Opinion
No. C 98-04241 SBA
March 25, 2002
JUDGMENT
In accordance with the Court's Findings of Fact and Conclusions of Law, IT IS HEREBY ORDERED that final judgment is entered in favor of Plaintiff United States of America against Defendant Richard A. Gabel in the amount of $96,620.00, plus interest and statutory additions, as provided by law. IT IS FURTHER ORDERED THAT final judgment is entered in favor of Plaintiff United States of America against Defendant Iris A. Gabel in the amount of $58,441.00, plus interest and statutory additions, as provided by law.
EVIDENTIARY RULINGS, FINDINGS OF FACT, AND CONCLUSIONS OF LAW
This matter came on trial before the Court. Having heard, read and considered all of the evidence admitted and the parties' arguments and being fully informed the Court hereby overrules Defendant's evidentiary objections and makes the following findings of fact and conclusion of law.
I. BACKGROUND STATEMENT
On November 5, 1998, Plaintiff Internal Revenue Service ("IRS"), filed a complaint to reduce assessments against Defendants Richard and Iris Gabel ("Gabels") to judgments and foreclose tax liens against certain real property. On June 25, 2001, the Court granted Defendants' motion to dismiss the claims relating to foreclosing the tax liens. On November 27, 2001, Defendants moved to dismiss the complaint for lack of subject matter jurisdiction. On December 18, 2001, the Court denied Defendants' motion.
The parties have stipulated that Defendants Richard and Iris Gabel did not pay Federal income taxes for the years 1989, 1990, 1991, and 1992, and have further stipulated to the income taxes and penalties due for these years in question. The only issue to be resolved at trial was whether the IRS failed to properly assess the taxes and penalties.
II EVIDENTIARY RULINGS
A. Admission of Certificate of Assessments, Payments, and Other Specified Matters (Forms 4340)
The Government has moved into evidence the Certificates of Assessments, Payments, and Other Specified Matters ("Forms 4340") for Richard L. Gabel covering his individual income taxes for the years ending December 31, 1989, December 31, 1990, December 31, 1990, and December 31, 1992 (Govt's Exs. 1-4) and for Iris A. Gabel covering her individual income taxes for the years ending December 31, 1989, December 31, 1990, December 31, 1991, and December 31, 1992 (Govts' Exs. 5-8). In their post-trial briefs, Defendants appear to renew their objection to the introduction of this evidence on the grounds that there is no foundation and that the documents are hearsay. The Court OVERRULES the objection.
The Government introduced the testimony of Mary K. Jones, "In Court Witness Coordinator" for the IRS. Ms. Jones also serves as the custodian of records for the Fresno Service Center. Ms. Jones testified concerning the contents of Form 4340s and how they are generated. While she did not generate the Form 4340s for Defendants Richard A. Gabel and Iris A. Gabel which the Government has moved into evidence, she did verify the accuracy of the Forms by comparing them to the Individual Master File accessed from Martinsburg, West Virginia which contains information on taxpayer's individual accounts. The Court finds that Ms. Jones is competent to testify concerning the authenticity, preparation, and accuracy of the Form 4340s and that there is adequate foundation to introduce them into evidence.
Defendants argue that the Form 4340s should not be admitted because the IRS did not provide the documents until recently. The Court previously denied Defendants' motion in limine to exclude the forms on the basis of timeliness. Additionally, Defendants argue that it is impossible for a taxpayer to get further documentation — i.e., "supporting documents" — to verify the accuracy of an assessment. According to Defendant Richard Gabel, he made every effort to obtain information from the IRS both through discovery requests in the present litigation as well as Freedom of Information Act ("FOIA") requests. Defendants contend they never received adequate information. They conclude that because they were unable to obtain the information necessary to rebut the presumption of validity of the Form 4340s, the Form 4340s should be inadmissible.
Other than a perfunctory introductory statement, Defendants did not argue in their motion in limine that the Form 4340 should be excluded because it was not timely produced. The Form 4340 was provided at least as early as December 4, 2001, when the IRS attached the Form 4340 with its Opposition to Defendants' motion to dismiss for lack of subject matter jurisdiction. (See Declaration of David Denier filed 12/4/01 ("Denier Decl. 1"), at Exs. 1-8.) Additionally, the same information was contained in the literal transcripts furnished to Defendants earlier. Other than a general claim of prejudice, Defendants have not articulated how they have been prejudiced by the allegedly tardy production of the Form 4340s.
Defendants have provided no authority for this argument. Indeed, faced with a similar challenge, a district court in the Southern District of California denied a defendant's argument that since the Government failed to produce a "collection file", the Form 4340 was rendered inadmissible.See United States v. Boyce, 148 F. Supp.2d 1069, 1089-90 (S.D. Cal. 2001) The district court noted that the Sixth Circuit rejected a similar argument that the taxpayer was entitled to all original documents used by the IRS to prepare a summary record of assessments. See id. (citingGentry, 962 F.2d at 558) (finding that neither the Tax Code nor the Treasury Regulations require that taxpayers be given original documents regarding assessments).
Additionally, Defendants' reliance on Richard Gabel's alleged FOIA requests is misplaced. Richard Gabel contends that he submitted approximately seventy FOIA requests to the IRS but that he did not receive an adequate response. (Defs' Exs. H-1 through H-12.) However, he also admitted that he did not pursue an administrative appeal or judicial review of the denial of those requests as mandated under Federal law.See 5 U.S.C. § 552(a)(6)(A)(ii). Thus, this Court is without jurisdiction to redress any alleged violations of FOIA. See In re Steele, 799 F.2d 461, 465-66 (9th Cir. 1986); Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994). More importantly, those FOIA requests are not relevant to the present action. "The FOIA is not to be used as a substitute for the traditional means of discovery available to a litigant." Steele, 799 F.2d at 466. Moreover, Defendants have presented no authority that the alleged failure to provide information pursuant to a FOIA request is grounds to exclude evidence.
The Court notes that the alleged FOIA requests introduced were unsigned and Richard Gabel admitted that the dates on these alleged FOIA requests do not correspond to the actual dates on which he made the FOIA requests.
Finally, the Court has previously ruled that while hearsay, the Forms 4340 fall within the public records exception under Federal Rule of Evidence 803(8). See Hughes, 953 F.2d at 539-40; Farr v. United States, 990 F.2d 451, 454 (9th Cir. 1993). "These forms are also self-authenticating public documents under Federal Rule of Evidence 902(1) because they are certified under seal." Boyce, 148 F. Supp.2d at 1082 (citing Hughes, 953 F.2d at 539-40.) Finally, the Ninth Circuit has held that IRS Forms 4340 are admissible even though they are a computer-generated document prepared exclusively for litigation purposes. See Hansen, 7 F.3d at 138; Hughes, 953 F.2d at 539-40. Defendants have offered no authority to the contrary. Based on the foregoing, the Court OVERRULES the Defendants' objection to the admission of the Form 4340s.
2. Admission of Summary Records of Assessment
The Government has also moved to introduce the Summary Records of Assessment (Exs 77-85) to corroborate the validity of the assessments. The Defendants have renewed their objection to the admission of the evidence on the grounds that it was not timely produced prior to trial. The Government contends that the discovery requests ostensibly seeking production of the Summary Records of Assessments were vague and overbroad. More importantly, Defendants did not seek an order compelling discovery and preclusion on this ground is not warranted. The failure to move for any prior action evidences either the lack of importance Plaintiffs placed on the alleged inadequacy or the illegitimacy of their concern. Other than a perfunctory assertion of "prejudice", Defendants have failed to articulate how they have been prejudiced by the late production of the Summary Records of Assessment. To the extent Defendant Richard Gabel relies upon his FOIA requests in support of excluding the Summary Records of Assessment, this is not a proper basis for the same reasons as discussed above. Finally, for the same reasons as discussed above, the Summary Records of Assessments are admissible hearsay. Therefore, the Court OVERRULES Defendants' objection to the admission of the Summary Records of Assessment.
III. FINDINGS OF FACT A. Stipulated Facts
Based upon the stipulation of the parties, the Court finds that,
1. Defendants Richard L. Gabel and Iris A. Gabel were lawfully married during the calendar years 1989, 1990, 1991 and 1992.
2. Defendants Richard L. Gabel and Iris A. Gabel did not file Federal income tax returns for the tax years 1989, 1990, 1991, and 1992.
3. On March 24, 1995, the IRS mailed statutory notices of deficiency to Richard L. Gabel at 4725 Rolling Hills Way, Castro Valley, California, for tax years 1989, 1990, 1991, and 1992, determining income tax deficiencies and asserting penalties for failure to file returns and for failure to pay estimated taxes. To correct an error in calculation for tax year 1991, a second notice was sent to Mr. Gabel on October 20, 1995, for the year 1991. Attached to the notices of deficiency were computations of gross income and taxable income. The computations showed how the IRS computed Richard L. Gabel's tax liability for 1989, 1990, 1991, and 1992. The major item in the computations is the amount of unreported business receipts. Computations of the business receipts are based upon deposits to Account No. 319-806918-3 at Great Western Bank in Castro Valley, California.
4. On March 24, 1995, the IRS mailed statutory notices of deficiency to Iris A. Gabel at 4725 Rolling Hills Way, Castro Valley, California, for tax years 1989, 1990, 1991, and 1992, determining income tax deficiencies and asserting penalties for failure to file returns and for failure to pay estimated taxes. Attached to the notices of deficiency were computations of gross income and taxable income. The computations showed how the IRS computed Iris A. Gabel's tax liability for 1989, 1990, 1991, and 1992. The major item in the computations is the amount of unreported business receipts. Computations of the business receipts are based upon deposits to Account No. 319-806918-3 at Great Western Bank in Castro Valley, California.
5. Defendants Richard L. Gabel and Iris A. Gabel received the statutory notices of deficiency with respect to their 1989, 1990, 1991 and 1992 tax years. The statutory notices of deficiency properly notified the Gabels of their right to contest the IRS determinations without having to pay taxes by filing a petition with the United States Tax Court. The Gabels did not file petitions with the Tax Court contesting the tax determinations in the statutory notices of deficiency.
6. Deposits made to Account No. 319-806918-3 in the names of Dick Gabel and Iris Gabel at Great Western Bank, for the period of January 1, 1989 through December 31, 1992, are income to Defendants Richard L. Gabel and Iris A. Gabel within the meaning of 26 U.S.C. § 61.
7. Any income Defendants Richard L. Gabel and Iris A. Gabel had during the tax years 1989, 1990, 1991, and 1992 was community income and any deductible expenses that Defendants Richard L. Gabel and Iris A. Gabel had during the tax years 1989, 1990, 1991, and 1992 were community expenses.
8. Prior to or during the years 1989, 1990, 1991, and 1992, Defendants Richard L. Gabel and Iris A. Gabel did not enter into any agreement transmuting community property to the separate property of either spouse.
9. The income tax liabilities, failure to file penalties, and estimated tax penalties for Richard L. Gabel for tax years 1989, 1990, 1991, and 1992 are:
Tax Year Total Tax Failure to File Penalty Estimated Tax Penalty 26 U.S.C. § 6654(a)(1) 26 U.S.C. § 6654
1989 $ 5,689.00 $1,422.00 $ 385.00
1990 $26,814.00 $6,703.00 $1,755.00
1991 $28,160.00 $7,040.00 $1,611.00
1992 $13,173.00 $3,293.00 $ 575.00 __________ __________ _________ Total for all years: $73,836.00 $18,458.00 $4,326.00
10. The income tax liabilities, failure to file penalties, and estimated tax penalties for Iris A. Gabel for tax years 1989, 1990, 1991, and 1992 are:
Tax Year Total Tax Failure to File Penalty Estimated Tax Penalty 26 U.S.C. § 6654(a)(1) 26 U.S.C. § 6654
1989 $ 1,000.00 $ 250.00 $ 68.00
1990 $18,534.00 $4,633.00 $1,213.00
1991 $19,501.00 $4,875.00 $1,116.00
1992 $ 5,605.00 $1,401.00 $ 245.00 __________ __________ _________
Total for all years: $44,640.00 $11,159.00 $2,642.00
B. Unstipulated Facts
The Court finds that,
11. The Certificates of Assessment for Richard L. Gabel for tax years 1989, 1990, 1991, and 1992 specify the amounts and dates of the assessments, additions to tax, credits, refunds, and the dates on which the Statutory Notices of Balance Due were sent. (Govt's Exs. 1-4).
12. The Certificates of Assessment for Iris A. Gabel for tax years 1989, 1990, 1991, and 1992 specify the amounts and dates of the assessments, additions to tax, credits, refunds, and the dates on which the Statutory Notices of Balance Due were sent. (Govt's Exs. 5-8).
13. The Summary Records of Assessment for Richard L. Gabel and Iris A. Gabel were signed by an assessment officer. (Govt's Exs. 77-85.).
14. On August 28, 1995, October 30, 1995, and March 25, 1996, the IRS made timely assessments against Richard L. Gabel for income taxes, failure to file penalties, and estimated tax penalties for the tax years 1989, 1990, 1991, and 1992.
15. On August 28, 1995, the IRS made timely assessments against Iris A. Gabel for income taxes, failure to file penalties, and estimated tax penalties for the tax years 1989, 1990, 1991, and 1992.
16. Defendant Richard L. Gabel lacks credibility as a witness.
IV. CONCLUSION OF LAW
1. Under section 6203 of the Internal Revenue Code, an assessment is made "by recording the liability of the taxpayer in the office of the Secretary." 26 U.S.C. § 6203.
2. In practice, the IRS makes assessments by having an assessment officer fill out and sign a "summary record of assessment," formerly known as a Form 23C. See 26 C.F.R. § 301.6203-1; Geiselman v. United States, 961 F.2d 1, 5-6 (1st Cir. 1992).
3. The summary record of assessment through supporting records shall provide identification of the taxpayer, the character of the liability assessed, the taxable period, if applicable, and the amount of the assessment. See 26 C.F.R. § 301.6203-1.
4. If the taxpayer requests a copy of the record of assessment, he shall be furnished a copy of the pertinent parts of the assessment which set forth the name of the taxpayer, the date of assessment, the character of the liability assessed, the taxable period, if applicable, and the amounts assessed. See 26 C.F.R. § 301.6203-1.
5. The Certificate of Assessments, Payments, and Other Specified Matters ("Forms 4340") is a supporting record for the summary record of assessments. The Form 4340 provides all of the required assessment information to which a taxpayer is entitled under law. See 26 C.F.R. § 301.6203-1. The IRS is not required to provide a taxpayer with all original documents that it used in preparation for the summary record. See Gentry v. United States, 962 F.2d 555, 557 (6th Cir. 1992).
6. Form 4340s are admissible under the Federal Rules of Evidence. While hearsay, the Forms 4340 fall within the public records exception under Federal Rule of Evidence 803(8). See Hughes v. United States, 953 F.2d 531, 539-40 (9th Cir. 1992); Farr v. United States, 990 F.2d 451, 454 (9th Cir. 1993). "These forms are also self-authenticating public documents under Federal Rule of Evidence 902(1) because they are certified under seal." United States v. Boyce, 148 F. Supp.2d 1069, 1082 (S.D. Cal. 2001) (citing Hughes, 953 F.2d at 539-40.) Finally, the Ninth Circuit has held that IRS Forms 4340 are admissible even though they are a computer-generated document prepared exclusively for litigation purposes. See Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993) 138; Hughes, 953 F.2d at 539-40.
7. "The Government bears the initial burden in an action to collect taxes and can satisfy that burden by introducing into evidence a properly certified tax assessment." Boyce, 148 F. Supp.2d at 1081-82 (citingUnited States v. Janis, 428 U.S. 433, 440-41, 96 S.Ct. 3021, 49 L.Ed.2d 1046 (1976); Oliver v. United States, 921 F.2d 916, 919 (9th Cir. 1990);Hauf v. IRS, 968 F. Supp. 78, 82 (N.D.N.Y. 1997)).
8. Giving proper notice under 26 U.S.C. § 6303(a) is not a prerequisite to the IRS' filing a civil action to reduce an assessment.See Purcell v. United States, 1 F.3d 932, 941 (9th Cir. 1993) (citingUnited States v. Chila, 871 F.2d 1015, 1018 (11th Cir. 1989)).
9. IRS Form 4340s provide at least presumptive evidence that a tax has been validly assessed under 26 U.S.C. § 6203. See Huff v. United States, 10 F.3d 1440, 1445 (9th Cir. 1993); see also Boyce, 148 F. Supp.2d at 1081-82 ("Certificates are sufficient in the absence of contrary evidence to establish that assessments were properly made and to establish the adequacy and propriety of notices of intent to levy.") (citing Hansen, 7 F.3d at 138; Hughes, 953 F.2d at 535, 540; Zolla, 724 F.2d at 810; Gentry, 962 F.2d at 557). The Form 4340 alone is sufficient to establish the presumptive validity of the assessment. See Huff, 10 F.3d at 1445; Farr, at 454; cf. United States v. Zolla, 724 F.2d 808, 809-10 (9th Cir. 1984) (finding that presumption that notice of deficiency sent not defeated by lack of original documents because defendant introduced no direct evidence rebutting presumption). After Form 4340s are admitted into evidence, the burden shifts to the Defendants to rebut the presumption of validity. See Huff, 10 F.3d at 1445-46.
10. The Government has submitted IRS Form 4340s for Richard L. Gabel and Iris A. Gabel which comply with the standards required under 26 C.F.R. § 301.6203-1. (Govt's Exs. 1-8.)
11. The Government has also submitted Summary Records of Assessment which comply with 26 U.S.C. § 6203 and corroborate that assessments were made against Richard L. Gabel and Iris A. Gabel for the years 1989, 1990, 1991, and 1992. (Govts' Exs. 77-85.)
12. Defendants have presented no persuasive proof that the Form 4340s with the taxpayer Iris A. Gabel (Govt's Exs. 5-8) do not correspond to Defendant Iris A. Gabel.
13. Moreover, the taxpayer name, the character of the liability assessed, the taxable periods and the amounts of the assessment in the Form 4340s, as well as the Statutory Notice of Deficiency which Defendant Iris A. Gabel received, are sufficient to identify Iris A. Gabel as the taxpayer against whom the assessments were made as listed in the Form 4340s submitted by the Government (Govts' Exs. 5-8). See e.g., In re Gongaware, 207 B.R. 95, 98-99 (Bankr. W.D. Pa. 1997) (finding that incorrect social security number and address did not cast doubt on the identity of the taxpayer); Moore v. United States, 1993 WL 414711, *2, 72 A.F.T.R.2d (RIA) 93-6571, 93-6572 (E.D. Cal. March 16, 1993) (finding that despite incorrect social security number, assessment valid because taxpayer sufficiently identified from supporting documents and social security number not required under the regulations).
14. Defendants have provided no contrary evidence indicating that the Internal Revenue Service made invalid assessments.
15. Therefore, the Court HOLDS that the Internal Revenue Service made valid assessments against Defendant Richard L. Gabel and Iris A. Gabel for the tax years 1989, 1990, 1991, and 1992, as set forth in the Certificates of Assessments and Payments admitted into evidence.
V. CONCLUSION
Accordingly,
IT IS THE CONCLUSION OF THE COURT THAT Richard L. Gabel is indebted to the United States of America for the amount of $96,620.00, plus interest and statutory additions, as provided by law, for the unpaid assessments of Federal income tax liabilities.
IT IS THE FURTHER CONCLUSION OF THE COURT THAT Iris A. Gabel is indebted to the United States of America for the amount of $58,441.00, plus interest and statutory additions, as provided by law, for the unpaid assessments of Federal income tax liabilities.