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United States v. Mooney

United States District Court, D. Minnesota

May 15, 2018

United States of America, Plaintiff,
v.
William J. Mooney, Joni T. Mooney, and Harbor Holdings, Mid-Atlantic Trustees and Administrators, Defendants.

          Michael R. Pahl, U.S. Department of Justice, Tax Division, for Plaintiff.

          William J. Mooney and Joni T. Mooney, pro se.

          MEMORANDUM OPINION AND ORDER ADOPTING REPORT AND RECOMMENDATION

          SUSAN RICHARD NELSON UNITED STATES DISTRICT JUDGE.

         This matter comes before the Court on the Answer and Objection (“Objection”) [Doc. No. 147] filed by Defendants William J. Mooney and Joni T. Mooney (collectively “the Mooneys”) to Magistrate Judge Leo I. Brisbois's Report and Recommendation dated April 19, 2018 (“R&R of April 19, 2018”) [Doc. No. 146]. In the R&R, the magistrate judge recommended that the Motion for Summary Judgment [Doc. No. 119] filed by the United States of America (“Plaintiff”) be granted. For the reasons set forth below, after a de novo review, this Court overrules the Mooneys' Objection, adopts the R&R in its entirety, and grants Plaintiff's Motion for Summary Judgment.

         I. BACKGROUND

         The facts and lengthy procedural history of this case have been thoroughly and accurately stated in several Orders of this Court and of the magistrate judge. (See, e.g., Order of Nov. 7, 2016 [Doc. No. 36]; Mem. Op. & Order of May 31, 2017 [Doc. No. 78].) Therefore, this Court, like the magistrate judge, recites the facts here only to the extent necessary to contextualize and rule on the Mooneys' Objection.

         A. Factual Background

         Very briefly stated, on July 28, 2016, Plaintiff initiated this action against the Mooneys “to reduce federal tax and penalty assessments to judgment and enforce federal tax liens on property located in this district.” (Compl. [Doc. No. 1] at 1.) Before reciting the facts, however, this Court notes that even at this stage of the litigation, only Plaintiff has filed admissible evidence regarding the Mooneys' tax liability and the Mooneys' history of ownership of the property at issue. Among other documents, Plaintiff has filed the sworn declarations of Internal Revenue Service (“IRS”) Revenue Officers Richard Wallin (“Wallin Decl.”) [Doc. No. 123] and Shawn M. Kennedy (“Kennedy Decl.”) [Doc. No. 122]. Plaintiff has also filed Certifications of Assessments and Payments that provide the transactional history of the relevant tax years. (See Exs. 1-15 to Pl.'s Opp'n to Defs.' Mot. Summ. J. [Doc. No. 108].)[1] In the absence of any evidence offered by the Mooneys to call into question the veracity of these documents, combined with the presumption of correctness that tax assessment documents enjoy, see, e.g., N.S. State Univ. v. United States, 255 F.3d 599, 603 (8th Cir. 2001), this Court considers the Mooneys' tax and civil penalty liability as set forth in Sections I.A.1 and I.A.2 to be undisputed.[2]

         1. The Mooneys' Tax Liability

         William Mooney owes federal income taxes for the 2002, 2003, 2004, 2013, and 2014 tax years, and Joni Mooney owes federal income taxes for the 2002, 2003, 2013, and 2014 tax years. (See Exs. 1-5.) In 2002 and 2003, the Mooneys filed joint tax returns, which the IRS later audited. (Wallin Decl. ¶ 4.) This audit demonstrated that the Mooneys had failed to report some taxable income and consequently owed additional taxes, plus interest and penalties. (William Mooney Test., Ex. 29 to Wallin Decl. [Doc. No. 123-1] at 44-45; Exs. 1-2.) As of June 9, 2016, the Mooneys' tax liability, including income taxes, interest, and penalties for those two years had an unpaid balance of $24, 065.46. (Exs. 1-2.)

         For the 2004 tax year, William Mooney did not file a federal income tax return, but the IRS recreated his net income for that year, assessed taxes, and sent him notice of the tax assessment and the penalties imposed. (Wallin Decl. ¶ 5; Notice of Deficiency, Ex. 35 to Wallin Decl. [Doc. No. 123-3].) As of June 9, 2016, William Mooney's tax liability for the 2004 tax year was $30, 546.41. (Ex. 3.)

         For the 2013 and 2014 tax years, the Mooneys again filed joint federal income tax returns. (Wallin Decl. ¶ 7.) The IRS assessed taxes for those years based on the Mooneys' self-reported income. (Id.; see also Exs. 4-5.) The federal income tax, penalties, and interest for those two tax years maintained an unpaid balance of $3, 138.66 as of June 9, 2016. (See Exs. 4-5.)

         In all, as of January 1, 2018, the assessments made against William Mooney, including federal income taxes, interest, and penalties for the tax years of 2002-2004 and 2013-2014 maintained a balance of $63, 355.21. (Kennedy Decl. ¶ 5.) Likewise, as of that same date, the assessments made against Joni Mooney, again including federal income taxes, interest, and penalties for the 2002-2003 and 2013-2014 tax years maintained an unpaid balance of $30, 240.11. (Id. ¶ 7.) Additional interest continues to accrue on these debts at a rate specified by federal law. (Id. ¶¶ 5, 7.) Moreover, as shown in the IRS transcripts of account, notices of the aforementioned assessments and demands for payment were sent to the Mooneys. (Id. ¶¶ 5, 7.) However, despite these notices and demands for payment, the Mooneys have failed to pay what they owe the IRS. (Id. ¶¶ 5, 9.)

         2. The Mooneys' Civil Penalty Liability

         In 2009, the Mooneys filed federal income tax returns for the 2004-2008 tax years. (Wallin Decl. ¶ 6.) A delegate of the Secretary of the Treasury deemed all of these tax returns to be frivolous, so a penalty was assessed for each of the submitted tax returns. (Tax Returns & Penalty Approval Forms, Exs. 30-34 to Wallin Decl. [Doc. No. 123-2].) As of January 1, 2018, this penalty assessment against William Mooney had an unpaid balance of $37, 907.70, and the penalty assessment against Joni Mooney had an unpaid balance of $37, 630.81. (Kenney Decl. ¶¶ 9, 11.) The IRS again sent the Mooneys notices of these assessments as well as demands for payments. (Id. ¶¶ 10, 12; see also Exs. 6-15.)

         3. The Property at Issue

         It is undisputed that in February of 1982, the Mooneys acquired by deed a property located at 409 6th Avenue Northwest, Little Falls, Minnesota. (William Mooney Dep. (“Mooney Dep.”) [Doc. No. 124-2] at 13.)[3] It is also undisputed that the Mooneys officially owned this property until 2004. (Id. at 21; Quit Claim Deed, Ex. 16 to Wallin Decl. (“Deed”) [Doc. No. 123-1] at 1.) In 2004, however, William Mooney purported to transfer the property to the Harbor Holdings Trust, a “Pure Trust” that was created in September of that year. (See Trust Documents, Ex. 25 to Wallin Decl. [Doc. No. 123-1] at 10-20.) A ...


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