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Jonathan Shafmaster v. United States of America

May 7, 2012


The opinion of the court was delivered by: Paul Barbadoro United States District Judge

Opinion No. 2012 DNH 091


The government seeks summary judgment with respect to the Shafmasters' claims for a refund of a failure-to-pay penalty. The sole question raised by the present motion is whether a Notice of Tax Lien that was sent to the Shafmasters satisfies the notice and demand requirement that is a prerequisite for the imposition of a failure-to-pay penalty under 26 U.S.C. § 6651(a)(3). For the reasons provided below, I determine that it does, and I therefore grant the government's motion for summary judgment.


A. History of Dealings Between Shafmasters & IRS After an audit of the Shafmasters' personal income taX returns for the 1993 and 1994 tax years, the IRS issued notices of deficiency and proposed assessments. The Shafmasters petitioned the tax court for a redetermination of the proposed assessments. They were referred to an IRS appeals officer, with whom they worked from 1999 until early 2001 to resolve their objections. On March 19, 2001, the Shafmasters entered into three written Stipulations of Settlement. On April 25, 2001 the tax court issued two brief orders implementing the settlement agreements. The tax court decisions and the settlement agreements were both silent on the issue of whether the Shafmasters would owe failure-to-pay penalties.

The government asserts that on September 10, 2001, it sent the Shafmasters a notice stating the amount they owed and demanding payment. The Shafmasters assert that such document was not sent to their address. On October 7, 2002, a document titled "Notice of Federal Tax Lien" was sent to the Shafmasters. The contents of that document are described in some depth infra.

On January 6, 2004, the Shafmasters submitted a Form 870-AD, in which they sought specific reductions in the amounts owed for the 1992-1994 tax years based on net operating carryback losses they had incurred subsequent to those years. The IRS accepted the offer shortly after it was submitted.

On August 4, 2004, the Shafmasters and the IRS entered into an installment agreement establishing a schedule for payment of the outstanding tax liabilities. The agreement identifies the Shafmasters' liability, sets a payment schedule, and states that the Shafmasters agree to "pay the federal taxes shown, PLUS PENALTIES AND INTEREST PROVIDED BY LAW." Doc. No. 25-1.

On April 17, 2006, the IRS imposed a failure-to-pay penalty for the 1994 tax year.

B. Procedural History

After paying off their balance in full, the Shafmasters filed a refund claim on September 18, 2008. They argued, inter alia, that they were entitled to a refund of the failure-to-pay penalty. The IRS filed a motion for summary judgment which I granted in part and denied in part, Doc. No. 31.

I rejected the Shafmasters' claim that certain representations by IRS agents equitably estopped the government from imposing the failure-to-pay penalty. I agreed with the Shafmasters, however, that a triable issue of fact existed as to whether the IRS had sent notice and demand to the Shafmasters' last known address, a prerequisite to imposition of the penalty. Although the government produced a Form 4340 indicating that notice and demand had been properly sent on September 10, 2001, I determined that the presumption of correctness typically accorded to that form had been sufficiently rebutted by the Shafmasters' submissions. In conjunction with their averments that they never received the notice and demand, the Shafmasters also presented a handwritten notation on a "Request for Quick or Prompt Assessment" form, dated September 5, 2001, that reads:


Doc. No. 29-2. After considering the notation's indication that the IRS should not directly bill the Shafmasters, and in light of the document's temporal proximity to the date the IRS contends notice and demand was issued, I concluded that a reasonable factfinder could question whether notice and demand had been properly sent.

Based on assertions that it could explain away the notation, I permitted the government to again move for summary judgment. After a second round of summary judgment filings, however, I was again unable to conclude on the basis of the government's submissions that notice and demand was sent to the Shafmasters on September 10, 2001. Nonetheless, among its submissions accompanying the motion, the government also produced a Notice of Tax Lien form that was sent to the Shafmasters on October 7, 2002. The document appears on its face to satisfy the notice and demand required by statute, and the Shafmasters do not contest that the form was properly sent to them. I directed the government to submit a third summary judgment ...

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