United States District Court, E.D. New York
DONALD and ELIZABETH H. KEARNS, Plaintiffs,
UNITED STATES OF AMERICA, Defendant.
Douglas Robert Eisenberg, Esq., John Patrick Campbell, Esq., Schenck, Price, Smith, and King, LLP, Florham Park, NJ, for Plaintiffs.
Bartholomew Cirenza, Esq., U.S. Department of Justice, Tax Division, Washington, DC, for Defendant.
MEMORANDUM & ORDER
JOANNA SEYBERT, District Judge.
Plaintiffs Donald and Elizabeth H. Kearns ("Plaintiffs") commenced this action on June 18, 2013 against defendant the United States of America (the "Government" or "Defendant") seeking a partial tax refund for the 2006 tax year. The Government moves to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1), on the ground that this Court lacks subject matter jurisdiction due to Plaintiffs' failure to file a timely administrative claim for a refund. For the following reasons, the Government's motion is GRANTED.
In 2006, Mr. Kearns sold his interest in C&W Corporate Securities, LLC ("C&W"). (Compl. ¶ 8.) Plaintiffs allege that Mr. Kearns did not receive cash for the sale in 2006. Rather, Mr. Kearns only "received units from C&W... with an appraised value of $402, 055.00." (Compl. ¶ 8.) On or before April 15, 2007, Plaintiffs jointly filed their 2006 U.S. Individual Income Tax Return ("2006 Form 1040") with the Internal Revenue Service ("IRS"). (Compl. ¶ 7, Ex. A.) They reported the appraised value of the units from C&W as income on their 2006 Form 1040 and paid $143, 000.00 in federal income tax on the appraised value for the 2006 tax year. (Compl. ¶¶ 9-10.)
Plaintiffs further allege that on January 10, 2007, Mr. Kearns received "the cash for the units of C&W... in the amount of approximately $469, 773.00." (Compl. ¶ 11.) Plaintiffs apparently did not report this amount to the IRS on their 2007 Form 1040. On March 8, 2011, the IRS issued a Notice of Deficiency to Plaintiffs indicating that Plaintiffs failed to report the $469, 773.00 in cash received in 2007 and that Plaintiffs therefore owed an additional $153, 216.00 in taxes and $30, 643.20 in penalties and interest for the 2007 tax year. (Compl. ¶ 12, Ex. F.)
After receiving the Notice of Deficiency, Plaintiffs "contacted their accountant, John Giacchetti, CPA, and presented the Notice of Deficiency to him, " but Giacchetti "failed to contest the determination by the 90-day deadline set forth in the Notice of Deficiency." (Compl. ¶ 13.) However, on August 19, 2011, Giacchetti provided "a detailed written explanation to the IRS... requesting a reconsideration of the audit of the tax return for the [2007 tax year]...." (Compl. ¶ 13.) By letter dated January 3, 2012, the IRS denied Plaintiffs' request for reconsideration of the audit. (Compl. Ex. K.)
Plaintiffs next mailed a Form 843 Claim for Refund and Request for Abatement for the 2006 tax year to the IRS on November 13, 2012. (Compl. ¶ 17, Ex. H.) By letter dated March 22, 2013, the IRS advised Plaintiffs that the Form 843 was not actually included with the transmittal letter sent on November 13, 2013, (Compl. ¶ 18, Ex. I), and Plaintiffs re-sent a copy on March 27, 2013 (Compl. ¶ 19, Ex. J), which the Government claims it received on April 19, 2013 (Gov't's Br., Docket Entry 9, at 3).
Plaintiffs allege that the IRS has not made a determination with respect to their Form 843 Claim. (Compl. ¶ 20.) Accordingly, they commenced this action on June 18, 2013 seeking a tax refund for the $143, 000 they paid in federal income tax in 2006. They claim that, because a portion (i.e., $402, 055.00) of the cash proceeds received in 2007 (i.e., $469, 773.00) was reported as income received in 2006, the tax paid on the income reported in 2006 (i.e., $143, 000.00) should be credited against Plaintiffs' 2007 tax deficiency. (Compl. at 7.)
The Government has moved to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1), on the ground that this Court lacks subject matter jurisdiction due to Plaintiffs' failure to file a timely administrative claim for a refund. (Docket Entry 9.) This motion is currently pending before the Court.
The Court will first set forth the applicable legal standard before turning to the ...