Smith v. United States ( 2003 )

United States Court of Appeals
Fifth Circuit
F I L E D
Revised May 28, 2003 April 16, 2003
IN THE UNITED STATES COURT OF APPEALS Charles R. Fulbruge III
FOR THE FIFTH CIRCUIT Clerk
No. 02-20640
FRANK W SMITH; JANICE M SMITH
Plaintiffs - Appellants
v.
UNITED STATES OF AMERICA
Defendant - Appellee
Appeal from the United States District Court
for the Southern District of Texas
Before KING, Chief Judge, and DAVIS, Circuit Judge, and VANCE,
District Judge.*
PER CURIAM:
Plaintiffs-Appellants Frank and Janice Smith appeal the
district court’s order granting the Defendant-Appellee United
States’s motion for summary judgment and denying their motion for
summary judgment. We affirm in part, reverse in part, and
remand.
I. FACTUAL AND PROCEDURAL HISTORY
A. Facts
This case centers on whether Frank and Janice Smith (“the
*
United States District Judge Sarah S. Vance of the
Eastern District of Louisiana, sitting by designation.
1
Smiths”) are subject to penalties and interest due to their
underpayment of income taxes for tax years 1983 and 1984. The
parties agree on the following facts.
The Smiths were limited partners in Barrister Equipment
Associates Series 166 (“Barrister 166”), a publishing business.
Barrister 166 was one of 124 similar Barrister partnerships. In
1983 and 1984, Barrister 166 reported ordinary losses. For 1983
and 1984, the Smiths claimed a portion of the Barrister 166
losses and a portion of Barrister 166’s bases in property to
receive a tax credit.2
The Internal Revenue Service (“IRS”) began investigating the
Barrister partnerships. Though the statute of limitations for
assessing 1983 and 1984 taxes ran in 1987 and 1988, a Barrister
166 representative agreed to extend the statutes of limitations.
In 1989, the IRS sent a “Notice of Final Partnership
Administrative Adjustment,” informing Barrister 166 that it was
disallowing its partnership losses and bases in property subject
to investment tax credit (“ITC”) for 1983 and 1984.
Several partners in the Barrister partnerships, including
Barrister 166, filed petitions in United States Tax Court to
contest the disallowances. The Smiths were parties to the
2
The Smiths’ claimed shares of the ordinary losses were
$20,955 and $27,108 and their claimed shares of the bases were
$465,005 and $174,615, for 1983 and 1984, respectively.
2
Barrister 166 Tax Court proceedings.3 The Barrister 115 case was
tried as a test case. In 1995, the Tax Court ruled that the IRS
correctly disallowed Barrister 115’s 1983 and 1984 losses and
bases in investment tax credit property. This decision was not
appealed. The Tax Court then entered agreed decisions in the
other Barrister cases, including Barrister 166, disallowing all
losses and bases in property subject to the ITC.
On February 22, 1996, the IRS sent the Smiths a letter
indicating the tax, penalties, and interest due as a result of
the Tax Court’s decision. The letter indicated that the IRS used
the increased rate of interest provided for in 26 U.S.C.
§ 6621(c)4 for substantial underpayments attributable to tax-
motivated transactions. As for the amount of penalties due, the
letter stated:
Please note that there are two penalty reports enclosed
reflecting both the Government’s settlement position
and litigating position being proposed for all
Barrister investors. We ask that you sign the penalty
report for the settlement position as this would
provide both you and the Government with a fair method
of resolving this matter. If you choose not to
[accept] the settlement position or if we do not hear
from you within 30 days from the date of this letter,
we will have no alternative other than to issue a
3
These proceedings took place pursuant to the Tax Equity
and Fiscal Responsibility Act (“TEFRA”), Pub. L. No. 97-248, 96
Stat. 324 (1982), which allows litigation at the partnership
(rather than individual) level. See Alexander v. United States,
44 F.3d 328, 330 (5th Cir. 1995) (explaining TEFRA’s distinction
between partnership and nonpartnership items).
4
We use the 1984 version of the United States Code
because the 1983 and 1984 tax years are at issue in this case.
All citations to a specific section are to Title 26 of the United
States Code unless otherwise stated.
3
Statutory Notice of Deficiency to you asserting the
Government’s litigating position.5
The settlement and litigation penalty amounts were set forth
on four Forms 870, which are titled “Waiver of Restrictions on
Assessment and Collection of Deficiency in Tax and Acceptance of
Overassessment.” Form 870 states:
I consent to the immediate assessment and collection of
any deficiencies (increases in tax and penalties) and
accept any overassessment (decrease in tax and
penalties) shown above, plus any interest provided by
law. I understand that by signing this waiver, I will
not be able to contest these years in the United States
Tax Court, unless additional deficiencies are
determined for these years.
The IRS’s instruction accompanying Form 870 states:
Your consent will not prevent you from filing a claim
for refund (after you have paid the tax) if you later
believe you are so entitled. It will not prevent us
from later determining, if necessary, that you owe
additional tax; nor extend the time provided by law for
either action.
. . .
If you later file a claim and the Service disallows it,
you may file suit for refund in a district court or in
the United States Claims Court, but you may not file a
petition with the United States Tax Court.6
The Smiths signed the two “settlement position” forms and
5
The “settlement position” form listed 26 U.S.C. § 6659valuation penalties of $3,720 and $1,397 for 1983 and 1984,
respectively. The “litigation position” form listed § 6653(a)(1)
negligence penalties of $2,384 and $1,376 for 1983 and 1984;
§ 6653(a)(2) negligence penalties in amounts to be determined;
and § 6661 substantial understatement penalties of $11,920 and
$6,811 for 1983 and 1984.
6
The Smiths did not receive a copy of the Form 870
instructions with the IRS’s February 22 letter. The attorney for
the United States acknowledged at oral argument, though, that a
tax attorney who received a Form 870 would expect the
instructions to apply.
4
returned them to the IRS on March 20, 1996. The letter the
Smiths’ attorney sent with the forms stated:
In accordance with your solicitation, Mr. and Mrs.
Smith have agreed to waive the restrictions on
assessment and collection relative to the proposed
penalty under I.R.C. Sec. 6659 on the understanding
that by entering into this waiver, the Internal Revenue
Service will not issue a notice of deficiency for
additional penalties.
. . .
Although my clients have agreed to the Forms 870,
we remain unclear as to certain aspects of this case
and are requesting further documentation from
you. . . . [W]e do not believe that the increased
interest rate under Code Sec. 6621(c) should apply nor
that there is actually any basis in the decision for
the assertion of any penalties in this case. If you
are in possession of any documentation that indicates
that those penalties are appropriate, I would
appreciate your return of that documentation by return
mail.
My client[s] recognize[] that, notwithstanding our
continuing concerns, under the terms of the Forms 870,
the Government may proceed with the assessment of the
penalt[ies] and interest thereon set out in the Forms
870 and that they will not have an opportunity to file
a petition with the Tax Court to contest th[ose]
penalt[ies].
On April 2, 1996, the IRS, unaware that the Smiths had sent
the signed forms, issued the Smiths a notice of deficiency for
the 1983 and 1984 tax years, asserting the penalties referenced
in the “litigation position” forms. On April 15, the Smiths’
attorney sent a letter to the IRS referencing the Smiths’ March
20 letter and asking the IRS to withdraw the deficiency notices.
The IRS responded with a letter on May 13 stating it had not yet
received the Smiths’ March 20 letter but that the “settlement
position” forms the Smiths signed would be processed and the
deficiency notices would not apply.
5
The Smiths paid the assessments due according to the
“settlement position” Forms 870 and filed refund claims with the
IRS. Once the IRS disallowed the Smiths’ claims, the Smiths
filed a refund suit in federal district court.
B. Procedural History
The Smiths filed suit in federal district court to recover
federal income tax, penalties, and interest they paid for the tax
years 1983 and 1984. The Smiths argued that: (1) the statute of
limitations barred the IRS’s collection of taxes, penalties, and
interest; (2) the Smiths are not liable for § 6659 valuation
overstatement penalties; (3) the Smiths are not liable for
§ 6621(c) interest; (4) the IRS incorrectly calculated the
interest due under Avon Products, Inc. v. United States, 588 F.2d
342 (2d Cir. 1978); and (5) the IRS cannot make investment tax
credit adjustments because it did not send the Smiths a statutory
notice of deficiency as § 6230(a)(2)(A)(i) requires.
Both the Smiths and the United States moved for summary
judgment. The United States argued that: (1) the Smiths waived
the statute of limitations; (2) the IRS and the Smiths had
reached an informal settlement agreement that made the Smiths
liable for the § 6659 penalties and § 6621(c) interest; (3) the
interest was correctly calculated because Avon Products does not
apply; and (4) a statutory notice of deficiency was not required
because the IRS’s disallowance was a computational adjustment
pursuant to the Tax Court’s decision.
In their motion for summary judgment, the Smiths abandoned
6
several of their claims and argued only that: (1) they had not
reached a settlement with the IRS; and (2) they should not be
liable for § 6659 penalties and § 6621(c) interest on the merits.
The district court granted the United States’s motion for
summary judgment and denied the Smiths’ motion for summary
judgment. The district court found that the Smiths conceded
several issues so that the only issues remaining were whether the
Smiths were liable for penalties and interest under §§ 6659 and
6621(c). The district court then found that the Smiths settled
their liability for § 6659 penalties. The district court
rejected the Smiths’ argument that the Form 870 represented only
a waiver of their right to contest penalties in Tax Court and
held that the Smiths also waived their right to file a refund
action. The district court then found that imposition of
§ 6621(c) penalty interest was warranted because the Smiths
agreed to liability for § 6659 valuation overstatement penalties,
and a valuation overstatement is by definition a tax-motivated
transaction.
The Smiths appealed. They now argue that: (1) the district
court erred in finding that the Smiths settled with the IRS on
§ 6659 penalties and, on the merits, § 6659 penalties are
inappropriate; (2) the district court erred in finding that
§ 6621(c) interest is due, and, on the merits, § 6621(c) interest
is inappropriate; (3) the district court erred in finding they
had conceded two of their other three arguments, and that, on the
merits, the IRS incorrectly calculated interest under Avon
7
Products and the IRS failed to issue a notice of deficiency under
26 U.S.C. § 6320(a)(2)(A)(i).
II. STANDARD OF REVIEW
We review a grant of summary judgment de novo, applying the
same standards as the district court. Daniels v. City of
Arlington, 246 F.3d 500, 502 (5th Cir.), cert. denied, 534 U.S.
951 (2001). Summary judgment should be granted if there is no
genuine issue of material fact for trial and the moving party is
entitled to judgment as a matter of law. FED. R. CIV. P. 56(c).
In determining if there is a genuine issue of material fact, this
court reviews the evidence in the light most favorable to the
non-moving party. Daniels, 246 F.3d at 502.
Further, though the burden of proof is generally on a
taxpayer in a refund action, e.g., Smothers v. United States, 642
F.2d 894, 901 n.17 (5th Cir. Unit A April 1981), the burden of
proof on the issue of equitable estoppel is on the party
asserting estoppel, e.g., Kennedy v. United States, 965 F.2d 413,
417 (7th Cir. 1992). The district court’s interpretation of a
settlement agreement between the IRS and a taxpayer is an issue
of law we review de novo. Estate of Kokernot v. Comm’r of
Internal Revenue, 112 F.3d 1290, 1293-94 (5th Cir. 1997).
III. DISCUSSION
A. 26 U.S.C. § 6659 Penalties
The Smiths argue that they should not be estopped from
challenging the § 6659 penalties assessed against them because
the Forms 870 they signed were not agreements to settle and
8
reserved their right to contest the penalties in a refund action.
The Smiths point to the specific language on the form, which
states that the form only waives the right to contest the
assessment in Tax Court, and to the instructions, which state
that the taxpayer may later file a refund suit. The Smiths also
assert that no court has interpreted a Form 870, without more, as
a final settlement of tax liability. Assuming they are not
estopped, the Smiths urge this court to hold that there is no
basis for § 6659 penalties because the Tax Court did not make a
finding that the disallowance was “attributable to” a valuation
overstatement.
The United States argues that the Smiths should be estopped
because the IRS clearly manifested an intent to reach a final
settlement with the Smiths, the Smiths signed the “settlement
position” Forms 870 intending to settle the claims, and the IRS
relied to its detriment on the signed forms because it allowed
the statute of limitations on assessing higher penalties to run.
Further, the IRS argues that if the Smiths are not estopped, the
panel should remand this case to the district court rather than
addressing whether § 6659 penalties are appropriate on the
merits.
The district court found that the Smiths agreed to settle
with the IRS when they signed and returned the Forms 870. The
district court rejected the Smiths’ argument that the form was
merely a waiver of the Smiths’ right to contest the penalty in
Tax Court and instead found it was “part of an overall settlement
9
position which, if signed, would resolve the matter between the
Smiths and the United States.” The district court also noted
that the Smiths’ conduct after signing the forms indicates that
they meant to settle because when the IRS erroneously issued a
deficiency notice listing additional penalties, the Smiths
quickly responded with a letter seeking to enforce the terms of
their agreement with the IRS.
In this case, though there was an informal settlement, it
was not as broad as the IRS claims. The Smiths agreed to waive
their right to contest the penalties before payment in Tax Court,
but they did not agree to waive their right to contest the
penalties after payment in a refund action in district court.
Initially, we review our law on when and how informal
agreements between the IRS and a taxpayer are enforceable. The
United States Code contains formal settlement procedures for the
IRS to use in settling a taxpayer’s tax liability. See Gen.
Split Corp. v. United States, 500 F.2d 998, 1000-01 (7th Cir.
1974) (“Under 26 U.S.C. § 7121 the Secretary or his delegate is
authorized to enter into a closing agreement regarding the tax
liability of any person which, when approved, is final and
conclusive. Under 26 U.S.C. § 7122 the Secretary or his delegate
is authorized to compromise any civil or criminal tax case where
there is doubt as to liability and/or collectibility.”)
(citations omitted). Because these formal procedures can be
quite cumbersome, the IRS often enters into informal settlement
agreements with taxpayers. See id. If the IRS does not use a
10
formal settlement procedure, but instead engages in an informal
settlement, the informal settlement agreement is not, in itself,
enforceable. See Botany Worsted Mills v. United States, 278 U.S.
282, 288-89 (1929) (“We think that Congress intended by the
statute to prescribe the exclusive method by which tax cases
could be compromised . . . and did not intend to intrust the
final settlement of such matters to the informal action of
subordinate officials in the Bureau.”).7 But, though an informal
settlement agreement is not itself enforceable, several circuits,
including this one, have enforced such agreements using
principles of equitable estoppel. See Daugette v. Patterson, 250
F.2d 753, 755-57 (5th Cir. 1957); see also, e.g., Ihnen v. United
States, 272 F.3d 577, 579-81 (8th Cir. 2001), cert. denied, 123
S. Ct. 114 (2002); Aronsohn v. Comm’r of Internal Revenue, 988
F.2d 454, 456-57 (3d Cir. 1993); Union Pac. R.R. Co. v. United
States, 847 F.2d 1567, 1570-73 (Fed. Cir. 1988); Gen. Split
Corp., 500 F.2d at 1002-04.
In this circuit, a taxpayer may be estopped from filing a
refund action if the taxpayer settles with the IRS before the
statute of limitations runs, makes a representation that he will
not file a refund action as part of the settlement, and then
files a refund action once the statute of limitations has run and
the IRS can no longer assess deficiencies related to the
7
In Botany Worsted Mills, the Supreme Court left open
the question of whether an informal settlement agreement could be
enforced using estoppel. See 278 U.S. at 289.
11
settlement. See Daugette, 250 F.2d at 756. Put another way, the
taxpayer is estopped when he misrepresents that he will not file
a refund action and the IRS reasonably relies on this
misrepresentation by allowing the statute of limitations to run.
It is undisputed that the statute of limitations on § 6659
penalties and § 6621(c) interest ran after the Smiths executed
the Forms 870. Thus, the key question in this case is whether
the Smiths informally settled their liability with the IRS and
agreed, as a part of that settlement, to give up their right to
file a refund action.
Turning to the facts of this case, we find that the Smiths
did not agree to give up their right to file a post-payment
refund action. First, we consider the nature of a Form 870.
After a partnership-level Tax Court proceeding, the IRS generally
may not assess nonpartnership items, such as penalties, without
first providing a statutory notice of deficiency. See 26 U.S.C.
§§ 6212, 6213 (1982 & Supp. 1984); Maxwell v. Comm’r of Internal
Revenue, 87 T.C. 783, 787-88 (T.C. 1986). Once the IRS issues a
notice of deficiency, a taxpayer has 90 days to file suit in Tax
Court. See 26 U.S.C. § 6213(a). Form 870 is the IRS form used
to waive restrictions such as the statutory notice requirement.
Form 870 is generally used when a taxpayer is willing to waive
his right to proceed in Tax Court before paying the tax or
penalties due in order to expedite the collection process. See
Phila. & Reading Corp. v. United States, 944 F.2d 1063, 1067 (3d
Cir. 1991). The taxpayer benefits because his waiver stops
12
interest from accruing, and the IRS benefits because it can
immediately assess and collect the amount due. See id.We have distinguished the Form 870 from other forms the IRS
could use to settle a taxpayer’s liability. By its terms, Form
870 is only an offer to waive the right to file a pre-payment
action in Tax Court. Forms 870-L and 870-L(AD), on the other
hand, are forms memorializing “agreements,” where the taxpayer is
explicitly barred from seeking a refund. Like Form 870, Form
870-AD is an offer to waive restrictions on collection and
assessment, but it, too, is distinguishable from Form 870.
Unlike Form 870, Form 870-AD must be signed by both the taxpayer
and the IRS and explicitly states that the case is closed. Thus,
unlike Forms 870-AD, 870-L, and 870-L(AD), Form 870 does not
contain any statements that there is a final agreement or that
the taxpayer is prohibited from filing a refund action.
We recognized that Form 870 is markedly different from Form
870-AD in Daugette v. Patterson. See 250 F.2d at 755-57. In
Daugette, we found estoppel against the taxpayer because Form
870-AD expressly bars the taxpayer from filing a refund action.
See id. Further, other circuits have distinguished Form 870 from
Form 870-AD, finding that while Form 870-AD purports to be final,
Form 870 does not. See, e.g., Elbo Coals, Inc. v. United States,
763 F.2d 818, 820-21 (6th Cir. 1985); see also Daugette, 250 F.2d
at 756-57 (distinguishing Joyce v. Gentsch, 141 F.2d 891 (6th
Cir. 1944), on the basis that Form 870 does not purport to be a
final settlement that precludes assertion of further
13
deficiencies).
In this case, there was an agreement between the Smiths and
the IRS.8 The IRS correctly notes that its letter of February 22
and the accompanying (unsigned) Form 870 were an offer for a
settlement for the tax years 1983 and 1984. The Smiths accepted
this offer by signing the Form 870. As consideration, the Smiths
gave up their right to file a pre-payment action in Tax Court and
the IRS gave up its right to assess higher penalties.
The scope of the agreement, though, is not as broad as the
IRS asserts. It was reasonable for the Smiths to believe that
Form 870’s effect was limited to its express terms. The
instructions to Form 870 make it clear that the taxpayer is
waiving only his right to contest the penalties in Tax Court; the
form and instructions say nothing about precluding a refund
action. After signing the Form 870, the Smiths sent it back to
the IRS with a letter from their attorney, stating the Smiths
waived only “the restrictions on assessment and collection
relative to the proposed penalty under I.R.C. Sec. 6659” so that
the Smiths “will not have an opportunity to file a petition with
the Tax Court to contest that penalty.” Further, in this letter,
the Smiths’ attorney stated that the Smiths dispute “that there
8
Whether there is an agreement is governed by the
federal common law of contracts, which uses “the core principles
of the common law of contract[s] that are in force in most
states.” See United States v. Nat’l Steel Corp., 75 F.3d 1146,
1150 (7th Cir. 1996); see also Estate of Ray v. Comm’r of
Internal Revenue, 112 F.3d 194, 196 (5th Cir. 1997) (applying
“general contract principles” to determine when an agreement
based on a Form 870-L(AD) was formed).
14
is actually any basis in the decision for the assertion of any
penalties in this case” and asked for additional information
about § 6621(c) interest, which suggests that the Smiths did not
believe the case closed. Later, in their April 15 letter to the
IRS, the Smiths characterized their agreement as such: “if [the
Smiths] executed a Form 870 agreeing to waive the restrictions on
assessment and collection on a stated 6659 penalty . . . no
notice of deficiency for additional penalties would be issued.”
Further, Mr. Smith testified in his deposition that he did not
believe signing the “settlement position” Forms 870 waived his
right to later file a refund action.
The IRS argues that the Smiths must have viewed the Forms
870 as proposing a final settlement for two main reasons. First,
the IRS points out that it asked the Smiths to sign the
“settlement position” Form 870 as “a fair method of resolving
th[e] matter.” This language, without more, does not make it
clear that the IRS meant for the Smiths to give up their rights
to both a prepayment action and a refund action. Second, the IRS
notes that when the IRS assessed a notice of deficiency, the
Smiths objected. But the Smiths’ objection does not suggest that
they gave up their right to file a refund action. Rather, this
objection simply showed that the Smiths wanted the IRS to assess
the agreed deficiencies because that assessment would stop
interest from accruing on the deficiencies. See Phila. & Reading
Corp., 944 F.2d at 1067 (“[A] taxpayer that forgoes review in Tax
Court can, by executing a binding Form 870, suspend interest on
15
tax due from the thirtieth day following the filing of the waiver
through the time that the IRS issues a notice and demand for
payment.”) (citing 26 U.S.C. § 6601). Because there was no
meeting of the minds between the Smiths and the IRS whereby the
Smiths agreed to waive their right to file a refund action, the
Smiths are not estopped from filing this refund action.
Because we find that the Smiths are not estopped from
seeking a refund on the undisputed facts, we remand to the
district court to address the merits of the Smiths’ refund action
in the first instance.
B. 26 U.S.C. § 6621(c) Interest
Next, we consider whether the district court improperly
assessed § 6621(c) interest against the Smiths.
The district court determined that the Smiths must pay
§ 6621(c) penalty interest. The district court reasoned that,
according to § 6621(c), interest is imposed when there is
substantial underpayment attributable to a tax-motivated
transaction. The statute defines a “tax-motivated transaction”
as, inter alia, “any valuation overstatement (within the meaning
of section 6659(c)).” Because the Smiths agreed to § 6659
penalties, the district court found, they conceded that they
engaged in tax-motivated transactions and § 6621(c) interest was
thus appropriate.
Because we hold that the Smiths are not estopped from
challenging the § 6659 penalties in this refund action and we
remand for a determination of whether § 6659 penalties are
16
warranted, we remand on the issue of § 6621(c) interest as well.
C. Waiver of the Smiths’ Remaining Arguments
Finally, we consider whether the district court correctly
held that the Smiths conceded all other bases for recovery
contained in their complaint.
The Smiths argue that they did not actually concede the two
arguments that they expressly conceded in their motion for
summary judgment. The Smiths reason that, because the United
States’s motion for summary judgment, filed the same day as the
Smiths’ motion for summary judgment, briefed these issues, the
United States could not have believed the issues were conceded.
Then, on the merits, the Smiths argue that the IRS erroneously
computed the interest on the Smiths’ 1983 and 1984 tax liability
according to Avon Products, Inc. v. United States, 588 F.2d 342(2d Cir. 1978), because the IRS did not account for an
overpayment in computing interest on the Smiths’ 1984 tax
liability. The Smiths further argue that the IRS’s investment
tax credit-related assessment was invalid because the IRS failed
to issue a statutory notice of deficiency as required by 26
U.S.C. § 6230(a)(2)(A)(i).
The United States argues that the Smiths abandoned these
arguments before the district court. The United States points
out that in their motion for summary judgment, the Smiths stated
that they were limiting their claims to recovery of § 6659
penalties and § 6621(c) interest and that they conceded all other
bases for recovery. If these issues are not waived, the United
17
States asserts that the IRS did not incorrectly compute the
interest due because Avon Products does not apply and that the
IRS did not need to issue a statutory notice of deficiency
because ITC-related assessments may be summarily assessed without
a notice of deficiency.
The district court found that the Smiths conceded these
arguments based on their statement in their summary judgment
brief that they “conceded all other bases for recovery of their
original claims, including their statute of limitations defense.”
In their complaint, the Smiths made essentially five
arguments. These are: (1) that they did not agree to § 6659
penalties and § 6659 penalties are unwarranted; (2) that
§ 6621(c) interest is unwarranted; (3) that the IRS incorrectly
calculated the interest due under Avon Products; (4) that the IRS
failed to issue a notice of deficiency before making ITC-related
adjustments; and (5) that the statute of limitations barred the
IRS’s collection of tax, penalties, and interest. The Smiths now
claim that arguments (3) and (4) were not waived.9
In their motion for summary judgment, the Smiths made two
statements of concession. First, at the beginning of their
motion for summary judgment, the Smiths stated:
Frank W. Smith and Janice M. Smith move for
summary judgment against the United States for refunds
based on recovery of the § 6659 penalty and interest
and the penalty portion of the interest charged under
§ 6621(c). The Smiths did not agree to and the IRS
9
The Smiths do not attempt to reinvigorate their statute
of limitations argument on appeal.
18
improperly assessed the § 6659 penalty and interest
related to the § 6659 penalty. The Smiths did not
agree to and the IRS improperly assessed the § 6621(c)
penalty.
These partial refunds are all that remain in
issue. The Smiths have conceded all other bases for
recovery of their original claims, including their
statute of limitations defense.
Later in the motion, the Smiths stated: “This motion for summary
judgment addresses the only two issues remaining in this case,
(i) the § 6659 valuation overstatement penalty and interest on
that penalty, and (ii) the § 6621(c) penalty interest.” The
Smiths’ motion for summary judgment makes no argument about the
incorrect calculation of interest under Avon Products or the
deficiency notice requirement under 26 U.S.C.
§ 6230(a)(2)(A)(i).10
In its motion for summary judgment, filed on the same day as
the Smiths’ motion, the United States argued all five issues. It
is reasonable to assume that the United States did not realize
that the Smiths conceded these issues until the Smiths filed
their motion for summary judgment. But in its response to the
Smiths’ motion for summary judgment, the United States argued
that the Smiths waived these two arguments by expressly stating
that they had conceded them and that no other arguments remained.
The Smiths responded by stating, in their response to the
10
Though § 6230(a)(2)(A)(i) was not enacted until 1986,
it was made effective for partnership tax years beginning after
September 3, 1982. See Pub. L. No. 99-514, § 1875, 100 Stat.
2085, 2896 (1986) (stating that the amendments “shall take effect
as if included in the Tax Equity and Fiscal Responsibility Act of
1982”).
19
United States’s Motion for Summary Judgment, that they conceded
only the statute of limitations issue. The Smiths did not
explain why their unambiguous statements of concession of all but
two issues did not waive these issues. Rather, they simply
argued that the United States was not entitled to summary
judgment on these issues on the merits.
The Smiths now contend that the two arguments were not
waived and may be addressed by this court on appeal. We find
that the district court correctly concluded that the arguments
were waived. The Smiths expressly stated that they conceded the
issues in their motion for summary judgment. This motion
purported to address the only remaining issues in the case, and
it did not provide any argument on the two issues the Smiths now
urge. A party’s concession of an issue means the issue is waived
and may not be revived. See, e.g., Fehlhaber v. Fehlhaber, 681
F.2d 1015, 1030 (5th Cir. 1982). The Smiths provide no
explanation of why their statements of concession apply only to
the statute of limitations argument and not to the Avon Products
and notice of deficiency arguments. We thus affirm this portion
of the district court’s ruling.
IV. CONCLUSION
For the foregoing reasons, the district court’s order
granting the United States’s motion for summary judgment and
denying the Smiths’ motion for summary judgment, is AFFIRMED IN
PART, REVERSED IN PART, and REMANDED for further proceedings.
Costs shall be borne by the United States.
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