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Roberts v. Internal Revenue Service

December 28, 2006


The opinion of the court was delivered by: Marrero, District Judge


Plaintiff Eli Mason Roberts ("Roberts"), brought this claim pro se against defendants the Internal Revenue Service ("IRS"), IRS employees Mary Hannah ("Hannah") and Diane Herndon ("Herndon"), former IRS employee Lynne Walsh ("Walsh") (collectively the "IRS Defendants"), and against defendant National Financial Services, LLC ("NFS"). Roberts's complaint arises out the IRS's assessment and collection of income tax allegedly owed by Roberts in relation to a sale of AOL Time Warner stock during the tax year 2002. Before the Court are the IRS Defendants' and NFS's motions to dismiss Roberts's complaint. For the reasons discussed below, both motions are GRANTED.



Roberts's claims against NFS arise out of NFS's action in reporting a sale of stock by Roberts to the IRS. Roberts alleges that the IRS advised him that NFS reported the proceeds received by Roberts in 2002 for a sale of stock in AOL Time Warner to the IRS as "income." (Complaint, dated Feb. 24, 2006 ("Compl."), at 4; Plaintiff's Amended Response to Defendant National Financial Services [sic] Motion to Dismiss the Complaint ("Pl.'s Res. to NFS"), at 1 (asserting that NFS "made it look like a gain").) Roberts claims, and the Defendants do not deny, that this sale of stock actually resulted in a loss to Roberts since the value of AOL Time Warner had decreased since Roberts purchased the stock. Roberts's complaint also states that he had "never heard of [NFS]" prior to this dispute with the IRS, which began in 2004, since he "buy[s][his] stock through Fidelity Brokerage Services." (Compl. at 4.) However, Roberts's subsequent filings concede that he received a notice about the report to the IRS which contained NFS's name "at the top of the page along with Fidelity Brokerage Services." (Pl.'s Opp'n at 1.) Roberts does not clearly specify the cause of action he is claiming against NFS, and he does not ask for any type of relief from NFS.

Roberts's claims against the IRS Defendants arise out of the dispute between Roberts and the IRS concerning the amount of tax owed by Roberts for the tax year 2002. After receiving the report from NFS regarding the sale of Roberts's AOL Time Warner stock, the IRS notified Roberts of the new information it had received in an attempt to determine the tax consequences of the sale.

Although Roberts characterizes this correspondence as a "notice from the [IRS] that I owed them $9,333.00," (Compl. at 1), the notice is clearly an invitation for Roberts to challenge the proposed changes to his 2002 tax return by responding to the notice. ( See Compl. at Exhibit A.) The notice states only that "[the IRS is] proposing changes to [Roberts's] 2002 tax return" and that the "notice requires a response." ( Id. at 1.) The first page also provides steps for Roberts to follow if he disagreed with the proposed changes, including "[e]nclos[ing] a signed statement explaining each change you disagree with and why you disagree" and "[i]nclud[ing] any supporting documents you wish us to consider." ( Id.) The second page of the notice shows that the IRS is proposing to increase Roberts's taxable income by $23,807 relating to income from securities. ( Id. at 2.) The third page of the notice states that "[the IRS] used the zero cost basis because [it was] not able to determine the cost or adjusted basis of the stock sold" and requests Roberts to "[p]lease provide the date you acquired the assets and the cost or adjusted basis for your asset." ( Id. at 3.) Finally, page five of the notice contains a list of "information [used] to determine [the IRS's] tax proposal" and the first item listed is $23,741 for a sale of AOL Time Warner securities reported by NFS. ( Id. at 5.)

Roberts did not follow the steps outlined in the IRS notice. However, Roberts states that he called the IRS numerous times, and even visited its Manhattan office once, but was not able to convince the IRS that the sale of AOL Time Warner stock was not income. After numerous subsequent notices, the IRS eventually levied several of Roberts's personal accounts to satisfy his alleged tax indebtedness and the associated penalty fees and interest charges. Soon afterwards, the IRS issued Roberts a refund check for amounts levied in excess of the amount due. (Memorandum of Law in Support of IRS Defendants' Motion to Dismiss, dated July 31, 2006 ("IRS Mem."), at 4.) Subsequent to the filing of this case, the IRS sent Roberts another refund check for the funds collected in relation to the sale of the AOL Time Warner stock. ( See id., at 4 n. 4.) At a conference before this Court, Roberts acknowledged that he had in fact been refunded this money.*fn1 ( See Hearing Transcript (May 19, 2006), at 20:17-21.)

Roberts alleges that the various IRS defendants engaged in fabrication, fraud, threats, deception, lying, embezzlement, plunder, theft, harassment, and stealing. Roberts further claims that the process used to levy his accounts was unconstitutional because "[t]he notice [of levy] did not give any elaborations about how, when or where [the levy would occur] and neither what the levy action would be on," (Compl. at 25, accord id. at 31), and because the IRS did not file a petition with a court naming Roberts as a defendant and allowing him to defend the petition before the levy occurred. Roberts alleges that the actions of the IRS Defendants' repeatedly violated the "right to know clause" and "fair notice act" of the United States Constitution. ( Id. at 1, 2-3, 25, 27 & 31.)

Roberts asks for relief as follows:

I pray for a judgment [sic] against the [IRS], Diane Herndon and Lynne Walsh, to award me exemplary damages of $2,000,000 because of the extra losses I endured and because of damages beyond the actual losses. Also because of criminal procedures that was [sic] imposed upon me by the defendants and which led [sic] as a punishment against me for no reason.

I pray for a judgment [sic] against the [IRS], Diane Herndon and Lynne Walsh to award me punitive damages of $2,000,000 because of fabricated lies the defendants use to impose a harsh and a severe punitive taxation on me.

I pray for a judgment [sic] against the [IRS], Diane Herndon and Lynne Walsh to award me compensatory damages of $2,000,000 as an instance or means for the emotional harm and embarrassment I suffered while among bank personnel who I felt that they [sic] assumed that I was guilty of tax evasion, no matter how much I tried to explain my position of innocense [sic]. I also pray for this award to be given to make up for all the losses and emotional injury.

The total judgment I pray for is $6,000,000, which is a small amount compared to the amount of over-all damages the Internal ...

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