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Loera v. Commissioner of Internal Revenue

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA


June 22, 2005

MANUEL VICTOR LOERA AND ANGELICA LOERA (DECEASED), PLAINTIFF,
v.
COMMISSIONER OF INTERNAL REVENUE, MARK W. EVERSON AND DEPARTMENT OF JUSTICE U.S. ATTORNEY, TAX DIVISION, EILEEN J. O'CONNOR, DEFENDANTS.

The opinion of the court was delivered by: Claudia Wilken United States District Judge

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

Defendants Commissioner of Internal Revenue, Mark W. Everson and Department of Justice United States Attorney, Tax Division, Eileen J. O'Connor move for summary judgment.*fn1 Pro se Plaintiff Manuel Victor Loera opposes this motion. This case arises from Defendants' denial of Mr. Loera's amended tax return on the ground that it was not filed within the three year statutory period. Mr. Loera submitted, with his amended return, documents purporting to establish that the three-year time period was tolled because he was financially disabled. The matter was heard on February 18, 2005. At the hearing, the Court granted Mr. Loera additional time to produce further information and ordered Defendants to write a letter to Mr. Loera advising him of the necessary information to be submitted by him. On May 27, 2005, Defendants filed their Report Regarding Plaintiff's Alleged Disability to which was attached their letter to Mr. Loera and Mr. Loera's additional information. Having considered all of the papers filed by the parties and oral argument on the motion, the Court GRANTS Defendants' motion.

BACKGROUND

In 1999, Mr. Loera and his wife filed a joint tax return for the 1998 tax year. In July, 2003, Mr. Loera filed an amended tax return seeking a refund for the 1998 taxable year. The amended return was filed over four years after the original. The Internal Revenue Service (IRS) denied Mr. Loera's claim for a refund, noting that amended returns must be filed within three years from the time the original return was filed.

With his amended return, Mr. Loera submitted a letter dated July 10, 2003 from Dr. Mary Patten, a letter dated July 23, 2003 from Dr. Albert Yu and a rating decision by the Department of Veterans Affairs (DVA) based on examinations conducted on March 14 and May 27, 2003. Dr. Patten's letter states that Mr. Loera "provided full time care for [his ill wife] during 1998 and 1999 and thus was unable to attend to his finances during this time period." Dr. Yu's letter reads, "This is to verify that [Mr. Loera] had to dedicate himself to taking care of his wife, who had disabling strokes, and ended w[ith her] passing away in 1999. He had to take care of her full time for almost 3-4 years prior to her death. He was extremely stressed out and unable to attend to his finances during that period of time." The DVA's rating decision was based on two medical examinations in March and May, 2003. The report indicated Mr. Loera suffered from a variety of ailments, including Post Traumatic Stress Disorder, but was "competent to handle [his] funds for VA purposes."

The additional information submitted by Mr. Loera after the hearing is a note written by Dr. Yu dated March 22, 2005, which reads, "This is to verify Mr. Loera was very stressed out and might have difficulty with managing his financial affairs while trying to take care of his sick wife from 1998-1999. I certify that, to the best of my knowledge and belief, the above representations are true, correct, and complete. Patient also had low back pain, high blood pressure in last few years."

Mr. Loera also claims he was misinformed by an IRS representative that he should file an appeal in Tax Court and requests compensation in the amount of his costs of filing and shipping documents to the wrong court.

LEGAL STANDARD

Summary judgment is properly granted when no genuine and disputed issues of material fact remain, and when, viewing the evidence most favorably to the non-moving party, the movant is clearly entitled to prevail as a matter of law. Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir. 1987).

The moving party bears the burden of showing that there is no material factual dispute. Therefore, the court must regard as true the opposing party's evidence, if supported by affidavits or other evidentiary material. Celotex, 477 U.S. at 324; Eisenberg, 815 F.2d at 1289. The court must draw all reasonable inferences in favor of the party against whom summary judgment is sought. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d 1551, 1558 (9th Cir. 1991).

Material facts which would preclude entry of summary judgment are those which, under applicable substantive law, may affect the outcome of the case. The substantive law will identify which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

Where the moving party does not bear the burden of proof on an issue at trial, the moving party may discharge its burden of showing that no genuine issue of material fact remains by demonstrating that "there is an absence of evidence to support the nonmoving party's case." Celotex, 477 U.S. at 325. The moving party is not required to produce evidence showing the absence of a material fact on such issues, nor must the moving party support its motion with evidence negating the non-moving party's claim. Id.; see also Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 885 (1990); Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991), cert. denied, 502 U.S. 994 (1991). If the moving party shows an absence of evidence to support the non-moving party's case, the burden then shifts to the opposing party to produce "specific evidence, through affidavits or admissible discovery material, to show that the dispute exists." Bhan, 929 F.2d at 1409. A complete failure of proof concerning an essential element of the non-moving party's case necessarily renders all other facts immaterial. Celotex, 477 U.S. at 323.

DISCUSSION

Amended tax returns must "be filed by the taxpayer within 3 years from the time the return was filed." 26 U.S.C. § 6511(a). The three year time period is tolled when a person is financially disabled. 26 U.S.C. § 6511(h). In order for a person to be considered financially disabled, he or she must be unable to manage his financial affairs by reason of a medically determinable physical or mental impairment of the individual which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

26 U.S.C. § 6511(h)(2)(A). Additionally, in order for the tolling exception to apply, the taxpayer must prove he or she is financially disabled "in a form and manner as the Secretary may require." Id.

These requirements are set forth in Revenue Procedure 99-21, 1999-1 C.B. 960. The taxpayer must submit a statement by a physician that sets forth:

(a) the name and a description of the taxpayer's physical or mental impairment;

(b) the physician's medical opinion that the physical or mental impairment prevented the taxpayer from managing the taxpayer's financial affairs;

(c) the physician's medical opinion that the physical or mental impairment was or can be expected to result in death, or that it has lasted (or can be expected to last) for a continuous period of not less than 12 months;

(d) to the best of the physician's knowledge, the specific time period during which the taxpayer was prevented by such physical or mental impairment from managing the taxpayer's financial affairs; and

(e) the following certification, signed by the physician: I hereby certify that, to the best of my knowledge and belief, the above representations are true, correct, and complete.

Id. The physical or mental impairment must be that of the taxpayer, not a third person. Brosi, Bruce L., 120 T.C. 5 (2003). The taxpayer must also submit a written statement that "no person . . . was authorized to act on behalf of the taxpayer in financial matters during the claimed disability." Rev. Proc. 99-21, 1999-1 C.B. 960.

To support his claim, Mr. Loera submitted to the IRS the statements from two physicians and the Department of Veterans Affairs document described above. Read in the light most favorable to Mr. Loera, each fails to comply with Revenue Procedure 99-21, and therefore cannot establish that Mr. Loera was financially disabled within the meaning of 26 U.S.C. § 6511(h).

The letter from Dr. Patten does not give a "name and a description of the taxpayer's physical or mental impairment." It does not indicate that Mr. Loera was disabled in any way other than being preoccupied with caring for his wife. Also, the letter does not contain a certification as required by Revenue Procedure 99-21.

The July 23, 2003 letter from Dr. Yu does not name or describe Mr. Loera's physical or mental impairment, other than to describe Mr. Loera as "extremely stressed out." The only source of this condition indicated by the letter is Mr. Loera's attending to his wife.

Furthermore, both of these letters address Mr. Loera's condition only until the death of Mr. Loera's wife. Mr. Loera's wife passed away June 8, 1999, four months after Mr. Loera filed the 1998 tax return. Even if the time limit were tolled during the time Mr. Loera was caring for his ailing wife, the three-year statutory limit would end on June 9, 2002. Mr. Loera filed the amended return in July, 2003, over one year beyond the tolled statutory time period.

The March 22, 2005 letter from Dr. Yu is similar to his first letter with the exception that it adds that Mr. Loera suffered from low back pain and high blood pressure in the last few years. However, Dr. Yu does not indicate the dates Mr. Loera suffered from these specific ailments and does not indicate that these specific ailments were so severe that they prevented Mr. Loera from managing his financial affairs.

The DVA rating decision is not written by a physician. Although the report names and describes Mr. Loera's medical condition, including physical and mental impairments, it does not indicate "the physician's medical opinion that the physical or mental impairment prevented the taxpayer from managing the taxpayer's financial affairs." Rev. Proc. 99-21. Nor does it indicate "the specific time period during which the taxpayer was prevented by such physical or mental impairment from managing the taxpayer's financial affairs." Id. Finally, it does not address any time period prior to March, 2003. The only conclusion regarding Mr. Loera's ability to handle financial affairs appears to support Defendants: "The examiner indicated that [Mr. Loera was] competent to handle [his] funds for VA purposes." Pl.'s Ex. H at 5. Thus, the report fails to fulfill the requirements of Revenue Procedure 99-21.

Mr. Loera argues that he was in fact unable to manage his finances during the period he was taking care of his wife and afterward as he dealt with his numerous medical ailments. Mr. Loera may be correct in his assertion. However, the question is not whether Mr. Loera was unable to manage his finances, but whether he has fulfilled the statutory requirements for proof of financial disability. The statute requires proof "in a form and manner as the Secretary may require." Mr. Loera has failed to meet the regulatory requirements needed to toll the three-year time limit on amended returns. Therefore, Mr. Loera's claim is time- barred.

Mr. Loera requests compensation for mistakenly filing his complaint in Tax Court before he filed the instant complaint in this Court. Because Mr. Loera cites no case law or statute entitling him to compensation, his request is denied.

CONCLUSION

Because Mr. Loera cannot prove a financial disability exception to the three-year statute of limitations, Defendants' motion for summary judgment is GRANTED. Judgment shall be entered accordingly. Each party will bear his or her own costs.

IT IS SO ORDERED.


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