Opinion
16277-16L
05-27-2022
KEVIN J. MIRCH & MARIE C. MIRCH, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Patrick J. Urda, Judge.
On February 1, 2022, the Commissioner filed a motion for leave to file first amended answer, seeking to assert certain estoppel-related defenses to some of the challenges to the notice of deficiency raised by petitioners Kevin J. and Marie C. Mirch. [Doc. 88 ¶ 3.] The parties have fully briefed the motion. After review, we will grant the Commissioner leave to amend.
Unless otherwise indicated, all "Doc." references are to the docket index in Docket No. 16277-16L, and all Rule references are to the Tax Court Rules of Practice and Procedure.
The Commissioner requests permission to amend his answer to add certain affirmative defenses in response to two arguments the Mirches purportedly raised during the course of the last six years of litigation: (1) that the IRS failed to send the notice of deficiency to the Mirches' last known address and (2) that IRS employees falsified records relating to the notice of deficiency, which he later specified was a reference to the Mirches' allegation that IRS employees altered the certified mail list showing when and where the IRS mailed the notice of deficiency. [Docs. 88, 93.] The Mirches respond, inter alia, that (1) they will be prejudiced by amendment at this stage and (2) the proposed amendment would be futile. [Docs. 91, 95.]
Generally, leave to amend a pleading is "given freely" when justice requires, based on the facts and circumstances viewed in light of sound reason and fairness. Rule 41(a); see also Law v. Commissioner, 84 T.C. 985, 990 (1985). This language mirrors that of Federal Rule of Civil Procedure 15(a), which courts have consistently found to "reflect a liberal attitude in favor of pleading amendments." Derksen v. Commissioner, 84 T.C. 355, 357 (1985); Curr-Spec Partners, LP v. Commissioner, T.C. Memo. 2007-289, 2007 WL 2768784, at *4, affd, 579 F.3d 391 (5th Cir. 2009).
When evaluating a motion for leave to amend, we consider factors including the timeliness of the motion, the reasons for the delay, and whether the moving party had sufficient prior opportunity to allege the matter contained in the requested amendment. Derksen, 84 T.C. at 358 n.7; Watkins v. Commissioner, T.C. Memo. 2014-197, at *11-12; Estate of Lee v. Commissioner, T.C. Memo. 2009-303, 2009 WL 4981328, at *3. Leave to amend may be withheld when there is undue delay, bad faith, prejudice resulting from the amendment, or a dilatory motive of the movant. See, e.g., Foman v. Davis, 371 U.S. 178, 182 (1962); Russo v. Commissioner, 98 T.C. 28, 31 (1992); Ho v. Commissioner, T.C. Memo. 2006-41, 2006 WL 626254, at *6. Leave to amend should not be granted where the taxpayer seeks to raise a futile argument. See Block v. Commissioner, 120 T.C. 62, 64 (2003); Russo, 98 T.C. at 31.
Consistent with the liberal standard governing amendments to pleadings, we will grant the motion to amend. Generally, the Commissioner seeks to assert various estoppel defenses to arguments based upon previous litigation between the parties. Although the Commissioner might have raised such defenses earlier, we do not believe that adding these particular defenses at this stage prejudices the Mirches. The defenses are rooted in the prior litigation, and the Mirches are well aware of the facts underlying the Commissioner's defenses and well positioned to respond. See, e.g., Minnick v. Commissioner, 611 Fed.Appx. 477, 478 (9th Cir. 2015), aff'g T.C. Memo. 2012-345, 2012 WL 6572443 (upholding Tax Court's grant of leave to amend answer where "the record show[ed] that [the t]axpayers were in fact aware of and prepared to argue" the issue at trial and had not demonstrated "that they suffered any prejudice as a result of the Commissioner's delay in amending the answer"). Moreover, this case has not been scheduled for trial, and the Mirches will have ample opportunity to reply to the new pleading (and prepare a response for trial). See; Ax v. Commissioner, 146 T.C. 153, 169 (2016) ("[W]here . . . the non-moving party is given adequate time . . . to respond to the new pleading, there is no prejudice."); Curr-Spec Partners LP v. Commissioner, 2007 WL 2768784, at *5 ("We also note that the instant case was not scheduled for trial when [taxpayer] filed its motion [to amend].").
Nor is it obvious that the defenses that the Commissioner seeks to assert are futile, as the Mirches suggest. Although we are not persuaded of the futility of the Commissioner's arguments at this stage, we stress that our ruling does not mean that the Commissioner has established the affirmative defenses. And the Mirches will have a full opportunity to argue (by dispositive motion and at trial) that the defenses do not apply here.
It is therefore
ORDERED that the Commissioner's motion for leave to file first amended answer, filed February 1, 2022, is granted, and the Clerk of Court is directed to file the first amended answer lodged with the Commissioner's motion [Doc. 89] as of the service date of this Order.