"Assignment of Benefits" in which he agreed to assign the first
$45,000 of the "third division I receive in connection with the
Estate of my stepfather, Edward O. Hynard, to my stepbrother,
Paul Hynard, as and for the recovery of a debt to Paul, which I
hereby acknowledge." Rifkin Decl. Ex. E; Brackney Decl. Ex. A at
On June 12, 1992, Edward O. Hynard died. Rifkin Decl. Ex. I;
Brackney Decl. Ex. A at 28. Plaintiff testified that he learned
that he would not receive any money from the estate of Edward O.
Hynard sometime in 1994. Brackney Decl. Ex. A at 30. Plaintiff
further claims that Edward O. Hynard's estate was probated in
1998-1999. Id. Plaintiff claims that he did not receive any
distribution from Edward O. Hynard's estate and Vicha Hynard
never paid him $45,000. Id. at 28-30.
In August of 1998, the IRS sent a notice of levy to Astoria
Federal Savings & Loan and to plaintiff at P.O. Box 1102, Middle
Island, New York, 11763. Rifkin Decl. Ex. N. The Notice of Levy
notified plaintiff that a total of $9,504.48 representing due
and owing tax liability for 1988 and 1989 would be levied from
his bank account. Id. On August 27, 1998, plaintiffs bank,
Astoria Federal Savings and Loan Association, sent plaintiff a
copy of the Notice of Levy. Rifkin Decl. Ex. N and O; Brackney
Decl. Ex. A at 43-44. In August of 1998, plaintiff was
incarcerated at the Groveland Correctional Facility, but
plaintiff failed to notify the IRS that he was at a different
address. Brackney Decl. Ex. A at 45, 48-49.
On October 2, 1998, the IRS levied plaintiffs personal
checking account at Astoria Federal Savings and Loan in the
amount of $1,729.06 for unpaid taxes, interest, and penalties
for the 1988 tax year and $7,7175.42 for unpaid taxes, interest,
and penalties for the 1989 tax year. Rifkin Decl. at ¶¶ 15, 33.
Prior to filing this suit on November 7, 2001, plaintiff had
paid his full tax liability for the 1988 and 1989 tax years.
Rifkin Decl. ¶¶ 19, 37 (as of October 22, 2001, plaintiffs
accounts for 1988 and 1989 had a zero balance).
STANDARD FOR SUMMARY JUDGMENT
A party is entitled to summary judgment when there is no
"genuine issue of material fact" and the undisputed facts
warrant judgment for the moving party as a matter of law.
Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In addressing a
motion for summary judgment, "the court must view the evidence
in the light most favorable to the party against whom summary,
judgment is sought and must draw all reasonable inferences in
[its] favor." Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538
(1986). Whether any disputed issue of fact exists is for the
Court to determine. Balderman v. United States Veterans
Admin., 870 F.2d 57, 60 (2d Cir. 1989). The moving party has
the initial burden of demonstrating the absence of a disputed
issue of material fact. Celotex v. Catrett, 477 U.S. 317, 323,
106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once such a showing has
been made, the non-moving party must present "specific facts
showing that there is a genuine issue for trial." Fed.R.Civ.P.
56(e). The party opposing summary judgment "may not rely on
conclusory allegations or unsubstantiated speculation." Scotto
v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998). Moreover, not
every disputed factual issue is material in light of the
substantive law that governs the case. "Only disputes over facts
that might affect the outcome of the suit under the governing
law will properly preclude summary
judgment." Anderson, 477 U.S. at 248, 106 S.Ct. 2505.
Applying this standard, plaintiffs motion for summary judgment
must be denied and defendants' cross-motion granted.
PLAINTIFF IS NOT ENTITLED TO A BAD DEBT DEDUCTION
Plaintiff appears to claim that he is entitled to a bad debt
deduction of $3,000 for the 1988 tax year and $3,000 for the
1989 tax year.*fn1 Brackney Decl. Ex. A at ¶¶ 5(a)-(g), 5(k),
6(a)-(d), Ex. B at 23-24, 36-38, 50-52; Rifkin Decl. Ex. D, M.
However, the undisputed facts show that plaintiff has failed to
establish the elements of either a business or a nonbusiness bad
debt under 26 U.S.C. § 166. Therefore, defendants are entitled
to summary judgment on this issue and plaintiffs motion for
summary judgment should be denied.
A. Plaintiff Bears the Burden of Proof that He Is Entitled
to a Deduction
The burden of proof with respect to a claimed tax deduction
rests upon the taxpayer. Wisely v. United States,
893 F.2d 660, 666 (4th Cir. 1990) ("deductions are a matter of
legislative grace, and the taxpayer seeking the benefit of a
deduction must show that every condition which Congress has seen
fit to impose is fully satisfied"). Likewise, the burden of
proof with respect to a bad debt deduction is on the taxpayer.
Davis v. C.I.R. 866 F.2d 852, 859 (6th Cir. 1989) (citing
Welch v. Helvering, 290 U.S. 111, 115, 54 S.Ct. 8, 78 L.Ed.
212 (1933)). To meet this burden, a taxpayer must, as a matter
of law, make an affirmative showing supported by specific
evidence that he is entitled to the challenged deductions.
LaBow v. Comm'r of Internal Revenue, 763 F.2d 125, 131-32 (2d
Cir. 1985) (taxpayer "must always make an affirmative showing,
based on `specific evidence' and not just the `taxpayer's
unsupported statement,' that he is entitled to a deduction")
(quoting Hintz v. Commissioner, 712 F.2d 281, 286 (7th Cir.
B. Plaintiff Is Not Entitled to a Bad Debt Deduction
Debts owed to a taxpayer which become worthless during the
taxable year are deductible from gross income pursuant to
Section 166 of the Internal Revenue Code. 26 U.S.C. § 166. A
business bad debt is
fully deductible from ordinary income, however, a nonbusiness
bad debt of a non-corporate taxpayer is treated as a short-term
capital loss. Marrin v. C.I.R., 147 F.3d 147, 150 (2d Cir.
1998); 26 U.S.C. ¶ 166(d)(1). Section 1211(b) restricts the
deduction for capital losses of a non-corporate taxpayer to the
$3,000. Marrin, 147 F.3d at 150; 26 U.S.C. § 1211(b).
Plaintiff does not state whether he is entitled to a bad
business or a bad nonbusiness debt deduction. I conclude that
the so-called debt was a nonbusiness debt. Plaintiff did not
attempt to deduct the $45,000 debt in full; rather, he claimed a
$3,000 deduction for both the 1988 and 1989 tax years, which is
more consistent with a nonbusiness bad debt deduction. Moreover,
the document that allegedly gives rise to the debt has nothing
to do with any trade or business. The April 26, 1987,
"Assignment of Benefits," which plaintiff identifies as the
written agreement memorializing this debt, states:
I, Vicha Hynard, hereby agree to assign the first
FORTY-FIVE THOUSAND and 00/100 DOLLARS ($45,000.00)
of the third division I receive in connection with
the Estate of my stepfather, Edward O. Hynard, to my
stepbrother, PAUL HYNARD, as and for the recovery of
a debt to Paul, which I hereby acknowledge.
Rifkin Decl. Ex. E. Plaintiff claims that his step-brother
signed the above-described document after shooting him. Brackney
Decl. Ex. A at 25-27.