control of EMI, insisting that no checks other than checks for payroll and recurring obligations could be issued without his approval. J. Ex. 37; Tr. 643.
47. However, through April, 1982, Beeler maintained some control over EMI. Tr. 975. Then, in May, 1982, Ross became more involved with authorizing payment of bills, requested job descriptions for each employee, and exercised significant control over the real estate operations as he and Beeler were negotiating the end of their partnership. Tr. 137, 321, 784; J. Exs. 52, 53, 54, 55; Pl's. Exs. 27, 52; Beeler Aff. P 31.
48. In July, 1982, Ross instructed the bookkeeping department to cease paying Beeler's secretary. Beeler Aff. P 38; Pl.'s Ex. 30.
49. By August 5, 1982, Ross was closely involved in the management of the Equidyne properties. Tr. 366-67, 643-44.
50. Ross eventually took over the management of EMI and the Equidyne properties. After Ross effectively took over the management, the partnerships continued to collect rents. Tr. 367. Ross decided not to pay EMI's outstanding payroll taxes, even though there was sufficient money to do so, because he decided that he could not be held personally liable for the payroll taxes. Tr. 404-06, 420-21, 540-41, 544-47. Ross told Liebmann that no one would have to pay the taxes. Tr. 847-48, 888-89.
51. Ross and Beeler dissolved their partnership effective November 1, 1982, when Beeler moved out of the Equidyne offices. Beeler Aff. P 42.
52. When Beeler ceased working for the Equidyne entities in the Fall of 1982, Ross created General American Management Corporation ("GAMC") to take over EMI's management duties at the Equidyne properties. Tr. 324-25, 644; Beeler Aff. P 43.
53. GAMC was a subsidiary of General American Corporation, which Ross and his family owned and which Ross controlled. Tr. 47-49; 324-25, 644-45.
54. Ross controlled GAMC and structured the management function of GAMC so that each Equidyne property filed its own payroll tax returns. Tr. 179-80, 216-17, 644-45.
55. At the time Ross discontinued EMI's operations, EMI held accounts receivable from the partnerships in the form of unreimbursed and unpaid management fees. Tr. 421-22; Beeler Aff. PP 43, 46.
56. Liebmann continued to work with Ross until February, 1983. Tr. 606, 715.
57. In March, 1983, Ross transferred $ 146,000 in limited partnership investment funds from the general partner of the partnerships, Equidyne Properties, to General American Properties, an affiliate of General American Corporation, rather than transferring the funds to EMI to pay the taxes. Tr. 183-88, 590-92; Beeler Aff. P 47; Pl.'s Ex. 36.
E. The Penalties:
58. On or about October 13, 1983, the IRS notified Beeler, Ross and Liebmann of the proposed assessment of a one hundred percent penalty in the amount of $ 96,781.04 pursuant to 26 U.S.C. § 6672, for the failure to collect, truthfully account for, and pay over to the IRS the EMI employees' FICA (Federal Insurance Contributions Act) and federal income tax withholdings for the second, third, and fourth quarters of 1981 and the first, second, and third quarters of 1982. Stip. Fact 33; J. Exs. 72, 73, 74.
59. On or about March 26, 1985, the IRS assessed a one hundred percent penalty in the amount of $ 60,773.19 against Beeler, Ross, and Liebmann, pursuant to 26 U.S.C. § 6672, for the unpaid tax liabilities of EMI for the second, third, and fourth quarters of 1981 and the first quarter of 1982. Stip. Fact 34. Liabilities for the second and third quarters of 1982 were erroneously left off the assessment. Stip. Fact 34.
60. On or about July 16, 1985, Beeler paid $ 124.28 toward his penalty assessment and filed a claim with the IRS for a refund of the money applied to the assessment and for an abatement of the assessment. Stip. Fact 35. On May 8, 1986 and July 24, 1986, the IRS applied amounts seized from Beeler pursuant to levy procedures, $ 4,300.50 and $ 187.54, respectively, toward his penalty assessment. Stip. Fact 36.
II. LIABILITY UNDER 26 U.S.C. § 6672:
Sections 3102(a) and 3402(a) of the Internal Revenue Code require an employer to withhold FICA and income taxes from the wages of its employees. 26 U.S.C. §§ 3102(a), 3402(a). Pursuant to § 7501(a) of the Code, "Whenever any person is required to collect or withhold any internal revenue tax from any other person and to pay over such tax to the United States, the amount of tax so collected or withheld shall be held to be a special fund in trust for the United States." 26 U.S.C. § 7501(a). IRS regulations require that such trust funds be paid over to the IRS on a quarterly basis. 26 C.F.R. § 31.6011(a)-1, § 31.6011(a)-4; see United States v. Rem, 38 F.3d 634, 641 (2d Cir. 1994). If an employer withholds trust fund taxes, but fails to pay them over to the United States, its employees are credited with payment of the taxes nonetheless and the Government must look elsewhere for their recovery. Fiataruolo v. United States, 8 F.3d 930, 938 (2d Cir. 1993).
Section 6672 of Title 26 of the United States Code provides a means by which the Government may recover trust fund taxes that an employer has failed to pay over. It establishes a penalty equal to the amount of the unpaid taxes that may be imposed on those persons who are responsible for the tax delinquency. Fiataruolo, 8 F.3d at 938. Section 6672 provides:
Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.
26 U.S.C. § 6672(a). Thus, given a valid assessment of unpaid withholding taxes, the elements of a claim under § 6672(a) for imposition of a penalty for unpaid withholding taxes are (1) that the individual be a person responsible for the collection and payment of withholding taxes, and (2) that the individual's failure to comply with the statute was willful. See Rem, 38 F.3d at 642; Hochstein v. United States, 900 F.2d 543, 546 (2d Cir. 1990). Individuals seeking to avoid liability under the statute bear the burden of proving by a preponderance of the evidence the absence of one or both of these elements. Rem, 38 F.3d at 643; United States v. McCombs, 30 F.3d 310, 318-319 (2d Cir. 1994); Hochstein, 900 F.2d at 546.
Courts have referred to persons required to "collect, truthfully account for, and pay over any tax" as responsible persons. See, e.g., Rem, 38 F.3d at 642; Slodov v. United States, 436 U.S. 238, 246 n.7, 56 L. Ed. 2d 251, 98 S. Ct. 1778 (1978). A person may be a "responsible person" without being the most responsible person. See Hochstein, 900 F.2d at 547. An individual need not "'have the final word as to which creditors should be paid'" as long as the person has significant control over the disbursement of funds. Rem, 38 F.3d at 642 (quoting Hochstein, 900 F.2d at 547 (quoting Gephart v. United States, 818 F.2d 469, 475 (6th Cir. 1987)); Fiataruolo, 8 F.3d at 939.
More than one individual may be a responsible person within the meaning of § 6672(a). Rem, 38 F.3d at 642. However, under long-standing administrative practice, the IRS "'collects the amount of unpaid trust fund taxes only once, whether collected in part or in whole from each responsible person and/or corporate employer.'" Bradley v. United States, 936 F.2d 707, 711 (2d Cir. 1991) (quoting In re Technical Knockout Graphics, Inc., 833 F.2d 797, 799 (9th Cir. 1987)); Brown v. United States, 591 F.2d 1136, 1142-43 (5th Cir. 1979). Thus, responsible persons are to be held jointly and severally liable for the amount of any one hundred percent penalty. Sinder v. United States, 655 F.2d 729, 732 (6th Cir. 1981); Brown, 591 F.2d at 1142.
To give effect to the revenue collection purpose of the statute, the courts have taken a "broad view" of who qualifies as a "responsible person" within the meaning of § 6672. Rem, 38 F.3d at 642 (quoting Fiataruolo, 8 F.3d at 938); Barnett v. IRS, 988 F.2d 1449, 1454 (5th Cir.), cert. denied, 126 L. Ed. 2d 448, 114 S. Ct. 546 (1993). Responsibility under section 6672 "is a matter of status, duty and authority." Fiataruolo, 8 F.3d at 939 (citations omitted). Although determinations of responsibility and willfulness under § 6672 are often very fact-specific and can be made only in view of the totality of the relevant circumstances, there are several general principles to be considered. In Rem, the Court of Appeals summarized general principles that apply:
It is not necessary that the individual in question have the final word as to which creditors should be paid in order to be subject to liability under this section. The determinative question is whether the individual has significant control over the enterprise's finances. No single factor is dispositive in evaluating whether the individual had significant control; that determination must be made in light of the totality of the circumstances. Relevant considerations include whether the individual: