lien in favor of the United States is valid, and encumbers the real property of Defendants as described above. Due to the neglect or failure of Defendants Robert L. Goldstein and Susan Quick Goldstein to pay in full the assessments based on their 1991 tax return, after giving notice and demand, and pursuant to 26 U.S.C. § 6321, a lien arose in favor of the United States upon all property in which Defendants have an interest, including the real property at issue in this suit. Section 6321 provides:
If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.
Such lien arises at the time the assessment was made, and continues until the liability for the assessed amount or judgment against the taxpayer arising from such liability is satisfied or it becomes unenforceable due to a lapse of time. 26 U.S.C. § 6322. As determined above, Defendants are liable for the outstanding balance on their 1991 federal individual income tax return. Additionally, the lien is not unenforceable by lapse of time, as the duration of the lien is linked to the same period of limitations governing the collection of the original tax assessment. See 26 U.S.C. § 6502. Therefore, the United States was entitled to file, or refile, its Notice of Federal Tax Lien against Defendants with the County Clerk of Harris County, Texas, in order to perfect the federal tax lien against any competing liens. See 26 U.S.C. § 6323.
Defendants vaguely argue that the Revenue Reconciliation Act of 1998 and/or The Restructuring and Reform Act of 1998 prohibit the refiling of a lien for a successive ten year period. See Document No. 16. However, the Court finds that the original statutory period to file had not expired, and further, that it is extended by the timely filing of suit to collect on the 1991 federal income tax liabilities of Defendants. Defendants offer no statutory authority for the premise that a federal tax lien cannot be refiled for a successive ten year period. Instead, the Court reads 26 U.S.C. § 6323 as allowing a federal tax lien to be refiled. Delayed refiling affects only the priority of the lien against competing liens; it does not affect the validity.
Once the United States acquired the lien on all of the Goldstein's property pursuant to 26 U.S.C. § 6321, the United States was also entitled to file an action in Federal District Court to enforce its lien:
(a) Filing. — In any case where there has been a refusal or neglect to pay any tax, or to discharge any liability in respect thereof, whether or not levy has been made, the Attorney General or his delegate, at the request of the Secretary, may direct a civil action to be filed in a district court of the United States to enforce the lien of the United States under this title with respect to such tax or liability or to subject any property, of whatever nature, of the delinquent, or in which he has any right, title, or interest, to the payment of such tax or liability. . . .
(b) Parties. — All persons having liens upon or claiming any interest in the property involved in such action shall be made parties thereto.
(c) Adjudication and decree. — The court shall, after the parties have been duly notified of the action, proceed to adjudicate all matters involved therein and finally determine the merits of all claims to and liens upon the property, and, in all cases where a claim or interest of the United States therein is established, may decree a sale of such property, by the proper officer of the court, and a distribution of the proceeds of such sale according to the findings of the court in respect to the interests of the parties and of the United States. . . .
§ 7403(a), (b), (c). Therefore, the federal tax lien is valid and the United States is entitled to foreclose on such lien.
Because none of Defendants' arguments have any merit, it is
ORDERED that United States' Motion for Summary Judgment against Defendants Robert L. Goldstein and Susan Quick Goldstein (Document No. 10) is GRANTED.