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United States v. Martynuk

United States District Court, S.D. New York

January 26, 2015

GEORGE MARTYNUK, et al., Defendants.



From 2002 through 2009, Defendants George Martynuk and Rosemary Martynuk (the "Martynuks"), a married couple, failed to pay the total amount of their tax liabilities. The United States of America (the "Government") filed this action to reduce to judgment the tax assessments of the Internal Revenue Service (the "IRS"), and to foreclose federal tax liens against the Martynuks' property - namely, shares in a cooperative apartment building located on Manhattan's Upper East Side (the "Property"). Because there is no material dispute of fact regarding the Martynuks' tax liabilities or the validity of the tax liens, the Government's motion for summary judgment is granted.


A. Factual Background

The Martynuks are the owners of 595 shares of the capital stock of Guardsmans Tenants Corporation ("Guardsmans"). (Gov't 56.1 ¶ 1). These 595 shares represent the full ownership interest for Unit 3G (the "Apartment") in the cooperative apartment building located at 64 East 94th Street, New York, New York 10128. ( Id. at ¶ 2). The Martynuks are the assignees of the proprietary lease for Unit 3G. ( Id. at ¶ 3).

George Martynuk resides with his family in Greentown, Pennsylvania, on the weekends, and spends his weekdays in Manhattan. (Martynuk Decl. ¶¶ 3-5). While in Manhattan, he resides in and conducts his business from the Apartment. ( Id. at ¶ 5). Martynuk relates that having an apartment in Manhattan is necessary because his work as an opera agent requires that he attend auditions, performances, and receptions, and stay in close contact with opera houses. ( Id. at ¶ 6). Because he often meets with singers and attends rehearsals late into the night, he could not maintain his current business from his family home in Pennsylvania. ( Id. ).

The IRS made assessments jointly and severally against the Martynuks for deficiencies in the payment of federal income taxes for the each of the taxable years from 2002 through 2009 (the "Tax Years"). (Gov't 56.1 ¶ 4; Gould Decl. ¶¶ 2-10 & Ex. 1). The deficiency assessments for the Tax Years are based on income that was self-reported by the Martynuks on their federal income tax returns for the Tax Years. (Gov't 56.1 ¶ 5). Interest and penalties have continued to accrue over time with respect to the Martynuks' joint and several tax liabilities for the Tax Years. ( Id. at ¶ 27).

The Martynuks have suffered personal and professional setbacks that have purportedly prevented them from paying their taxes liabilities in full. ( See Martynuk Decl. ¶¶ 9-10). Rosemary Martynuk, once an opera singer, was injured in a car accident in 2006. ( Id. at ¶ 8). The injuries from the accident ended her career as a singer, and resulted in "staggering" medical bills, which the Martynuks paid off at the expense of the IRS and other creditors. ( See id. at ¶¶ 8, 12). George Martynuk's business has suffered from the closing of many opera houses in recent years, which unsurprisingly makes his representation of opera singers less profitable. ( See id. at ¶ 9). Additionally, one of his "premier" clients - opera tenor Jerry Hadley - committed suicide in 2008. ( Id. ). Finally, the Martynuks' attempt to resolve their tax liabilities was impeded when, in 2011, they hired a tax resolution firm called "Tax Tiger, " which reportedly took a $2, 500 retainer from the Martynuks but did nothing to resolve or settle the Martynuks' liabilities. ( Id. at ¶¶ 10-11).

The IRS has made numerous attempts to collect the taxes owed by the Martynuks for the Tax Years, but has been unable to collect from the Martynuks the full amount of their federal tax liabilities. (Gov't 56.1 ¶ 26). Efforts to collect the unpaid assessments have included: (i) service of notice and demand, in accordance with 26 U.S.C. § 6303; (ii) issuance of notices of intent to levy, pursuant to 26 U.S.C. § 6320; (iii) issuance of multiple levies to banks and other income sources, which yielded little or no results; and (iv) multiple telephone and written contacts to attempt to bring the Martynuks into compliance. (Gould Decl. ¶ 24).

The IRS examined all of the assets belonging to the Martynuks for collection potential. (Gould Decl. ¶ 25). Based on this examination, including the review of financial statements submitted by the Martynuks, the IRS determined that the Martynuks' interest in the Property offered the only means of recovering the delinquent taxes. ( Id. ). To that end, the IRS has recorded Notices of Federal Tax Lien ("NFTLs") in New York County, New York, against the Martynuks for deficiencies in payment of their federal tax liabilities for each of the Tax Years. (Gov't 56.1 ¶¶ 30-38).

As of March 31, 2014, the Martynuks' joint and several income tax liabilities for the Tax Years is $394, 759.92, a figure that includes unpaid federal taxes, interest, penalties, and other additions. (Gov't 56.1 ¶ 28). Interest will continue to accrue on these amounts until the liabilities are satisfied or until the penalties reach the maximum accrual total. ( Id. at ¶ 29).

The Martynuks have proposed an installment agreement, which would require them to pay $500 to the IRS per month. (Dunn Decl. ¶ 3; see also Martynuk Decl. ¶¶ 16-17). The IRS rejected this proposal because, inter alia , the Martynuks' financial statements did not indicate an ability to make such payments; the Martynuks had failed to make estimated tax payments for 2013 or the first quarter of 2014;; and the Martynuks were not eligible for an installment agreement under IRS rules because they have an asset - the Property - that can be liquidated to satisfy (at least in part) their obligations. (Supp. Gould Decl. ¶¶ 4-9; see also Dunn Decl. ¶¶ 2-11).

B. Procedural Background

The Government commenced this action on June 13, 2013, by filing a Complaint. (Dkt. #1 ("Compl.")). The Complaint named, as Defendants, the Martynuks, Self Reliance (New York) Federal Credit Union (the "Credit Union"), Guardsmans, and John Does 1-10 - parties the Government believes may have, or may claim to have, interest in the sale of the Property. (Compl. ¶¶ 5-9). The Government filed an amended complaint on December 12, 2013, to add Capital One Bank ("Capital One") as a Defendant. ( See Dkt. #28 (Amended Complaint) ¶ 9).

The Martynuks initially proceeded pro se , but retained counsel in late 2013. They appeared through counsel at a pretrial conference on November 12, 2013. ( See Dkt. #21, 26). During the conference, the Martynuks argued that the IRS was required, but had failed, to exhaust reasonable collection alternatives before initiating an administrative levy on or lien foreclosure proceeding with respect to the Martynuks' primary residence. ( See Dkt. #26). The Court requested and received additional briefing on this issue from the parties. (Dkt. #26, 27, 37, 38). On February 18, ...

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