United States of America v. Komlo

MOTION for Summary Judgment

E.D. Pa.September 6, 2016

1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) Case No. 2:15-cv-03789-CDJ ) JENNIFER KOMLO, ) ) Defendant. ) __________________________________________) UNITED STATES’ MOTION FOR SUMMARY JUDGMENT The United States moves this Court under Federal Rule of Civil Procedure 56(a) for summary judgment as to the unpaid income tax liabilities (including interest and penalties) of Jennifer Komlo for her 1998, 2008, and 2010 tax years. The United States includes a memorandum in support of its motion, a statement of undisputed material facts (with accompanying exhibits), an index of evidence in support of the motion, the affidavits of Shari Green and Kyle Bishop, and a proposed order. Dated: September 6, 2016 ZANE DAVID MEMEGER United States Attorney CAROLINE D. CIRAOLO Acting Assistant Attorney General /s/ Kyle L. Bishop KYLE L. BISHOP RYAN MCMONAGLE Trial Attorneys, Tax Division U.S. Department of Justice, Tax Division P.O. Box 227 Washington, D.C. 20044 (202) 616-1878 Telephone (202) 514-6866 Facsimile Kyle.L.Bishop@usdoj.gov Case 2:15-cv-03789-CDJ Document 45 Filed 09/06/16 Page 1 of 2 2 CERTIFICATE OF SERVICE I hereby certify that on September 6, 2016, I filed the foregoing with the Clerk of Court using the CM/ECF system, which shall send notice of this filing to all parties registered to receive such notice. In addition, I served the foregoing on opposing counsel by overnight mail to the following address: Michael Kummer Morgan, Lewis & Bockius 2020 K St. NW Washington D.C. 20006 /s/ Kyle L. Bishop KYLE L. BISHOP Case 2:15-cv-03789-CDJ Document 45 Filed 09/06/16 Page 2 of 2 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) Case No. 2:15-cv-03789-CDJ ) JENNIFER KOMLO, ) ) Defendant. ) __________________________________________) MEMORANDUM IN SUPPORT OF UNITED STATES’ MOTION FOR SUMMARY JUDGMENT Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 1 of 28 i Table of Contents SUMMARY OF FACTS AND SUMMARY OF ARGUMENT ............................................... 1 ARGUMENT ................................................................................................................................. 5 I. THE UNITED STATES IS ENTITLED TO SUMMARY JUDGMENT AS A MATTER OF LAW AS TO THE CORRECTNESS AND VALIDITY OF ITS ASSESSMENTS OF KOMLO FOR HER 1998, 2008, AND 2010 TAX YEARS ................... 6 A. Res Judicata Prevents Komlo From Challenging the 1998 Assessments ................... 7 B. The United States Properly Assessed the Appropriate Amounts for Komlo’s 2008 Tax Year .................................................................................................................................... 9 C. Komlo Self-Reported Her 2010 Tax Liabilities, and the United States Properly Assessed Those Liabilities ...................................................................................................... 10 D. The United States Properly Assessed Interest and Penalties Against Komlo for her 1998, 2008, and 2010 Tax Year Liabilities ............................................................................ 11 II. KOMLO’S DEFENSES ARE NOT VIABLE .................................................................. 12 A. Komlo Is Barred by the Doctrine of Collateral Estoppel From Arguing That She Has Paid Her 1998, 2008, and 2010 Tax Year Deficiencies ................................................. 13 B. Komlo Cannot Produce Evidence Establishing that She Should Have Been Credited for Any Payment Towards Her 1998 Tax Year Deficiency ................................ 15 1. The Undisputed Evidence Establishes that Komlo Did Not Direct Any Voluntary Payment Towards Her 1998 Tax Liability ............................................................................ 16 2. Komlo Cannot Show Equity Requires that Payments from the Sale of the Condominium Should Be Applied to Her 1998 Tax Liability .............................................. 19 C. The United States Brought This Action Within the Statute of Limitations ............ 21 CONCLUSION ........................................................................................................................... 26 Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 2 of 28 1 SUMMARY OF FACTS AND SUMMARY OF ARGUMENT This is an action to collect unpaid federal income tax liabilities of the defendant Jennifer Komlo for 1998, 2008, and 2010. The 1998 tax liability arose after an IRS examination of the joint return filed by Komlo and her then spouse, Jeff Komlo. Komlo challenged the 1998 tax liability (as well as liabilities for 1993, 1994, 1995, and 1997) in the United States Tax Court. (Plaintiff’s Statement of Undisputed Material Facts (“PSUF”) 6). On April 22, 2003, in a proceeding before the Tax Court, Jennifer Komlo stipulated that she owed $38,208.00 in tax and $7,641.60 in accuracy-related penalties for the 1998 tax year. (PSUF 7). Komlo and the Commissioner stipulated that she was entitled to “innocent spouse” relief for the balance of the liabilities at issue in that proceeding. (PSUF 8). The United States later assessed her for additional income tax liabilities – in 2008 for her failure to report a number of items of income on her tax return (PSUF 14); and in 2010 for income tax liabilities self-reported to the Internal Revenue Service (PSUF 17). The United States also assessed penalties and interest related to these liabilities. Tax assessments are presumed correct and Komlo bears the burden to prove the determination is incorrect. Psaty v. United States, 442 F.2d 1154, 1159 (3d Cir. 1971). After entry of the Tax Court decision, and pursuant to a divorce court order, Komlo and her ex-husband sold their Florida condominium for $2,001,376.63. (PSUF 18, 36). The IRS had filed a notice of federal tax lien with respect to Mr. Komlo’s unpaid liabilities for 1993, 1994, 1995, 1997, 1998, 1999, and 2000. (PSUF 21). The notice filed with respect to 1998 did not include the $38,208 of tax and $7,641.60 of penalties assessed against Komlo. (PSUF 21). The IRS informed Komlo, through her settlement attorney, that an additional $73,297.00 should be paid to satisfy Komlo’s 1998 liability. (PSUF 31). From the proceeds of the condominium sale, Komlo’s settlement attorney sent the IRS the amount needed to satisfy the notice of federal tax lien with respect to Mr. Komlo’s sole Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 3 of 28 2 liabilities – $665,751.04. (PSUF 31-34; 40-45, 47-48). That real estate settlement attorney sent a check in that amount to the IRS with a designation that it be used to pay the liabilities of Mr. Komlo listed on the notice of federal tax lien – not Komlo’s liability. (PSUF 40-45). The balance of the proceeds from the sale of the condominium, after costs of sale, were distributed to Komlo. (PSUF 57-58). At the time of sale she received $215,432 for child support arrearages. (PSUF 56). Later, she received the entire amount that had been placed in escrow (less costs), which amounted to $475,969 (PSUF 58). Mr. Komlo received nothing. (56-58). In 2011, the IRS levied against Komlo’s wages to collect the unpaid liabilities from 1998, 2008, and 2010. Komlo challenged that levy in this Court. Komlo v. United States, No. 2-15-cv- 02127, 2015 WL 4246779 (E.D. Pa. July 23, 2015), aff’d, 2016 WL 4254915 (3d Cir. Aug. 12, 2016). (PSUF 84). This Court dismissed the complaint and the Third Circuit affirmed the dismissal. Id. In this prior lawsuit, Komlo claimed a refund under § 7422, that the levy was wrongful under § 7426, and that the IRS wrongfully disclosed her protected tax return information when it attempted to collect her unpaid liabilities for 1998, 2008, and 2010.1 Komlo, 2015 WL 4506096 at *1. Central to her claim for a refund, and central to the holding that the court lacked subject matter jurisdiction over that refund claim, was her contention that she had fully paid the tax liability for each year in the complaint – 1998, 2008, and 2010. “Komlo asserts she settled the full balance of the assessments entered against her when the IRS collected proceeds from the 2005 property sale.” Komlo v. United States, Docket No. 15-2793, 2016 WL 4254915, at *2 (3d 1 Unless otherwise indicated, all references to “section” or “Code” are references to the Internal Revenue Code of 1986, as amended. All references to the “Treasury Regulations” are references to the Treasury Regulations promulgated under the Code. Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 4 of 28 3 Cir. Aug. 12, 2016). The Third Circuit affirmed the district court’s dismissal of the refund claim because it concluded she had not met the jurisdictional pre-payment rule. The District Court properly dismissed Komlo’s refund claim. The jurisdictional basis for refund claims is 28 U.S.C. § 1346, a statute that permits taxpayers to file suit against the government for a “tax alleged to have been erroneously or illegally assessed or collected . . . .” As we have previously emphasized, “[i]t has been the uniform rule that a taxpayer must pay the full amount of a tax assessment or penalty before he can challenge its validity in a civil action in the United States district court under 28 U.S.C. § 1346.” Psaty v. United States, 442 F.2d 1154, 1158 (3d Cir. 1971). Id. Komlo’s contention in this case of full payment of her tax liabilities is now barred by res judicata. In the prior case, Komlo also contended that “the IRS misallocated these proceeds by crediting them in full to her ex-husband.” Id. She repeats that argument here. She also argues that, irrespective of her failure to pay the amounts due, she should nonetheless be credited for portions of those sale proceeds. While Komlo can attempt to defend against this suit by showing that the IRS misallocated the proceeds from the sale of the house to her ex-husband’s sole liabilities, the defense ultimately fails as it is unsupported by the evidence. There is no basis in law or equity for crediting any amount of the 2005 proceeds towards her liabilities, because the IRS applied the proceeds as directed by her agent towards her then-husband’s separate tax liabilities. (PSUF 31-34; 40-45, 47-48). Komlo may not through this litigation go back in time and reallocate that remittance. And, the undisputed facts demonstrate that Komlo received the balance of the proceeds from the sale of the condominium to cover both the child support arrearage and her interest in the property. Consequently, she cannot make out an equitable claim, even if one were available (which it is not). Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 5 of 28 4 In addition, Jennifer Komlo has challenged IRS attempts to collect the 1998 tax assessment resulting from the stipulated Tax Court decision for over a decade by filing myriad administrative requests with the IRS. In some instances, those requests, by operation of law, prevented the IRS from continuing collection efforts, and accordingly tolled the statute of limitations. She now asks this Court to hold that the actions she took to forestall or prevent collection did not toll the statute of limitations, allegedly rendering this suit untimely under section 6502 for the 1998 income tax year. Her claim is without merit. The action is timely as a matter of law, but, even if it were not, the duty of consistency bars her defense. “[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). After more than thirteen years of challenging the IRS determination of liabilities and her obligation to pay these taxes – during which time Komlo has been largely protected from administrative collection activities – Komlo cannot meet her burden of demonstrating that the tax assessments are incorrect, have been paid, or are untimely. See Psaty, 442 F.2d at 1159-60 (taxpayer has the burden of proving the assessment is incorrect, both the burden of going forward and the burden of persuasion, when the government seeks a judgment for unpaid taxes); United States v. Bishop, No. 12-209, 2013 WL 1755232 (E.D. Pa. April 23, 2013) (presumption of correctness extended to timeliness of assessment and time to file lawsuit). Summary judgment should be granted in favor of the United States in the amounts shown below, along with statutory additions including interest as allowed by law: Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 6 of 28 5 Year Type Assessment Date Initial Assessment Amount 1998 Income Tax 8/11/2003 $38,208.00 1998 § 6662 Penalty 8/11/2003 $7,641.60 2008 Income Tax 5/9/2011 $21,339.00 2008 § 6662 Penalty 5/9/2011 $4,268.00 2010 Income Tax 5/30/2011 $13,529.00 2010 § 6651 Penalty 5/30/2011 $46.59 Balance as of Sept. 1, 2016: $138,872.71 (See Ex. A). ARGUMENT Federal Rule of Civil Procedure 56(a) requires the Court to “grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to summary judgment as a matter of law.” Fed. R. Civ. P. 56(a). When “the nonmoving party bears the burden of persuasion at trial, the moving party may meet its burden on summary judgment by showing the nonmoving party’s evidence is insufficient to carry that burden.” Wetzel v. Tucker, 139 F.3d 380, 383 n. 2 (3d. Cir. 1998). “[B]ald assertion[s]” without documents or other corroborating evidence, “are insufficient to create a factual dispute.” United States v. Craig, 936 F. Supp. 298, 300 (E.D. Pa. 1996). “It is well established in the tax law that an assessment is entitled to a legal presumption of correctness – a presumption that can help the Government prove its case against a taxpayer in court.” United States v. Fior D'Italia, Inc., 536 U.S. 238, 242 (2002). The undisputed facts demonstrate that Komlo cannot rebut this presumption and, therefore, the Court should enter judgment for the United States. Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 7 of 28 6 I. THE UNITED STATES IS ENTITLED TO SUMMARY JUDGMENT AS A MATTER OF LAW AS TO THE CORRECTNESS AND VALIDITY OF ITS ASSESSMENTS OF KOMLO FOR HER 1998, 2008, AND 2010 TAX YEARS There are no material facts in dispute regarding the amounts or validity of the assessments made by the Internal Revenue Service (“IRS”) against Jennifer Komlo for income tax and penalty liabilities for 1998, 2008, and 2010. The United States assessed these amounts against Komlo, and thus the assessments are “presumed valid and establish a prima facie case of liability against [the] taxpayer.” Freck v. Internal Revenue Serv., 37 F.3d 986, 992 n. 8 (3d Cir. 1994). The United States may obtain the presumption of correctness, as it has done here, simply by introducing into evidence Forms 4340, or Certificates of Assessment, showing the assessments at issue. Psaty, 442 F.2d at 1161 n 14; see Ex. A (Certificates of Assessment of Jennifer Komlo for relevant periods in this case). “[T]he taxpayer bears the ultimate burden of proving, by a preponderance of the evidence, that a particular assessment is erroneous.” Sullivan v. United States. 618 F.2d 1001, 1008 (3d Cir. 1980) (citing Helvering v. Taylor, 293 U.S. 507, 515 (1935)). While the taxpayer can overcome the presumption of correctness by producing “‘competent and relevant credible evidence’ sufficient to establish that the Commissioner’s determination is erroneous, the ultimate burden of proof or persuasion remains at all times with the taxpayer.” Id. Komlo cannot meet this burden. She stipulated in the Tax Court that she is liable for the amounts assessed against her for the 1998 tax year. (PSUF 7). She offers no evidence that the adjustments to her 2008 income tax return, as made by the IRS in a notice of deficiency, are incorrect; rather, she alleges only that she is entitled to a state income tax deduction she did not receive (which she is not in fact entitled to receive). She self-reported her tax liability for 2010 and only contests that the IRS failed to credit her $200 in payments she supposedly made against that liability. Lastly, her contention that the interest and penalties in this case were calculated Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 8 of 28 7 incorrectly is based on her erroneous contention (addressed below) that she previously paid the tax liabilities. A. Res Judicata Prevents Komlo From Challenging the 1998 Assessments Komlo and her then-husband challenged their 1998 tax liability in the Tax Court in the early 2000s. (PSUF 1-6). Komlo agreed in a stipulation to the amount and validity of her 1998 assessment after she litigated the issue of her 1998 liability in the Tax Court. Komlo v. Commissioner, Tax Ct. Dkt. No. 9963-02; PSUF 7. That proceeding concluded when the parties stipulated to the entry of a decision that found Komlo liable for $38,208.00 in income taxes and $7,641.60 in accuracy-related penalties, and not liable for the deficiencies asserted for 1993, 1994, 1995, 1997 and the balance of 1998 beyond the stipulated amounts. (PSUF 7-8). The Tax Court issued a decision reflecting the stipulated amounts on April 22, 2003. (PSUF 8). The IRS then assessed Komlo those amounts. (PSUF 9). Komlo is thus now barred from challenging her 1998 tax liabilities. A taxpayer cannot relitigate a tax liability when the Tax Court has entered a decision for the same tax year. Commissioner v. Sunnen, 333 U.S. 591, 598 (1948) (determination of same tax year in Tax Court is res judicata). Tax Court decisions fixing the liability of a taxpayer have preclusive effect in a subsequent action. United States v. Bottenfield, 442 F.2d 1007, 1008 (3d Cir. 1971); see also Baptiste v. Commissioner, 29 F.3d 1533, 1539 (11th Cir. 1994) (stipulated order of Tax Court constitutes adjudication on the merits for res judicata purposes). Under the doctrine of collateral estoppel, when an “issue is actually and necessarily determined by a court of competent jurisdiction, that determination is conclusive in subsequent suits based on a different cause of action involving a party to the prior litigation.” Montana v. United States, 440 U.S. 147, 153 (1979); see also, e.g., Szehinskyj v. Attorney Gen. of the United States, 432 F.3d 253, 255 (3d Cir. 2005); United States v. Caraway, No. A-06-CA-972-SS, 2008 WL 2510668, at *3 (W.D. Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 9 of 28 8 Tex. Apr. 24, 2008) (granting the United States summary judgment against a taxpayer who stipulated to an amount in a Tax Court order). Komlo previously adjudicated her liability for the 1998 tax year in Tax Court. (PSUF 7- 8). She agreed to the entry of a decision finding a deficiency for 1998 (PSUF 7-8). Komlo was represented in that litigation, and her attorney signed the stipulation requesting the Court enter the Order. (PSUF 8). At her deposition, Komlo acknowledged that the Tax Court entered the order holding her liable for the 1998 deficiencies in tax and penalties. (PSUF 7). She is thus precluded from challenging the amount of the 1998 deficiency in tax and penalties. Komlo may raise issues related to assessments of Jeff Komlo in her response; specifically she may argue that the IRS’s erroneous failure to also assess Jeff Komlo for the 1998 tax and penalties assessed against her invalidates the assessments against her. She is incorrect because she stipulated to her liability and her stipulation was not conditioned on the IRS agreeing to first attempt to collect from Jeff Komlo. Although the stipulation provides for joint and several liabilities for the amounts in a Tax Court order, the alleged failure to properly assess Mr. Komlo does not invalidate the assessments against Jennifer Komlo. (PSUF 7-8). Joint and several liability for the tax shown on a return means that although the tax may be collected only once, each spouse is entirely responsible for the payment of the unpaid portions of the tax without apportionment between them. Dolan v. Commissioner, 105 T.C. 324, 326 n. 4 (1995); Pesch v. Commissioner, 78 T.C. 100, 129 (1982). “In turn, this means that the Commissioner may, as he sees fit, collect the tax from either one.” Riganti v. Commissioner,No. 23757-07S, 2010 WL 3199788, at *2 (Tax Ct. Aug. 11, 2010). Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 10 of 28 9 B. The United States Properly Assessed the Appropriate Amounts for Komlo’s 2008 Tax Year Komlo challenges the correctness of the 2008 assessment by stating that these assessments do not reflect deductions for state income tax withheld for that year. But the simple allegation that she is entitled to such a deduction is not sufficient evidence to overcome the presumption afforded these assessments. Komlo has not produced evidence showing that she actually paid these amounts without later claiming a refund of some or all of the withheld funds (e.g., her 2008 state income tax return or a 2009 Form 1099-G, “Certain Government Payments”). Furthermore, if Komlo did receive a refund, she likely would have excluded it from income on her 2009 income tax return. § 111(a) (excluding from gross income for federal tax purposes tax refunds received for which the taxpayer did not receive a federal income tax deduction). Generally, if State income tax was deducted on a Federal income tax return for a prior taxable year and if such deduction resulted in a tax benefit to the taxpayer (i.e., a reduction of Federal income tax) for such prior taxable year, then a subsequent recovery by the taxpayer (i.e., a refund) of such State income tax must be included in the taxpayer’s gross income for Federal tax purposes in the year in which the recovery is received. Butler v. Commissioner, 76 T.C.M. (CCH) 601, at *7 (Tax Ct. 1998). If this Court were to allow her now to take a deduction for state income taxes, it would result in a windfall, since the United States is now likely time-barred under section 6501(a) from assessing that additional income tax. § 6501(a) (“the amount of any tax imposed by this title shall be assessed within 3 years after the return was filed . . .”). Accordingly, given the lack of evidence produced in this litigation and the inequities that would result from its allowance, this Court should not permit Komlo to now deduct any allegedly paid state income tax. Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 11 of 28 10 Moreover, Komlo offers no challenge to the penalties and interest assessed against her except the allegation that she previously overpaid her tax liabilities through the sale of a Florida condominium in 2005 and thus does not owe any taxes for the 2008 income tax year. (PSUF 12). The IRS sent a notice to Komlo explaining that the income information the IRS received did not match the income information Komlo reported on her 2008 tax return. (PSUF 10-11; 13). On page 7 of the notice, the IRS identified each source of information received that differed from the tax return. The two most significant omissions were $30,576 of nonemployee compensation (item 1) and $66,217 of retirement income (item 4). (PSUF 11). Page 14 of that notice explains how Komlo’s liabilities were calculated when the omitted items are included. Based on the above, the IRS assessed Komlo an additional $21,339 in tax and $4,268 in negligence penalties on May 9, 2011. (PSUF 12, 14). The evidence presented by Komlo is insufficient to overcome the presumption of correctness that attaches to those assessments. Fior D'Italia, Inc., 536 U.S. at 242. C. Komlo Self-Reported Her 2010 Tax Liabilities, and the United States Properly Assessed Those Liabilities The assessments for 2010 are based on Komlo’s self-reported liabilities on her tax return. See Hibbs v. Winn, 542 U.S. 88, 100 n. 3 (2004) (“Income taxes . . . are typically self-assessed in the United States. As anyone who has filed a tax return is unlikely to forget, the taxpayer, not the taxing authority, is the first party to make the relevant calculation of income taxes owed”) (Ginsburg, J.); (PSUF 15). While the phrase self-assessment is not a “technical term,” (id.), “[o]ur complex and comprehensive system of federal taxation [relies] upon self-assessment and reporting.” United States v. Arthur Young & Co., 465 U.S. 805, 815 (1984). Here, Komlo reported an income tax liability of $13,529 on her 2010 tax return. (Ex. D, USAKOMLO00827- 829). She did not fully pay the reported liability. (Ex. A). Komlo does not challenge the amount Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 12 of 28 11 of the assessment, but only suggests that the liability should be reduced by $200 to reflect “federal income tax withheld from [her] W-2.” (PSUF 16). However, the transcript does reflect a $200 payment made by Komlo, and she offers no evidence that she made an additional $200 payment that would be reflected on this transcript other than the $200 in withholding. (PSUF 16). Also like her 2008 income tax year, Komlo offers no challenge to the penalties and interest assessed against her except the allegation that she previously overpaid her tax liabilities through the sale of her Florida condominium in 2005, and thus does not owe any taxes for the 2010 income tax year. (PSUF 16). Again, Komlo cannot meet her burden to rebut the presumption of correctness. Fior D'Italia, Inc., 536 U.S. at 242. D. The United States Properly Assessed Interest and Penalties Against Komlo for her 1998, 2008, and 2010 Tax Year Liabilities Negligence penalties under section 6662(b)(1) are appropriate when a taxpayer disregards rules or regulations. Negligence includes failure to make a reasonable attempt to comply with the tax laws, to exercise ordinary and reasonable care in preparing a tax return, keeping adequate books and records, or substantiating items correctly. Treas. Reg. § 1.6662-3(b)(1). A tax return is filed negligently if it is filed without a reasonable basis. Id. The reasonable basis standard is “a relatively high standard of tax reporting, that is, significantly higher than not frivolous or not patently improper. The reasonable basis standard is not satisfied by a return position that is merely arguable or that is merely a colorable claim.” Treas. Reg. § 1.6662-3(b)(3). The United States may also assess a penalty if a taxpayer fails “to pay the amount shown as tax on any return . . . on or before the date prescribed for such payment of such tax.” § 6651(a)(2). As discussed above, the penalties assessed against Komlo for her 1998 tax year cannot be challenged in this litigation due to the res judicata effect of the earlier Tax Court ruling. In Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 13 of 28 12 addition, Komlo offers no challenges to the penalties assessed against her for her 2008 and 2010 income tax years aside from her contentions that she previously fully paid those liabilities with the funds received in 2005 by the United States from the sale of the condominium she jointly owned with Mr. Komlo.2 Even assuming, arguendo, Komlo were to prevail on her claim that some portion of the proceeds from the 2005 condominium sale should applied to her 1998 liability, there is no basis for applying that money to 2008 and 2010, liabilities that were not in existence when the proceeds of the condominium sale were paid to the IRS. In addition, the Code provides that the United States is statutorily entitled to interest “[i]f any amount of tax . . . is not paid on or before the last date prescribed for payment.” § 6601(a). As such, once this Court determines Komlo failed to pay her tax liabilities in full, it must also grant the United States the interest to which it is entitled by law. II. KOMLO’S DEFENSES ARE NOT VIABLE Komlo has raised three arguments in her Answer and throughout this litigation. First, she argues that the United States may not prevail because it “received full payment for the alleged taxes and penalties at issue.” (Answer at 3). Second, she argues that, even if her accounts are not shown as “fully paid,” she should nonetheless be credited for payments on the 1998 tax year by virtue of the $655,751.04 payment remitted to the United States from the sale of a condominium she jointly owned with her ex-husband. (Answer at 4). Third, and finally, she argues that the United States may not collect the 1998 tax liabilities because collection is barred by the 10-year limitations period of section 6502. (Answer at 3-4). 2 William Jeffrey Komlo is at times referred to as Jeff Komlo or Mr. Komlo herein and in the attached exhibits. Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 14 of 28 13 All of these assertions fail as a matter of fact and law. Komlo cannot argue that she has paid her tax liability for the 1998 tax year because this Court and the Third Circuit have both concluded that she has not. Accordingly, the doctrine of collateral estoppel bars her from relitigating that issue. Komlo also cannot show that the United Sates should have credited her for full payment for the 1998 tax year based on its receipt of proceeds from the sale of Komlo’s and her husband’s condominium during their divorce proceeding. The undisputed evidence in this case shows that the Komlos expressly directed that the proceeds of the sale be applied to satisfy only Mr. Komlo’s separate liabilities for the 1993-2000, in order to release a recorded Notice of Federal Tax Lien for those separate liabilities that attached to the Florida condominium at the time of its sale. Finally, her timeliness defense fails because the undisputed facts show that the ten-year limitations period was tolled for 708 days by virtue of Komlo’s administrative challenge to the assessments against her for 1998, 2008, and 2010. As such, the United States’ suit to collect the tax liabilities owed by Komlo is timely. A. Komlo Is Barred by the Doctrine of Collateral Estoppel From Arguing That She Has Paid Her 1998, 2008, and 2010 Tax Year Deficiencies Komlo argues that, notwithstanding the Form 4340, she has nonetheless paid her tax liability for her 1998, 2008, and 2010 tax years in 2005. (Answer at 3, 4; PSUF 12, 16). She argues that her liability – which was a joint liability with her then-husband, but only assessed against her – was in fact paid from the proceeds of the sale of a jointly-owned home during her divorce. This argument is not new: Komlo made precisely the same argument to this court in Komlo v. United States, case no. 2:15-cv-2127 (E.D. Pa.). This Court rejected that argument, and dismissed the entire action. Komlo v. United States, 2015 WL 4246779 (E.D. Pa. July 23, Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 15 of 28 14 2015). The United States Court of Appeals for the Third Circuit affirmed the dismissal. Komlo v. United States, No. 15-2793, 2016 WL 4254915, at *2 (3d Cir. Aug. 12, 2016) (holding that the “District Court properly dismissed Komlo’s refund claim”). The Court’s determination that Komlo had not paid the 1998 liability in full was essential to its holding that it lacked jurisdiction over her claim for refund. Komlo v. United States, 2015 WL 45-6-06 (E.D. Pa. July 23, 2016), aff’d, 2016 WL 4254915 (3d Cir. Aug. 12, 2016). The issue of whether Komlo paid the tax she owed for 1998, 2008, and 2010 has been decided, and she is barred from relitigating it. Collateral estoppel bars the relitigation of an issue if “(1) the issue sought to be precluded [is]the same as that involved in the prior action; (2) that issue [was] actually litigated; (3) it [was] determined by a final and valid judgment; and (4) the determination [was] essential to the prior judgment.” Peloro v. United States, 488 F.3d 167, 174-75 (3d. Cir. 2007). All of the elements of collateral estoppel are present here. The issue of whether Komlo paid her assessed liabilities for the 1998, 2008, and 2010 tax years was both raised and actually litigated in Komlo’s prior lawsuit. In Komlo v. United States, Komlo sued the United States for a refund under 28 U.S.C. § 1346(a)(1) of amounts she claims that she paid with respect to the 1998, 2008, and 2010 tax years. 2015 WL 4506096, at * 2. The United States moved to dismiss that case for lack of subject matter jurisdiction on the ground that she did not pay her tax liability for any of those tax years, which is a jurisdictional prerequisite to any refund suit. Id.; see also Psaty, 442 F.2d at 1158. Komlo opposed the motion, and submitted documentary evidence that she argued established that she had paid the tax. Komlo v. United States, Case No. 2:15-cv-2127, ECF No. 14 at 19 (PSUF 84). This Court determined that Komlo did not pay the tax, and that determination was essential to its dismissal of the prior action. Indeed, the precise reason that this Court dismissed Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 16 of 28 15 her refund action for lack of subject matter jurisdiction was because she did not pay the amounts assessed against her for those tax years. Komlo, 2015 WL 4506096, at *3 (“It is apparent from the complaint and Plaintiff’s representations to the Court that the assessments against Ms. Komlo have yet to be paid in full, notwithstanding the Tax Court’s Order setting the amount of taxes owed by Plaintiff for the 1998 tax year.”). The Third Circuit reached the same conclusion, holding that “to establish subject matter jurisdiction under 28 U.S.C. § 1346, a taxpayer must first pay the ‘asserted deficiency.’ Komlo has not paid this amount.” Komlo, 2016 WL 4254915, at *2. Komlo cannot avoid that determination in this action by arguing that this Court’s dismissal of her prior action did not amount to a valid and final judgment. While Rule 41 states that an involuntary dismissal for lack of subject matter jurisdiction is not an adjudication on the merits, the Third Circuit has held that such dismissal is nonetheless “conclusive as to matters actually adjudged.” See Bromwell v. Mich. Mut. Ins. Co., 115 F.3d 208, 212 (3d Cir. 1997); see also Equit. Trust Co. v. Commodity Futures Trading Comm’n, 669 F.2d 269, 272 (5th Cir. 1982) (same). Accordingly, the Court’s adjudication that Komlo did not pay the taxes at issue precludes relitigation of that issue in this case. B. Komlo Cannot Produce Evidence Establishing that She Should Have Been Credited for Any Payment Towards Her 1998 Tax Year Deficiency Because Komlo is estopped from arguing that she has actually paid her tax liability for the 1998 tax year, she is left to argue instead that the Service should have credited her for payments towards her 1998 tax liability, but did not. She bases this defense on the flawed premise that the Service failed to allocate proceeds from the sale of real property jointly owned by her and her ex-husband to her tax liability for 1998. Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 17 of 28 16 The argument that the proceeds of the sale of the jointly owned home satisfy her 1998 tax liability is factually unsupported and legally without merit. The defense fails because the payment at issue was directed solely to Jeff Komlo’s separate tax liabilities. The payment was insufficient to pay off both Jeff Komlo’s separate liabilities and Jennifer Komlo’s jointly-owed portion of the 1998 tax liability. To the extent that this is an equitable defense, it fails because she cannot offer evidence to show the elements of estoppel, or wrongdoing on the part of the United States. Either way, she cannot prevail. 1. The Undisputed Evidence Establishes that Komlo Did Not Direct Any Voluntary Payment Towards Her 1998 Tax Liability Turning to the first point, Komlo has no viable defense because the undisputed evidence shows that she and her soon-to-be ex-husband explicitly directed the Internal Revenue Service to apply $655,751.04 from the proceeds of the sale of a jointly-owned condominium solely to Jeff Komlo’s separate tax liabilities for the 1993-2000 tax years. Accordingly, she cannot claim credit for the voluntary payment that the IRS applied pursuant to the directions given. The material facts regarding the payment for which Komlo now seeks credit are not in dispute. During her divorce proceeding, Komlo petitioned the Court of Common Pleas for Montgomery County, Pennsylvania for an order authorizing the sale of a Florida condominium that she owned jointly with her then-husband. (PSUF 18-19). The Court ordered the condominium sold and the proceeds of the sale distributed as follows: to the real estate broker a five-percent commission, then to “liens of public record, costs of sale and support arrearages owed by [Jeff Komlo] to [Jennifer Komlo]” and the balance of the net proceeds to be placed in escrow. (PSUF 20). At the time, the United States had recorded tax liens against Jeff Komlo totaling $655,751.04. (PSUF 21) It had no liens recorded against Komlo herself. (PSUF 30). Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 18 of 28 17 It is undisputed that the recorded notice of federal tax lien included Mr. Komlo’s separate portion of the 1998 tax liability; the notice did not include the portion of his liability for 1998 for which he and Jennifer Komlo agreed they were jointly liable pursuant to the Tax Court order. (PSUF 21). It is also undisputed that, at the time of the sale, the United States had not recorded a notice of federal tax lien against Jennifer Komlo.3 (PSUF 28, 30). When the Komlos closing attorney requested payoffs for Jeff and Jennifer Komlo at the closing of the sale of the condominium, the IRS informed them that Jeff owed $655,751.04 and Jennifer owed $73,297 for 1998. (PSUF 22-34). After closing, the closing attorney then sent a check for $655,751.04, the amount of Mr. Komlo’s liability, to the Internal Revenue Service “representing payment in full” of Mr. Komlo’s income tax liens for 1993 – 2000. (PSUF 40-45; 47-48). The IRS allocated those funds to Mr. Komlo as directed. (PSUF 46). The remaining funds were, per the Court’s sale order, deposited into an escrow account, which was distributed to Komlo at the conclusion of the divorce proceedings. (PSUF 56-58). On these facts, Komlo has no viable defense that funds from the sale of the Florida condominium should have been applied to satisfy her 1998 tax liability. When a taxpayer makes a voluntary payment to the United States, the taxpayer is entitled to designate the liability to which the payment will be applied, and the IRS will honor that designation. White v. United States, 43 Fed. Cl. 474, 478 (Fed. Cl. 1999); accord Davis v. United States, 961 F.2d 867, 878 (9th Cir. 1992). In the absence of a designation, however, the Service may “apply the payments as it sees fit.” In re Tech. Knockout Graphics, Inc., 833 F.2d 797, 799 (9th Cir. 1987). 3 At the time of the sale of the condominium, the IRS had only its unrecorded lien for 1998 which arises upon assessment. See § 6321. Since the IRS had not recorded a Notice of Federal Tax Lien, a purchaser could take title free of the lien against Jennifer Komlo. See § 6323(a). Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 19 of 28 18 Here, the Komlos designated the application of the funds to Jeff Komlo’s liabilities. (PSUF 40-45; 47-48; 51-54). The closing attorney’s letter to the IRS along with the check designated the payment of $655,751.04 towards “William Jeffrey Komlo[‘s] Income tax Liens for 1993, 1994, 1995, 1997, 1998, 1999, and 2000.” (PSUF 40-45; 47-48) The Komlos did not designate any portion of those proceeds towards the $73,297 for which Jennifer and Jeff were jointly liable under the Tax Court Order. (PSUF 40-45; 47-48). The joint portion of the 1998 liability was, erroneously, not assessed against Jeff Komlo and therefore had not been included on the recorded notice of federal tax lien. (PSUF 21; 25-28). It was obvious from the correspondence sent by the IRS to the closing attorney that the joint portion of the 1998 liability set forth in the Tax Court Order was not included on the recorded Notice of Federal Tax Lien.4 Moreover, Komlo does not dispute that the couple’s total tax liability at the time of the closing was $729,048.04 and that only $655,751.04 was remitted to the IRS – i.e., the couple’s total tax liabilities less the amount validly assessed against and jointly owed by Jennifer Komlo. No “misapplication of payment” defense can lie where the funds voluntarily paid to the Internal Revenue Service were not designated towards a liability, were designated toward a different liability, and the payment itself was insufficient to pay both the designated liability and the undesginated liability. See In re Tech. Knockout Graphics, Inc., 833 F.2d at 799. 4 When the United States attempted to learn whether Komlo and the closing attorney discussed whether the payment would satisfy Komlo’s 1998 liability, as well as her husband’s, Komlo asserted privilege over those communications. (PSUF 49-50). Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 20 of 28 19 2. Komlo Cannot Show Equity Requires that Payments from the Sale of the Condominium Should Be Applied to Her 1998 Tax Liability Since Komlo is unable to show that she did pay her 1998 tax liability, and is also unable to show that United States failed to credit her for a voluntary payment that was directed towards her 1998 tax liability, she is left to argue that United States should be equitably estopped from collecting those unpaid amounts. She premises this argument on the theory that because the United States did not also assess Jeff Komlo for the joint portion of their liability for 1998, it cannot now collect it from her. Komlo’s equitable estoppel defense fails at the starting line because she cannot offer evidence showing the traditional elements of estoppel. To succeed on a traditional estoppel defense, Komlo must prove that the United States made an affirmative misrepresentation that she reasonably relied upon to her detriment. U.S. v. Anmar, 827 F.2d 907, 912 (3d Cir. 1987). Komlo has not shown that the United States made any “affirmative misrepresentation” to her with respect to her tax liabilities for the 1998 tax year. In fact, the undisputed evidence shows that, when the condominium was sold, the United States informed her closing attorney that a payment of $655,751.04 would be sufficient to pay off only Jeff Komlo’s separate liabilities, and that she owed another $73,297 in addition to that amount. (PSUF 22-25; 27-33). The Revenue Officer explicitly informed Komlo’s attorney in writing that the $655,751.04 amount did not include Jennifer’s liability for 1998: “[t]his will serve as notification that nowhere on these federal tax lien liabilities are they inclusive of any federal income liabilities [of] Jennifer A. Komlo.” (PSUF 25). But even if Komlo’s settlement attorney remitted the $655,751.04 under a mistaken belief that the amount would also satisfy Jennifer’s 1998 joint liability, and even if that belief was reasonable, Komlo’s estoppel claim would still fail. The reason for this is simple: Komlo was Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 21 of 28 20 awarded all of the remaining proceeds of the sale of the condominium by the Court at the end of her divorce. (PSUF 56-58). In other words, the $73,297 that should have been paid to the United States ended up in Komlo’s pocket. Thus, Komlo did not suffer any detriment; rather, she received the proceeds from the property that otherwise would have been paid to the Internal Revenue Service if the joint portion of the 1998 liability was included on the recorded notice of federal tax lien. Finally, Komlo cannot meet the additional burden imposed on a litigant asserting estoppel against the government. When asserting estoppel against the government, the litigant “must not only prove the traditional elements of estoppel, buts he must also prove affirmative misconduct on the part of the government.” Anmar, 827 F.2d at 912 (emphasis added). Komlo has adduced no evidence in this case from which the Court could infer that United States’ failure to assess the joint portion of the Komlos’ 1998 tax liability was the result of “affirmative misconduct,” or anything more than a mistake. A mere error does not satisfy this requirement. United States v. Zarra, 810 F. Supp. 2d 758, 769 (W.D. Pa. 2011) (error in processing tax payment by check insufficient to establish estoppel defense against IRS), aff’d 477 F. App’x 859 (3d Cir. 2012); Crisci v. United States, No. 2:07-cv-1331, 2009 WL 3055314, at *3 (W.D. Pa. Sept. 21, 2009) (noting “affirmative misconduct requires more than a mere omission, negligent failure, or erroneous oral advice from an IRS agent” and granting United States’ motion for summary judgment on equitable estoppel claim). Moreover, Komlo was afforded sufficient notice through counsel and otherwise that her separate liabilities would not be – and were not – paid during the sale. The settlement statement she signed as part of the April 20, 2005 sale referenced IRS liens against Mr. Komlo, not liens agasint her. (PSUF 35, 37-39). In correspondence with the IRS after the sale, Komlo’s Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 22 of 28 21 settlement attorney inquired only about Mr. Komlo’s liabilities, and he took steps ensure that the liens against Mr. Komlo were released; he took no similar steps with respect to her liability for the 1998 tax year. (PSUF 22, 51-55). And, finally, the divorce decree noted that outstanding tax liabilities remained as of 2008 when it held Mr. Komlo responsible for those liabilities, and considered that Komlo may be left with “a potential[ly] large tax ramification with the IRS” in awarding the marital estate to Komlo. (PSUF 59-60). Accordingly, her equitable estoppel defense cannot survive summary judgment. C. The United States Brought This Action Within the Statute of Limitations Komlo’s only other defense is that, with respect to 1998, this action was not timely brought within the 10-year period of § 6502. Expiration of the statute of limitations to collect on the assessment is an affirmative defense and Komlo bears the burden of demonstrating that the statute expired before suit was filed. Bishop, 2013 WL 1755232, at *2-*3 (presumption of correctness extended to timeliness of assessment and time to file lawsuit). This fares no better than her other defenses for two reasons. First, the undisputed facts show that the 10-year limitations period was tolled by 708 days as a result of a Collections Due Process Hearing brought by Komlo on November 5, 2012, and which became final on October 16, 2014. Second, Komlo is estopped from arguing that the Collections Due Process Hearing closed earlier than October 16, 2014, because she benefitted from the fact that the United States was barred from collecting her tax liabilities during that period. The Government brought this suit 10 years and 695 days after it assessed the 1998 liabilities. (PSUF 61). Section 6502 permits the United States to bring suit to collect assessments Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 23 of 28 22 through court proceedings within 10 years after the assessment, although the Code also allows for that timeframe to be extended due to the occurrence of certain events.5 Section 6330(e)(1) is one of the provisions that provides for the extension of the statute of limitations. It tolls the ten-year limitations period of section 6502 “for the period during which [a collection due process] hearing, and appeals therein, are pending.” Thus, the statute is tolled during the pendency of the collection due process (“CDP”) hearing, as well as an additional 30 days thereafter. § 6330(e)(1); Treas. Reg. § 301.6330-1(g)(1) (“[t]he period of limitation under section 6502 . . . [is] suspended until . . . the determination resulting from the CDP hearing becomes final by expiration of the time for seeking judicial review . . . .”); United States v. Kollman, 774 F.3d 592, 595-56 (9th Cir. 2014). Here, Komlo filed a signed CDP hearing request with the IRS as to her 1998 income tax year on November 5, 2012. (PSUF 62-63). The IRS issued her a notice of determination as to that request on September 16, 2014. (PSUF 71). Accordingly, the period of limitations as calculated under section 6502 was tolled for 708 days (i.e., the number of days between November 5, 2012 and October 16, 2014). Since Komlo suspended the statute of limitations through her own action of filing for a collection due process hearing, which was not resolved for 708 days, during which time the United States suspended all collections efforts against her, this suit is timely under section 6502. Komlo cannot credibly challenge this result. First, she admitted that the CDP process took “many, many months,” or “years,” or “at least 18 months” at her deposition, and that the IRS informed her that the delay was in part because she requested innocent spouse relief. (PSUF 5 This suit is clearly timely brought as it relates to the 2008 and 2010 tax years. Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 24 of 28 23 64, 68-70). Further, the IRS never received a withdrawal of the CDP hearing despite requesting such a withdrawal several times, and Komlo makes no contention she sent such a withdrawal. (PSUF 81-83). Her transcripts reflect the request. (PSUF 65). Accordingly, there is no credible evidence that the CDP hearing was not pending for the 708 days in question. Komlo nonetheless asserts in her Answer that the CDP hearing was withdrawn because an entry on her transcript states “COLLECTION DUE PROCESS REQUEST WITHDRAWN BY TAXPAYER BECAUSE RESOLVED WITH COLLECTION.” (Answer at 4). However, the undisputed evidence is that this entry was simply a mistake; Komlo did not submit a withdrawal request on that date, nor did she resolve her underlying challenge then. (PSUF 66-67, 71, 81-83). Moreover, the entry that actually indicates the CDP hearing concluded is a separate entry correctly dated October 16, 2014. (72-73). As such, this entry does not create an issue of fact between the parties, as Komlo does not claim she withdrew the hearing request (PSUF 83), and no evidence contradicts the testimony that explains that an appropriate reading of the transcript entry shows the CDP hearing was pending for 708 days. Lastly, the duty of consistency bars Komlo from asserting that the CDP hearing was not pending for 708 days. The duty of consistency is a quasi-estoppel theory that prevents taxpayers from changing factual positions they have previously taken to attempt to game the system for the best tax benefits possible. Janis v. Commissioner, 461 F.3d 1080, 1086 (9th Cir. 2000); Eagan v. United States, 80 F.3d 13, 16-17 (1st Cir. 1996); Herrington v. Commissioner, 854 F.2d 755, 757 (5th Cir. 1988); Beltzer v. United States, 495 F.2d 211, 212-13 (8th Cir. 1974). The duty of consistency prevents taxpayers from taking positions after the statute of limitations has run that are contrary to those they took earlier. Herrington, 854 F.2d at 757. The Third Circuit has Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 25 of 28 24 recognized the doctrine. Commissioner v. Mellon, 184 F.2d 157, 159-60 (3d Cir. 1950) (holding the duty of consistency does not apply when all that is in dispute is a question of law). For a court to apply the duty of consistency there must be “(1) a representation or report by the taxpayer; (2) on which the Commission has relied; and (3) an attempt by the taxpayer after the statute of limitations has run to change the previous representation or to recharacterize the situation in such a way as to harm the Commissioner.” Herrington, 854 F.2d at 758; see also Kielmar v. Commissioner, 884 F.2d 959, 965 (7th Cir. 1989). “A key element [of the duty of consistency] is the fact that the earlier position was then to the advantage of the taxpayer but that it is now to the taxpayer’s advantage to shift [her] position.” Union Carbide Corp. v. United States, 612 F.2d 558, 566 (Ct. Cl. 1979). Here, assuming arguendo that the statute of limitations otherwise expired (which it has not) Komlo easily meets the three criteria of the duty of consistency. First, she made numerous representations to the IRS that her CDP hearing was not withdrawn after December 2012, including re-submitting an innocent spouse relief request and corresponding with the IRS employees charged with reviewing that CDP request. (PSUF 73-80). Second, the Commissioner relied upon her representation by continuing to consider the request and not taking any collection actions against her during that time. Treas. Reg. § 301.6330-1(g)(2) (providing that “levy actions that are subject of the requested CDP hearing . . . shall be suspended” during the pendency of a CDP request). Lastly, after she has derived the benefit of not having the IRS attempt to collect from her for the 22-month period during which her CDP request was pending, Komlo now seeks “after the statute of limitations has run” to change her representations in order to obtain the advantage of using section 6502 to bar collection of her liability through this proceeding. Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 26 of 28 25 The principles of equity and the duty of consistency do not permit such an argument. Indeed, a district court recently considered a similar situation, wherein the taxpayer attempted to argue the statute of limitations was tolled because the IRS misplaced its earlier request for a CDP hearing. United States v. Holmes, No. 4:15-CV-00626, 2016 WL 4363398, at *4-5 (S.D. Texas Aug. 16, 2016). The Court rejected such a position, finding that “the defendants have garnered the benefit of avoiding [collection of] the tax deficiency for many years, and now change their factual representation in an attempt to garner a judicial shield of protection from liability. Thus, the principle applies.” Id. at *4. In doing so, it noted the defendants sent correspondence to the IRS after it filed the CDP hearing request representing that the request had been filed, much as Komlo did here. Id. at *5. As such, there is no issue of material fact that prevents this Court from finding as a matter of law that the United States timely initiated this collection suit against Komlo for the 1998 (as well as 2008 and 2010) income tax year liabilities. Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 27 of 28 26 CONCLUSION The Court should grant the United States summary judgment its complaint as there are no issues of material fact or law in dispute. Dated: September 6, 2016 ZANE DAVID MEMEGER United States Attorney CAROLINE D. CIRAOLO Principal Deputy Assistant Attorney General /s/ Kyle L. Bishop KYLE L. BISHOP RYAN O. MCMONAGLE Trial Attorneys, Tax Division U.S. Department of Justice, Tax Division P.O. Box 227 Washington, D.C. 20044 (202) 616-1878 Telephone (202) 514-6866 Facsimile Kyle.L.Bishop@usdoj.gov Case 2:15-cv-03789-CDJ Document 45-1 Filed 09/06/16 Page 28 of 28 1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) Case No. 2:15-cv-03789-CDJ ) JENNIFER KOMLO, ) ) Defendant. ) __________________________________________) STATEMENT OF UNDISPUTED MATERIAL FACTS IN SUPPORT OF UNITED STATES’ MOTION FOR SUMMARY JUDGMENT In support of its motion for summary judgment, the United States relies upon the following statement of undisputed material facts. I. Assessments of Tax Against Jennifer Komlo A. 1998 Income Tax Assessments 1. Jennifer Komlo was married to William Jeffrey Komlo (“Jeff Komlo” or “Mr. Komlo”) until 2008, but the couple separated in 2000. (See Ex. Q at USAKOMLO00972-75).1 2. Prior to their divorce, the couple failed to satisfy their federal income tax liabilities, incurring deficiencies in 1993, 1994, 1995, and 1998. (Ex. B at USAKOMLO00917). 3. They filed a joint return in each of those years. (Ex. B at USAKOMLO00924). 4. On or about October 19, 1999, Jeff and Jennifer Komlo filed a joint income tax return for 1998. (Ex. F at USAKOMLO00166). 5. After the Internal Revenue Service audited that return, it issued the Komlos a notice of deficiency. (Ex. G at K-00129-30). 1 In this statement, the United States uses exhibits non-sequentially. Case 2:15-cv-03789-CDJ Document 45-2 Filed 09/06/16 Page 1 of 13 2 6. The Komlos challenged the assessment in the United States Tax Court. (Ex. B). 7. In 2003, the United States Tax Court entered a stipulated order finding Komlo to be jointly and severally liable for a $38,208 portion of the unpaid taxes from 1998 and a corresponding penalty of $7,641.60. (Ex. B at USAKOMLO00918; Ex. E at 32:2-4, 32:8-19, 33:4-34:4). 8. The Tax Court stipulated decision also determined that she was not liable for any of the delinquent taxes from 1993, 1994, 1995, or 1997, and also for a significant portion of the delinquent taxes from 1998, because she qualified for relief under 26 U.S.C. § 6015(c), “Procedures to Limit Liability for Taxpayers No Longer Married or Taxpayers Legally Separated or Not Living Together.” (Ex. B at USAKOMLO00918). 9. Pursuant to the stipulated decision, the Internal Revenue Service entered an assessment of $38,208 of tax and $7,641.60 of penalties against Komlo on August 11, 2003. (Ex. A. at USAKOMLO00170; see also Complaint ¶¶ 7, 10-12; Answer ¶¶ 7, 10-12; Ex. C at 2). B. 2008 Income Tax Assessments 10. Komlo filed a tax return for the 2008 tax year on or about April 14, 2009. (Ex. J at USAKOMLO00707; Ex. A at USAKOMLO00177; Ex. E at 150:2-15). 11. On that return, she failed to include $30,576 in nonemployee compensation income received from Center for Medesthetix LLC in 2008. (Ex. K at USAKOMLO00699; Ex. E at 147:17-19). She also failed to include $66,217 in retirement income received from the National Football League. (Ex. K at USAKOMLO00700). 12. The IRS added a negligence penalty because of her failure to properly report her income. Komlo has offered no reason why she should not owe the 2008 tax year penalties or interest assessed against her other than the premise that the IRS failed to properly apply “in a Case 2:15-cv-03789-CDJ Document 45-2 Filed 09/06/16 Page 2 of 13 3 timely manner to [her] account the amounts the IRS collected from [her] (and from her ex- husband)” from the sale of their Florida condominium in 2005. (Ex. V at 2). 13. The IRS issued Komlo a timely notice of deficiency on December 20, 2010. (Ex. K at USAKOMLO000697-98). 14. The IRS then timely assessed against her an additional $21,339 in tax, $4,268 in penalty, and $2,137.18 in interest on May 9, 2011. (Ex. A at USAKOMLO00177; see also Complaint ¶¶ 9-10, 12; Answer ¶¶ 9-10, 12). C. 2010 Income Tax Assessments 15. On or about April 18, 2011, Komlo filed her 2010 tax year individual income tax return. (Ex. D; Ex. A at USAKOMLO00183; Ex. E at 152:1-9). On the return, she reported a tax liability of $13,529. She did not pay the entire liability with her return. (Ex. A at USAKOMLO00183). 16. The only defenses Komlo has offered as to why she should not be assessed the 2010 tax year penalties or interest asserted against her by the IRS is based upon the premise that the IRS failed to properly apply “in a timely manner to [her] account the amounts the IRS collected from [her] (and from her ex-husband)” from the sale of their Florida condominium in 2005, or that it did not credit her $200 in taxes withheld, despite the fact the transcript reflects that amount being withheld. (Ex. V at 2; Ex. A at USAKOMLO00183; Ex. R at 286:22-287:3). 17. On May 30, 2011, the IRS timely assessed against her $13,529.00 in tax and $46.59 in failure to pay penalties. (Ex. A at USAKOMLO00183; see also Complaint ¶¶ 9-11; Answer ¶¶ 9-11). Case 2:15-cv-03789-CDJ Document 45-2 Filed 09/06/16 Page 3 of 13 4 II. Sale of Florida Condominium 18. During divorce proceedings, Komlo successfully petitioned for a court order directing the sale of a residential property she co-owned with her ex-husband. (Ex. AQ; Ex. H). 19. The IRS did not seek an order of the sale of the property nor did it administratively seize the property. (Ex. H; Ex. E at 124:18-23). 20. In the final order, the court mandated that “the proceeds from the sale of the Florida Condominium, after payment of real estate broker commission in the amount of five (5%) percent of the purchase price, liens of public records, cost of sale expenses and support arrearages in the amount of $215,432 to be paid directly to Jennifer Komlo and be placed in an escrow account . . . . No further distribution shall be made without Order of this Court” (Ex. H at GDR000733-34) (emphasis added). 21. The IRS filed a notice of federal tax lien (i.e., a lien of public record) against Mr. Komlo in Palm Beach County, Florida, on December 4, 2003 for tax liabilities related to 1993, 1994, 1995, 1997, 1998, 1999, and 2000. (Ex. P) 22. Komlo had legal representation during her divorce proceedings. (Ex. E at 121:6- 18). 23. James Ryan of the Law Offices of Gary, Dytrych, & Ryan, P.A. represented Komlo in the sale of the jointly-owned condominium as the settlement attorney. (Ex. E, at 120:16-19). 24. As settlement approached, Ryan corresponded with IRS Revenue Officer Doug Engler. (Ex. S; Ex. T; Ex. Z). 25. Engler sent Ryan a fax in August 2004 providing “an accounting of what is owed (from the federal tax lien) and amounts due,” and noted “[a]ll the liabilities stipulated are against Case 2:15-cv-03789-CDJ Document 45-2 Filed 09/06/16 Page 4 of 13 5 Mr. William J. Komlo solely,” and that “[t]his will serve as notification that nowhere on these federal tax lien liabilities are they inclusive of any federal income liabilities [of] Jennifer A. Komlo.” (Ex. S at GDR000324; Ex. AN at 106:4-107:13; 126:16-128:10). 26. Engler instructed Ryan that in order to pay off the lien, filed solely against Mr. Komlo, he should “[m]ake all payments out to – Department of the Treasury, include Mr. Komlo’s name and SSN in the memo section of the check, etc.” (Ex. S at GDR0000325; Ex. AN at 106:4-107:13; 126:16-128:10). 27. The August 2004 fax reflected the fact that none of Mr. Komlo’s liabilities included any of Jennifer Komlo’s liabilities (i.e., they were separate liabilities). (Ex. S at GDR000324; Ex. AN at 128:5-10). 28. Engler also informed Ryan that the Jennifer Komlo owed an outstanding liability “in addition” to that of Mr. Komlo, and provided Ryan the payoff balance for that liability under the “presum[ption] that they would want her back tax matters resolved at closing as well.” (Ex. T). The fax stated: Message: Per your request and our telephone conversation of this date ref William J. Komlo and Jennifer A. Komlo. The following figures will serve as an update to my original payoff accounting of 8/9/04. Mr. William J. Komlo now owes $620,417.65. This amount is needed to full pay all federal tax liens. In addition, there is an outstanding tax liability for Jennifer A. Komlo (no lien has been filed in FL) but the liability exists and I would presume that they would want her back tax matters resolved at closing as well. Her payoff for a 1998-1040 liability is- $68,748.24. 29. Weeks before the sale, Ryan again contacted Engler via a fax with the memo “William J. Komlo” and requested a “payoff accounting on the federal tax lien.” (Ex. Z). 30. As stated in Engler’s August 2004 fax, the IRS did not file a tax lien against Komlo in Florida. (Ex. T). Case 2:15-cv-03789-CDJ Document 45-2 Filed 09/06/16 Page 5 of 13 6 31. On April 8, 2005, Engler sent a fax to the Law Offices of Gary, Dytrych, & Ryan, P.A., that listed the payoff balances for both Mr. Komlo and the defendant, as follows: Taxpayer Year Amount William Komlo 1993 $23,796.44 William Komlo 1994 $35,973.85 William Komlo 1995 $41,406.36 William Komlo 1997 $75,773.94 William Komlo 1998 $314,389.64 William Komlo 1999 $38,647.66 William Komlo 2000 $125,763.15 Jennifer Komlo 1998 $73,297.00 (Ex. O at GDR000140). 32. That document includes the handwritten notation: “$655,751.04 4-15 Jeff.” (Ex. O at GDR000140). 33. That document also includes the handwritten notation: “These numbers are good until 4/22/05 per Engler.” (Ex. O at GDR000140). 34. The handwritten amounts listed for Mr. Komlo’s 1993, 1994, 1995, 1997, 1998, 1999, and 2000 tax years add up to $655,751.04. (Ex. O at GDR000140). 35. The sale occurred on or about April 20, 2005. (Ex. I at K-17; Ex. E at 115:24- 117:7; 120:20-121:2). 36. The property sold for $2,001,376.63. (Ex. I at K-17, line 601). Case 2:15-cv-03789-CDJ Document 45-2 Filed 09/06/16 Page 6 of 13 7 37. The settlement statement executed at the time of sale indicated on Line 506, as one of the reductions in amount to be paid to the seller, $655,751.04 for “JEFF KOMLO IRS TAX LIENS.” (Ex. I at K-17, line 506). 38. That settlement statement made no mention of any taxes or tax liens related to Jennifer Komlo. (Ex. I at K-17; Ex. E at 117:8-23). 39. Komlo signed the settlement statement. (Ex. I at K-11; Ex. E at 116:8-10). 40. On April 21, 2005, Ryan sent a letter to Douglas J. Engler, Revenue Officer for the Internal Revenue Service. (Ex. O at GDR000141). 41. That letter referenced a check numbered 399942297. (Ex. O at GDR000141). 42. Enclosed with that letter was a check numbered 399942297 made out to the U.S. Treasury for $655,751.04. (Ex. O at GDR000141-42). 43. The Internal Revenue Service applied the $665,751.04 from this sale toward unpaid taxes owed by Mr. Komlo as instructed by Ryan. (Ex. O at GDR000141). 44. The check did not reference the tax liens of Mr. Komlo, or the tax liabilities of Jennifer Komlo. (Ex. O at GDR000142). 45. The cover letter that accompanied the check included the following subject line: RE: William Jeffrey Komlo SSN [redacted]-20682 Income Tax Liens for 1993, 1994, 1995, 1997, 1998, 1999 and 2000 (Ex. O at GDR000141). 2 The parties agree that the Social Security number reflected on this document (and in any other instances where a Social Security number is redacted, unless otherwise specified) is that of William Jeffrey Komlo. Case 2:15-cv-03789-CDJ Document 45-2 Filed 09/06/16 Page 7 of 13 8 46. The appropriate way to allocate a payment received in this fashion was to apply it to the liabilities of Mr. Komlo. (Ex. AN at 130:4-131:12, 131:24-132:23). 47. The letter stated the check represented “payment in full of the above [i.e., the subject line] based on your estoppel letter dated 4/8/05 which was updated to provide amounts good through April 22, 2005.” (Ex. O at GDR000141). 48. The letter made no mention of Jennifer Komlo or her tax liabilities. (Ex. O at GDR000141). 49. Komlo does not recall any conversation with her settlement attorney instructing him to use the proceeds of the sale of the Florida condominium to pay off her tax liabilities. (Ex. E at 132:21-133:19, 139:9-16). 50. Komlo has not produced any documents in this litigation showing any communication either from her to her attorneys, or from her attorneys to the IRS, requesting the funds paid to the IRS on April 22, 2005, be applied to her liabilities. (Ex. N at 4-5). When asked about any such communications at her deposition, Komlo answered as follows, subject to the attorney-client privilege: MS. LAMBA: I’m just going to say at this point Ms. Komlo is not waiving any privileges that may exist between her and Mr. Ryan when he was acting in his capacity as her attorney. Subject to that, and as we talked about, I don’t want you to reveal any confidential attorney/client communications, you can still answer the question. THE WITNESS: So to the extent that both my ex-husband and I had liability from 1998, and it was satisfied, and to the extent that the judge ordered at the hearing where he mandated that this be sold that all tax debt be taken care of, I, basically, assumed that that was going to happen. So to answer your question, I don’t recall having a conversation with Mr. Ryan about it. And I don’t recall Mr. Ryan having a conversation with me about it, at all. (Ex. E at 129:1-133:19). Case 2:15-cv-03789-CDJ Document 45-2 Filed 09/06/16 Page 8 of 13 9 51. After the sale, Komlo’s settlement attorney wrote Engler a letter dated August 12, 2005, stating “the income tax liens in connection with the above were paid off on April 22, 2005,” and listing only the name of William J. Komlo. (Ex. AA). 52. After the sale, Komlo’s settlement attorney wrote Engler a letter dated September 7, 2005, stating “the above referenced tax liens were paid off” through the April 2005 sale of the Florida condominium. (Ex. U). 53. The “above referenced tax liens” referred to in the September 7, 2005 letter were described in the subject line of the letter as: RE: William Jeffrey Komlo SSN [redacted]-2068 Income Tax Liens (Ex. U). 54. The September 7, 2005 letter made no mention of any tax liens or liabilities of Komlo. (Ex. U). 55. The IRS released the liens of William Jeffrey Komlo in September 2005. (Ex. Y). 56. Komlo immediately received $215,432 for the “support arrearages” from the sale of the Florida condominium in accordance with the divorce court’s order. (Ex. I at K-17, line 515; Ex. E at 121:6-18; Ex. AB; Ex. H at GDR000733-34). 57. The remaining funds from the sale, which amounted to $630,168.70, were deposited into an escrow account, pursuant to the order of the court administering the divorce. (Ex. H at GDR000734; Ex. I at K-17, line 603; Ex. E at 121:19-122:19). 58. Komlo ultimately received at least $450,969 of those funds, with the court directing that a portion go to pay professional fees for those involved in her divorce proceeding. (Ex. Q at USAKOMLO009972-73; Ex. E at 125:5-128:4; 128:19-129:3). Case 2:15-cv-03789-CDJ Document 45-2 Filed 09/06/16 Page 9 of 13 10 59. Komlo was on notice as of the date of her divorce that there remained outstanding federal income tax liabilities for 1998, as the divorce decree stated Mr. Komlo was to be “solely responsible for all Internal Revenue Service (IRS) debt, liabilities or liens owed either individually or jointly for all tax periods prior to December 31, 2000 . . . .” (Ex. Q at USAKOMLO000973). 60. The divorce decree referenced that Mr. Komlo left Komlo with “a potential large tax ramification with the IRS,” and considered that factor in awarding substantially all marital property to Komlo. (Ex. Q at USAKOMLO000974). III. Events Tolling the Statute of Limitations 61. The United States filed this suit on July 7, 2015, 695 days after August 11, 2013, which is ten years after the date the IRS assessed Komlo for her 1998 income tax liability. (Dkt. No. 1; Ex. A at USAKOMLO00170). 62. Komlo requested a Collection Due Process (“CDP) hearing on November 5, 2012. (Ex. L; Ex. E at 39:21-43:13; Ex. R at 171:7-22).3 63. Komlo signed that CDP request. (Ex. L at USAKOMLO00029; Ex. E at 41:24- 43:13, 63:24-64:23, 66:14-67:21). 64. Komlo included a request for innocent spouse relief with her CDP request. (Ex. L at USAKOMLO00029; Ex. AL; Ex. E at 63:24-64:23, 66:14-67:21; Ex. R at 171:7-22; Ex. AO at 41:4-15). 3 The deponent in the deposition attached as Exhibit R uses a pseudonym in her work at the IRS due to the fact her work requires that she contact high-risk taxpayers. Accordingly, the United States requested opposing counsel refer to her only as Shari Green in her deposition, and the Government has redacted her legal name in this transcript to protect that information. Case 2:15-cv-03789-CDJ Document 45-2 Filed 09/06/16 Page 10 of 13 11 65. The certified transcript of account for Komlo for 1998 reflects the filing of this CDP hearing request. (Ex. A, at USAKOMLO00172 (“LEGAL SUIT PENDING”); Ex. R, at 254:11-21). 66. The certified transcript of account reflects an entry that suggests Komlo withdrew her request for a CDP hearing on December 5, 2012. (Ex. A at USAKOMLO00172). 67. The entry stating Komlo withdrew the CDP hearing request was a “mistake.” (Ex. R, at 254:7-10). 68. Komlo recalled the CDP hearing took “many, many, many months.” (Ex. E, at 46:7-12). 69. Komlo later recalled the process took “years,” and at least “over a year.” (Ex. E at 47:9-10; 48:2-4). 70. Again, later during her deposition, Komlo stated she had a conversation with someone at the IRS about the innocent spouse aspect of her CDP hearing filed in November 2012, and that the conversation either took place “18 months” after she filed her CDP hearing request, or that the IRS employee informed her that the process could take “up to 18 months.” (Ex. E at 71:19-75:15). 71. Komlo did not resolve the CDP hearing as it pertained to the 1998 tax year until September 16, 2014, when the IRS sent her a Notice of Determination. (Ex. M at USAKOMLO00046-47). 72. Her certified transcript of account reflects that the IRS treated her CDP hearing as concluded on October 16, 2014. (Ex. A at USAKOMLO00173 (“LEGAL SUIT NO LONGER PENDING”); Ex. R at 255:3-14). Case 2:15-cv-03789-CDJ Document 45-2 Filed 09/06/16 Page 11 of 13 12 73. While the literal transcript does not include the words “collection due process hearing” on the entries that indicate Komlo’s CDP hearing request and the date the determination resulting from the CDP hearing became final, that is what those entries mean. (Ex. R at 254:7-10, 255:3-14, 256:15-20, 258:17-259:1). 74. The IRS fully considered the merits of the CDP case, and Komlo (through her representatives) communicated regarding that case between December 5, 2012 and September 16, 2014. (Ex. AC at K-00273-75; Ex. AD at K-411-12, K-421). 75. The IRS Appeals Office communicated to Komlo that it “received” her CDP “case for consideration” on January 10, 2013. (Ex. AG at USAKOMLO00258). 76. When the IRS informed Komlo it could not find a form required when applying for innocent spouse relief during a CDP hearing, Komlo re-submitted that form on January 17, 2013. (Ex. AF at USAKOMLO00061; Ex. AH; Ex. E at 99:14-100:23; Ex. AO at 75:24-76:17; 99:21-100:9). 77. On April 17, 2013, IRS Appeals sent Komlo a letter scheduling a CDP hearing on May 9, 2013. (Ex. AC at K-00273). 78. On May 20, 2013, IRS Appeals issued Komlo a notice of determination as to her 2008 and 2010 tax years, but not as to her 1998 tax year. (Ex. AO at 49:19-25). 79. On May 22, 2013, a representative of Komlo sent a letter to IRS Appeals noting that in a notice of determination regarding her request for an Offer in Compromise, the IRS did “not make reference to the 1998 tax year.” (Ex. AD at K-000411; see also Ex. AE at USAKOMLO00040-41). Case 2:15-cv-03789-CDJ Document 45-2 Filed 09/06/16 Page 12 of 13 13 80. On August 13, 2013, a representative of Komlo sent the IRS a letter following up on an earlier letter from May 2013 “requesting a redetermination for 1998.” (Ex. AI at USAKOMLO000621; Ex. E at 62:7-63:1). 81. On August 27, 2014, the IRS Appeals Officer assigned to Komlo’s case sent her representative a form that would permit her to withdraw her CDP hearing request. (Ex. AK). 82. The IRS never received a withdrawal of the CDP hearing despite requesting such a withdrawal several times. (Ex. R 171:7-22; 273:22-274:5, 282:5-6; 289:17-290:4). 83. Komlo offered no response when asked whether the CDP hearing tolled the statute of limitations for purposes of this litigation. (Ex. N at 2-3). IV. Komlo v. United States 84. Komlo argued that she has paid her tax for the 1998, 2008, and 2010 tax years in her prior refund action. See, e.g., Komlo v. United States, Case No. 2:15-cv-2127, ECF No. 14 at 19 (Ex. AP). Case 2:15-cv-03789-CDJ Document 45-2 Filed 09/06/16 Page 13 of 13 1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) Case No. 2:15-cv-03789-CDJ ) JENNIFER KOMLO, ) ) Defendant. ) __________________________________________) ORDER In consideration of the United States’ motion for partial summary judgment, as well as its memorandum in support, and any additional briefs on the topics, and for good cause shown, it is hereby ORDERED that the United States motion for summary judgment is GRANTED; and it is further ORDERED that this Court finds the United States is entitled to a judgment against Jennifer Komlo in the amount of $38,208.00 for her 1998 income tax liabilities; $7,641.60 for 1998 penalties under 26 U.S.C. § 6662; $21,339.00 for her 2008 income tax liabilities; $4,268 for 2008 penalties under 26 U.S.C. § 6662; $13,529.00 for her 2010 income tax liabilities; $46.59 for 2010 penalties under 26 U.S.C. § 6651; plus interest, until paid in full, as provided by 28 U.S.C. § 1961(c) and 26 U.S.C. §§ 6601 and 6621. SO ORDERED. ____________ ______________________________________ Date The Honorable C. Darnell Jones, II UNITED STATES DISTRICT JUDGE Case 2:15-cv-03789-CDJ Document 45-3 Filed 09/06/16 Page 1 of 1 1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) Case No. 2:15-cv-03789-CDJ ) JENNIFER KOMLO, ) ) Defendant. ) __________________________________________) INDEX OF EVIDENCE IN SUPPORT OF UNITED STATES’ MOTION FOR SUMMARY JUDGMENT Case 2:15-cv-03789-CDJ Document 45-4 Filed 09/06/16 Page 1 of 3 2 EXHIBITS Ex. Description A Certified Certificates of Assessment for Komlo – 1998, 2008, and 2010 B Stipulated Decision in Komlo v. Commissioner, Dkt. No. 9963-02 (Tax Ct.) C Defendant’s Responses to Plaintiff’s First Set of Interrogatories D Komlo’s 2010 Income Tax Return E Deposition of Jennifer Komlo Taken May 20, 2016 (excerpts) F Certified Certificates of Assessment for Jeff and Jennifer Komlo – 1998 G Notice of Deficiency for Jeff and Jennifer Komlo – 1993-1995 and 1997-1998 (excerpt) H March 23, 2005 Order of Court of Common Pleas of Montgomery County I Settlement Statements from Sale of 11202 Turtle Beach Rd. on April 20, 2005 J Komlo’s 2008 Income Tax Return K Notice of Deficiency for Komlo - 2008 L Komlo’s Request for a Collection Due Process Hearing Received November 7, 2012 M Notice of Determination for 1998 Issued September 16, 2014 N Defendant’s Responses to Plaintiff’s Second Set of Interrogatories O Correspondence Between Doug Engler and James Ryan Dated April 21, 2005 P Notice of Federal Tax Lien Filed Against Jeff Komlo in Palm Beach County, Florida Dated December 4, 2003 Q Final Decree in Divorce Dated May 16, 2008 R Rule 30(b)(6) Deposition of Shari Green Taken June 7, 2016 (excerpts) S Correspondence Between Doug Engler and James Ryan Dated August 9, 2004 T Correspondence Between Doug Engler and James Ryan Dated September 14, 2004 U Correspondence Between Doug Engler and James Ryan Dated September 7, 2005 V Defendant’s Supplemental Responses to Plaintiff’s Interrogatories W [reserved] X [reserved] Y Certificate of Release of Federal Tax Lien Against Jeff Komlo in Palm Beach County, Florida Dated September 28, 2005 Z Correspondence Between Doug Engler and James Ryan Dated March 22, 2005 AA Correspondence Between Doug Engler and James Ryan Dated August 12, 2005 Case 2:15-cv-03789-CDJ Document 45-4 Filed 09/06/16 Page 2 of 3 3 Ex. Description AB Authorization to Distribute Funds Signed by Komlo on April 26, 2005 AC Correspondence Between Komlo and IRS Appeals Dated April 17, 2013 AD Correspondence Between Senior and IRS Appeals Dated May 22, 2013 AE Notice of Determination for 2008 and 2010 Issued May 20, 2013 AF Request for Innocent Spouse Relief Stamped January 22, 2013 AG Correspondence Between Komlo and IRS Appeals Dated April 17, 2013 AH Letter Resubmitting Request for Innocent Spouse Relief Dated January 17, 2013 AI Correspondence Between Gabell and IRS Dated August 13, 2013 AJ [reserved] AK Correspondence Between Gabell and IRS Dated August 27, 2014 AL Request for Innocent Spouse Relief Stamped November 7, 2012 AM [reserved] AN Deposition of Doug Engler Taken July 7, 2016 (excerpts) AO Rule 30(b)(1) Deposition of Shari Green Taken June 7, 2016 (excerpts) AP Plaintiff’s Memorandum in Support of Her Answer to Defendant’s Motion to Dismiss in Komlo v. United States, Dkt. No. 2:15-cv-2127 (E.D. Pa.) AQ June 28, 2004 Order of Court of Common Pleas of Montgomery County DECLARATIONS 1. Declaration of Kyle A. Bishop 2. Declaration of Shari Green 3. Declaration of May I. Tucholski Pursuant to Federal Rule of Evidence 902(11) Case 2:15-cv-03789-CDJ Document 45-4 Filed 09/06/16 Page 3 of 3 Case 2:15-cv-03789-CDJ Document 45-5 Filed 09/06/16 Page 1 of 2 Case 2:15-cv-03789-CDJ Document 45-5 Filed 09/06/16 Page 2 of 2 Case 2:15-cv-03789-CDJ Document 45-6 Filed 09/06/16 Page 1 of 3 Case 2:15-cv-03789-CDJ Document 45-6 Filed 09/06/16 Page 2 of 3 Case 2:15-cv-03789-CDJ Document 45-6 Filed 09/06/16 Page 3 of 3 1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) Case No. 2:15-cv-03789-CDJ ) JENNIFER KOMLO, ) ) Defendant. ) ___________________________________________) DECLARATION OF KYLE L. BISHOP IN SUPPORT OF UNITED STATES’ MOTION FOR PARTIAL SUMMARY JUDGMENT I, Kyle L. Bishop, pursuant to 28 U.S.C. § 1746, declare as follows: 1. I am a trial attorney with the United States Department of Justice and represent the United States in this matter. I have personal knowledge of the matters set forth in this declaration and, if called as a witness, could testify competently thereto. 2. On February 22, 2016, I received Certificates of Official Records for Jennifer Komlo’s 1998, 2008, and 2010 tax years. A true and correct copy is attached as Exhibit A. 3. On April 22, 2003, the United States Tax Court entered a stipulated decision in Komlo v. Commissioner, Tax Ct. Dkt. No. 9963-02. A true and correct copy is attached as Exhibit B. 4. On March 11, 2016, I received signed interrogatory responses from Jennifer Komlo. A true and correct copy is attached as Exhibit C. 5. The United States retained a copy of Jennifer Komlo’s original 2010 income tax return. A true and correct copy is attached as Exhibit D. Case 2:15-cv-03789-CDJ Document 45-7 Filed 09/06/16 Page 1 of 7 2 6. On May 20, 2016, the United States took the deposition of Jennifer Komlo in this matter. A true and correct copy of excerpts from the transcript of that deposition is attached hereto as Exhibit E. 7. On April 4, 2002, the Internal Revenue Service sent a Letter 531(DO) Notice of Deficiency to William Komlo and Jennifer Komlo for the 1993, 1994, 1995, 1997, and 1998 tax years. A true and correct copy of that letter, which was produced to the United States by Defendant in this litigation, is attached hereto as Exhibit G. 8. On June 28, 2004, the Court of Common Pleas for Montgomery County, Pennsylvania ordered the sale of a condominium jointly-owned by William Komlo and Jennifer Komlo. A true and correct copy of that order, which Defendant produced to the United States in this litigation, is attached hereto as Exhibit H. 9. Defendant produced in this litigation HUD-1 Settlement Statements for the sale in 2005 of a condominium jointly-owned by William Komlo and Jennifer Komlo. True and correct copies of the HUD-1 Settlement Statements produced by Defendant are attached hereto as Exhibit I. 10. A true and correct copy of the 1040 U.S. Individual Income Tax Return filed by Jennifer Komlo for the 2008 tax year, and bearing her signature, is attached hereto as Exhibit J. 11. On or about November 5, 2012, Jennifer Komlo sent a Form 12153 (“Request for a Collection Due Process or Equivalent Hearing”) to the Internal Revenue Service with respect to the 1998, 2008, and 2012 tax years. A true and correct copy of that Form 12153 (“Request for a Collection Due Process or Equivalent Hearing”) is attached hereto as Exhibit L. Case 2:15-cv-03789-CDJ Document 45-7 Filed 09/06/16 Page 2 of 7 3 12. On May 18, 2016, Defendant served verified responses to the United States’ Second Set of Interrogatories. A true and correct copy of those verified responses are attached hereto as Exhibit N. 13. On April 15, 2016, the United States issued a subpoena for business records to the Law Offices of Gary, Dytrych, & Ryan, P.A. in this case requesting, among other documents, all communications between William or Jennifer Komlo or their agents and the Internal Revenue Service. In response to that subpoena, the Law Offices of Gary, Dytrych & Ryan, P.A. produced, among other documents, a copy of a Fax Transmittal Cover Sheet dated April 8, 2005 from Internal Revenue Service Revenue Officer Douglas J. Engler to Lessa Ray, and a copy of a cover letter and cashier’s check payable to the United States Treasury dated April 21, 2005. True and correct copies of those documents are attached hereto as Exhibit O. 14. Submitted with this motion is a true and correct copy of the signed Declaration of Custodian Pursuant to Federal Rule of Evidence 902(11) that Gary, Dytrych & Ryan, P.A. produced in response to the United States’ April 15, 2016 subpoena for production of documents. 15. On December 4, 2003, the United States issued a Notice of Federal Tax Lien for William Komlo’s unpaid federal income tax liabilities for the tax years 1993 through 2000, which was recorded in Clerk’s office of Palm Beach County, Florida on December 19, 2003. A true and correct copy of that Notice of Federal Tax Lien is attached hereto as Exhibit P. 16. On May 16, 2008, the Court of Common Pleas for Montgomery County, Pennsylvania issued a Final Decree in Divorce in William and Jennifer Komlo’s divorce case. A true and correct copy of that order, which Defendant filed as an Exhibit to a Motion for Preliminary Injunction in Case No. 2:15-cv-02127-CDJ (E.D. Pa.) is attached hereto as Exhibit Q. Case 2:15-cv-03789-CDJ Document 45-7 Filed 09/06/16 Page 3 of 7 4 17. On June 7, 2016, Defendant took the deposition of the United States pursuant to Rule 30(b)(6) of the Federal Rules of Civil Procedure. A true and correct copy of excerpts from the transcript of that deposition is attached hereto as Exhibit R. 18. In response to the United States’ subpoena for production of business records to the Law Offices of Gary, Dytrych, & Ryan, P.A in this case, the Law Offices of Gary, Dytrych & Ryan, P.A. produced a copy of a letter dated August 9, 2004 from Internal Revenue Service employee Douglas J. Engler to Jim Ryan, Esquire. A true and correct copy of the letter that was produced to the United States is attached hereto as Exhibit S. 19. In response to the United States’ subpoena for production of business records to the Law Offices of Gary, Dytrych, & Ryan, P.A in this case, the Law Offices of Gary, Dytrych & Ryan, P.A. produced a copy of a Fax Transmittal Cover Sheet dated September 14, 2004 from Internal Revenue Service Revenue Officer Douglas J. Engler to James H. Ryan. A true and correct copy of the Fax Transmittal Cover Sheet that was produced to the United States is attached hereto as Exhibit T. 20. In response to the United States’ subpoena for production of business records to the Law Offices of Gary, Dytrych, & Ryan, P.A in this case, the Law Offices of Gary, Dytrych & Ryan, P.A. produced a copy of a letter from Leesa C. Ray to the Department of the Treasury dated September 7, 2005. A true and correct copy of the letter that was produced to the United States is attached hereto as Exhibit U. 21. On June 24, 2016, Defendant served Supplemental Responses to Plaintiff’s Interrogatories on the United States. A true and correct copy of those Supplemental Responses is attached hereto as Exhibit V. Case 2:15-cv-03789-CDJ Document 45-7 Filed 09/06/16 Page 4 of 7 5 22. On September 28, 2005, the United States issued a Certificate of Release of Federal Tax Lien for William Komlo’s unpaid federal income tax liabilities for the tax years 1993, 1994, 1995, 1997, 1998, 1999, and 2000, which was recorded in Clerk’s office of Palm Beach County, Florida on October 14, 20015. A true and correct copy of that Certificate of Release of Federal Tax Lien is attached hereto as Exhibit Y. 23. In response to the United States’ subpoena for production of business records to the Law Offices of Gary, Dytrych, & Ryan, P.A in this case, the Law Offices of Gary, Dytrych & Ryan, P.A. produced a copy of a letter dated March 22, 2005 from Leesa C. Ray to Internal Revenue Service Revenue Officer Douglas J. Engler. A true and correct copy of the letter that was produced to the United States is attached hereto as Exhibit Z. 24. In response to the United States’ subpoena for production of business records to the Law Offices of Gary, Dytrych, & Ryan, P.A in this case, the Law Offices of Gary, Dytrych & Ryan, P.A. produced a copy of a letter dated August 12, 2005, purportedly faxed from Leesa Ray to Internal Revenue Service Revenue Officer Douglas J. Engler. A true and correct copy of that letter is attached hereto as Exhibit AA. 25. Defendant produced in this case a document dated April 26, 2005 and titled Authorization to Distribute Funds bearing Jennifer Komlo’s name. A true and correct copy of the Authorization to Distribute Funds produced by Defendant is attached hereto as Exhibit AB. 26. Defendant produced in this case a letter dated May 22, 2013, with attachments, from Brett W. Senior Esq. to Internal Revenue Service Appeals Officer Shari Green. A true and correct copy of the letter and attachments produced by Defendant is attached hereto as Exhibit AD. Case 2:15-cv-03789-CDJ Document 45-7 Filed 09/06/16 Page 5 of 7 6 27. On or about January 22, 2013, the Internal Revenue Service Appeals Office located in Plantation, Florida received a Form 8857 (“Request for Innocent Spouse Relief”) from Defendant Jennifer Komlo. A true and correct copy of that Form 8857 is attached hereto as Exhibit AF. 28. The Internal Revenue Service Office of the Chief Counsel received a letter dated August 13, 2013 and an attachment from Defendant’s representative Jeremy G. Gabell. A true and correct copy of that letter and attachments is attached hereto as Exhibit AI. 29. On May 20, 2013, the Internal Revenue Service Appeals Office sent a letter and Notice of Determination to Jennifer Komlo and Brett W. Senior with respect to Jennifer Komlo’s tax liabilities for the 2008 and 2010 tax years. A true and correct copy of that letter and Notice of Determination is attached hereto as Exhibit AJ. 30. On or about November 7, 2012, the Internal Revenue Service collections office in Philadelphia received a Form 8857 (“Request for Innocent Spouse Relief”) from Defendant Jennifer Komlo. A true and correct copy of that Form 8857 and attachments is attached hereto as Exhibit AL. 31. On July 19, 2016, Defendant took the deposition of Douglas J. Engler. A true and correct copy of excerpts from the transcript of that deposition is attached hereto as Exhibit AN. 32. On June 7, 2016, Defendant took the deposition of the Internal Revenue Service Appeals Officer Shari Green. A true and correct copy of excerpts from the transcript of that deposition is attached hereto as Exhibit AO. Case 2:15-cv-03789-CDJ Document 45-7 Filed 09/06/16 Page 6 of 7 7 I declare under penalty of perjury that the foregoing is true and correct and this declaration was executed on September 6, 2016 at Washington, District of Columbia. /s/ Kyle L. Bishop KYLE L. BISHOP Case 2:15-cv-03789-CDJ Document 45-7 Filed 09/06/16 Page 7 of 7