101749 (W.D.Ark); O'Kane v. United States, 1990 U.S. Dist. LEXIS 8700, 1990 WL 294241 (D.Idaho).
In Lindsey, rather than accept information offered by the plaintiff that could have resolved a levy dispute, the IRS expressly refused to consider relevant information and invited the plaintiff to bring a wrongful levy action in the district court. Lindsey, 1992 U.S. Dist. LEXIS 3588, at *2, 1992 WL 101749 *1. Significantly, the court applied 26 C.F.R. § 301.7430-1 to the case. The court, however, held that the plaintiff had satisfied the exhaustion of administrative remedies requirement based on the futility of complying with the C.F.R. as proven by the statements of the IRS. In this case, the court agrees that 26 C.F.R. § 301.7430-1 sets forth the administrative remedies available to the plaintiff in the IRS. However, the court cannot point to any statement of the IRS refusing to consider information, or directing the plaintiff to file a wrongful levy action in the district court. In short, the IRS did not demonstrate that pursuing the administrative remedies of 26 C.F.R. § 301.7430-1 would be futile.
In O'Kane, the pursuit of administrative remedies was found to be futile when the IRS filed an answer in the district court action, and thus took a position contrary to that of the plaintiff. O'Kane, 1990 U.S. Dist. LEXIS 8700, at *4, 1990 WL 294241 *1. This court, however, declines to follow the reasoning of the O'Kane court.
Under O'Kane, a plaintiff could avoid compliance with any administrative remedies in a dispute with the IRS simply by commencing an action and awaiting an answer by the IRS. If the IRS defaulted, the plaintiff would recover. If the IRS answered, the plaintiff would be relieved of the obligation to exhaust administrative remedies because such compliance would have been futile. Such post hoc reasoning is contrary to the express terms of 26 C.F.R. § 301.7430-1(d). That subsection states that the plaintiff must comply with the dictates of the section "prior to filing an action in a court of the United States ..." 26 C.F.R. § 301.7430-1(e)(1).
The court agrees with the reasoning in Rosenbaum v. IRS, 615 F. Supp. 23 (N.D.Ohio 1985). In Rosenbaum, the court applied 26 C.F.R. 301.7430-1 to the dispute between the IRS and the plaintiff, noting that compliance with the regulation would have required very little effort on the part of the plaintiff. 615 F. Supp. at 25. Moreover, the plaintiff, who was found to have prevailed, was held to compliance with the regulation notwithstanding the fact that the IRS imposed the levy before a thorough investigation. Id.
In this case, the IRS expressly stated that the nominee issue needed to be resolved. Although the district counsel states in its September 1, 1994 letter that it is the IRS' position that Edith LiButti's father had an ownership interest in the horse, the district counsel also states that "if Mr. LiButti disclaims any ownership ... in the horse then I would suggest that the Service would be unable to evaluate the merits of any offer submitted until the nominee issue is resolved." There is no evidence to suggest that the IRS refused to accept proof relating to the nominee issue. Nor is there any evidence before the court that the district director or district counsel had taken the position that the nominee issue was decided. This amounted to an invitation to the plaintiff to seek such a determination. The court cannot conclude that the government left "the taxpayer no alternative other than a judicial remedy ..." Weiss v. Commissioner, 850 F.2d 111, 115 (2d Cir. 1988). The plaintiff could have sought a determination through the IRS.
The plaintiff sought have the matter resolved in the district court, and prevailed. In so doing, however, the plaintiff failed to comply with the minimal requirements of 26 C.F.R. § 301.7430-1(d), which now forecloses the plaintiff from an award of litigation costs. The plaintiff has failed to show ant clear legal error or manifest injustice that will result from the court's October 30, 1995 memorandum-decision and order. Accordingly, the court decision of October 8, 1995 will not be reconsidered.
For the foregoing reasons, the plaintiff's motion for reconsideration is DENIED.
IT IS SO ORDERED.
Dated December 21, 1995
at Binghamton, New York
Thomas J. McAvoy
Chief U.S. District Judge