Opinion
20894-19 6791-20 10830-20 17749-21 17771-21
09-05-2023
NOEL M. PARDUCCI & KENNETH L. PARDUCCI, ET AL., Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Ronald L. Buch Judge
Pending before the Court is Mr. Simpson's motion, filed July 31, 2023, captioned Motion for Summary Judgment Allegations of Fraud. Mr. Simpson moves for partial summary judgment as to the issue of fraud or fraudulent intent. In response to a similar motion, the Commissioner contended that fraudulent intent is in dispute and can only be resolved by cross-examination. Summary judgment is not appropriate when material facts are genuinely in dispute. Because fraud is a material fact that remains in dispute in this case, we will deny Mr. Simpson's motion.
Background
The Commissioner issued a notice of deficiency to Mr. Simpson determining a deficiencies for 2012 and 2013. In addition to adjusting Mr. Simpson's tax liability, the Commissioner determined a fraud penalty under section 6663. In T.C. Memo. 2023-75, we held that the return that purported to be Mr. Simpson's 2013 Federal income tax return was not a valid return. Thereafter, the Commissioner amended his answer to include an addition to tax for the fraudulent failure to file for 2013. On July 31, 2023, Mr. Simpson filed a Motion for Summary Judgment as to the issue of fraud.
Discussion
Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Under Rule 121(a), either party may move for summary judgment regarding any legal issues in a controversy. The Court may grant summary judgment if the pleadings and other materials submitted to the Court show there is no genuine dispute of material fact. Rule 121(a)(2); Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The moving party bears the burden of demonstrating that there is no genuine dispute of material fact. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff 'd, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judgment, we draw factual inferences and resolve reasonable doubt in favor of the nonmoving party. FPL Group, Inc. v. Commissioner, 115 T.C. 554, 559 (2000); Espinoza v. Commissioner, 78 T.C. 412, 416 (1982). Here, Mr. Simpson and Scenic Trust, as the moving parties, must demonstrate that no genuine dispute exists as to any material fact. And we draw factual inferences in favor of the Commissioner, as the nonmoving party.
The burden of proof is on the Commissioner to establish fraud by clear and convincing evidence. See § 7454(a); Rule 142(b); Hebrank v. Commissioner, 81 T.C. 640, 642 (1983). The presence of fraud is a factual question to be determined by examining the entire record. Brunswick Hosp. Ctr., Inc. v. Commissioner, T.C. Memo. 198-253, 53 T.C.M. (CCH) 850, 853; Richman, 65 T.C.M. (CCH) at 1810. The Commissioner must show that the taxpayer acted specific intent to evade taxes known to be owing through conduct intended to conceal, mislead, or otherwise prevent collection. Stoltzfus v. United States, 398 F.2d 1002, 1004 (3d Cir. 1968). Because direct evidence of a taxpayer's subjective intent is rare, we may infer fraudulent intent from circumstantial evidence, and we consider the taxpayer's entire course of conduct. Rowlee v. Commissioner, 80 T.C. 1111, 1123 (1983); Richman, 65 T.C.M. (CCH) at 1810.
Mr. Simpson's case is one in a group of five consolidated cases. One of those other cases is Hoyal v. Commissioner, no. 6791-20. In Hoyal, the petitioners likewise filed a motion for summary judgment as to the question of fraud. By order dated May 4, 2022, we denied that motion because the question of fraud was a material fact in dispute. We must do the same here.
Summary judgment is not available because there is a genuine dispute as to the question of fraudulent intent. Summary judgment is generally inappropriate when fraudulent intent is a material fact that is genuinely in dispute. A factual issue is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 248 (1986); Richman, 65 T.C.M. (CCH) at 1810. A factual issue is material if the disputed fact would affect the outcome of the suit under governing law. Anderson, 477 U.S. at 248. The Court does not grant summary judgment where "motive, intent, and other subjective feelings and reactions are material." Richman, 65 T.C.M. (CCH) at 1811; Brunswick Hosp., 53 T.C.M. (CCH) at 853; Espinoza, 78 T.C. at 417. Likewise, when a party alleges that a factual question exists that necessitates testimony of witnesses, including cross-examination, such a statement is not considered a mere denial; a factual dispute exists. Brunswick Hosp., 53 T.C.M. (CCH) at 853.
The pleadings establish a genuine dispute of material fact. Under Rule 121(e), if it appears from the nonmoving party's declarations that the only legally available method of refuting facts set forth in the moving party's declarations is through cross-examination of the declarant, "such a showing may be deemed sufficient to establish that the facts set forth . . . are genuinely disputed." Here, Mr. Simpson declared that he properly reported his income and lacked fraudulent intent, without providing any documentary evidence. In the Commissioner's response, and supporting declaration, he asserts that disputes surrounding Mr. Simpson's intent can only be fully resolved by the cross-examination of Mr. Simpson and other witnesses. This assertion is sufficient to establish that Mr. Simpson's factual assertions are genuinely disputed.
To reflect the foregoing, it is ORDERED that the Mr. Simpson's Motion for Summary Judgment filed July 31, 2023, is denied.