Opinion
17771-21
07-26-2022
DENNIS LEE SIMPSON, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Ronald L. Buch Judge
This is a deficiency case in which Mr. Simpson challenges the Commissioner's deficiency and penalty determinations for tax years 2012 and 2013. Currently pending before the Court is Mr. Simpson's Motion to Strike filed pursuant to Rule 52. In this motion, Mr. Simpson requests that the Court strike from the record: (1) the Commissioner's response to the Court's Order to Show Cause; and (2) any statement pertaining to the magazine subscription business that is not related to tax years 2012 and 2013. Because these matters are in dispute and relevant to this proceeding, we will deny this motion.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times and all Rule references are to the Tax Court Rules of Practice and Procedure.
BACKGROUND
On August 2, 2021, the Commissioner sent Mr. Simpson a notice of deficiency for years 2012 and 2013, determining deficiencies of $7,203,670 and $1,916,763 for 2012 and 2013, respectively. The Commissioner also determined a civil fraud penalty for each year.
Mr. Simpson timely petitioned the Court to challenge the Commissioner's determinations. In his petition and amended petitions, he alleges that determinations are incorrect and that they are barred by the statute of limitations. The Commissioner alleges that the period of limitations remains open under the exception for a false or fraudulent return. See I.R.C. § 6501(c).
Mr. Simpson's case is one of five related cases before the court. These five cases relate to the operation of a subscription mailer business in Oregon in 2012 and 2013. Being that these cases are related, the Court sought the parties' views on whether to consolidate them. Although one of the parties never responded to the Court's order, no party objected. In responding to the Court's order, the parties that responded provided their perspective on the underlying facts that show the interrelatedness of these cases. Among his allegations, the Commissioner alleged that the magazine subscription business operated in a deceptive manner for many years prior and subsequent to the years at issue.
See Noel M. Parducci & Kenneth L. Parducci v. Commissioner, Docket No. 20894-19; Jeffrey D. Hoyal & Lori D. Hoyal v. Commissioner, Docket No. 6791-20 ; Crater Lake Trust, David Hoyal, Trustee, v. Commissioner, Docket No. 10830-20; Scenic Trust, Premier Trust, Inc., Trustee, v. Commissioner, Docket No. 17749-21; and Dennis Lee Simpson v. Commissioner, Docket No. 17771-21.
Soon after the Court ordered the cases to be consolidated, Mr. Simpson filed a Motion to Strike under Rule 52. In his motion, he asks the Court to strike from the record the Commissioner's response to the Order to Show Cause. Mr. Simpson argues that the response should be stricken because (in his view) it contains improper allegations and unrelated issues that were not requested by the Court in its Order to Show Cause. He provides examples of statements that he has denied and that he believes were made to prejudice the Court. Mr. Simpson also asks the Court to strike "all statements pertaining to the magazine subscription business that are not related to the filing of tax years 2012 and 2013, or to the accounting amortization issue." Mr. Simpson argues that those statements should be stricken because they are not related to the tax years before the Court.
He filed his motion only in his own case and not in any of the cases that are consolidated with his case. For future reference, if Mr. Simpson intends that a document be filed in any of the cases that are consolidated with his case, he will need to file it in each docket.
Mr. Simpson also asks the Court to allow evidence showing that he overpaid federal taxes in 2012 and 2013. The Court makes no determination on this issue because it is not pertinent to the Motion to Strike. We note, however, that Mr. Simpson did not raise the issue of an overpayment in his petition, first amended petition, or second amended petition.
DISCUSSION
Rule 52 provides that the Court may strike from any pleading "any insufficient claim or defense or any redundant, immaterial, impertinent, frivolous, or scandalous matter." Rule 52 was derived from Rule 12(f), Federal Rules of Civil Procedure (FRCP). Note to Tax Court Rule 52, 60 T.C. at 1093 (1973). Accordingly, the principles enunciated by the Federal Courts in the interpretation and application of FRCP 12(f) are applicable here. Allen v. Commissioner, 71 T.C. 577, 579 (1979); See Rule 1(b) (providing that the Court may give particular weight to the FRCP "to the extent that they are suitably adaptable to govern the matter at hand").
A motion to strike should only be granted in limited circumstances. In Estate of Jephson v. Commissioner, 81 T.C. 999 (1983), this Court set forth various principles to consider when deciding a motion to strike.
Matter will not be stricken from a pleading unless it is clear that it can have no possible bearing upon the subject matter of the litigation. A motion to strike should be granted only when the allegations have no possible relation to the controversy. When the court is in doubt whether under any contingency the matter may raise an issue, the motion should be denied. If the matter that is the subject of the motion involves disputed and substantial questions of law, the motion should be denied and the allegations should be determined on the merits. In addition, a motion to strike will usually not be granted unless there is a showing of prejudice to the moving party.Jephson, 81 T.C. at 1000-01 (internal quotation marks and citations omitted).
The material Mr. Simpson seeks to strike does not meet the standard to be stricken. We do not strike disputed material that is relevant to the controversy. Although Mr. Simpson argues that the statements are improper and are being used to distract the Court from the real issues of the proceeding, the statements the Court is being asked to strike are directly related to the underlying facts of the related cases. Mr. Simpson is merely disputing the Commissioner's fraud claim by alleging that the assertions made in relation to the claim are immaterial, impertinent, or frivolous because he disagrees with them or their relevance. See Allen, 71 T.C. at 579 ("To the extent that petitioner asserts that the fraud bases of such allegation, is frivolous, he is merely testing the factual bases of such allegation, or, as Rule 52 puts it, the sufficiency of the claim or defense."). These are factual disputes that should be determined on the merits. We will not strike them. Accordingly, it is
ORDERED that Mr. Simpson's Motion to Strike filed July 1, 2022, is denied.