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Mills v. United States

December 12, 2007

THE ESTATE OF RICHARD A. MILLS, DECEASED, AND THE MILLS ADMINISTRATIVE TRUST, PLAINTIFF,
v.
UNITED STATES OF AMERICA, DEFENDANT.



The opinion of the court was delivered by: Hayes, Judge

ORDER

The matter before the Court is Defendant's Motion to Dismiss Plaintiff's Complaint. (Doc. # 8).

BACKGROUND

Richard A. Mills died on August 30, 1999. Comp. at 2. In January of 1999, Mills made a gift of thirty percent of the common stock of the Dayton Corporation to his children, Timothy S. Mills and Gwen Mills. Comp. at Exhibit B. On December 17, 1999, the Estate of Richard Mills filed a Federal Gift Tax Return Form 709 with the Internal Revenue Service ("IRS") showing the taxable value of the gift stock to be $646,372. Id. The tax liability attributable to the gifted stock, $346,254, was paid on the same date the tax return was filed. Id.

On April 12, 2003, the trustee, Timothy S. Mills, on behalf of the Estate of Richard Mills, filed a Claim for Refund and Request for Abatement Form 843 seeking refund of an overpayment of the gift tax on the gifted stock on the grounds that the "value of the gift did not reflect the built-in tax liability to the Dayton Corporation." Id. The 2003 Claim for Refund asserted that the taxable value of the gifted stock was $599,496 entitling the taxpayer to a refund of $25,781. Id. at Ex. A. On June 23, 2003, the IRS issued a refund for the full amount of $25,781 claimed in the 2003 Claim for Refund. Hendon Declaration, Ex. 1 at3.

On March 16, 2007, the trustee, Timothy S. Mills, on behalf of the Estate of Richard Mills filed a Supplemental Claim for Refund and Request for Abatement Form 843 seeking refund of an overpayment of the gift tax on the gifted stock. Id. at Ex. B. The 2007 Supplemental Claim for Refund asserted that "the taxable gift of $599,496, reduced by the built-in tax liability must be further reduced, pursuant to the formula set forth in Rev. Rul. 75-72" because the gift tax liability from 1999 was paid by donees Timothy S. Mills and Gwen Mills. Comp. at 12. The 2007 Supplemental Claim for Refund asserted that the value of the stock was $386,772 entitling the taxpayer to an additional refund of $116,993. Id.

On March 20, 2007, the Estate of Richard A. Mills and the Mills Administrative Trust Estate ("Plaintiff") filed the Complaint against the United States of America seeking a federal gift tax refund for the sum of $116,993 plus statutory interest. Comp. at 2.

On July 3, 2007, the United States filed a motion to dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(1) on grounds of a lack of subject matter jurisdiction.

On July 19, 2007, the IRS sent notice to the Estate of Richard Mills disallowing the 2007 Supplemental Claim for Refund .

CONTENTIONS OF THE PARTIES

The United States contends that Plaintiff's 2007 Supplemental Claim for Refund is barred by statute of limitations set forth in 26 U.S.C. § 6511(a). The United States asserts that Plaintiff had until April 15, 2003 to file a claim for refund with respect to decedent's 1999 tax form. The United States asserts that the 2007 Supplemental Claim for Refund was filed well outside the three year statute of limitations imposed by 28 U.S.C. § 6511(a) and does not fit within any of the exceptions to the statute of limitations requirement. The United States contends that the 2007 Supplemental Claim for Refund is not a valid amendment to the 2003 Claim for Refund because the IRS issued a refund for the full amount claimed and the 2003 claim was no longer outstanding. The United States contends that the Plaintiff is not entitled to seek an additional refund outside the statute of limitations period based on a new legal theory that is not germane to the 2003 Claim for Refund. The United States asserts that the 2003 Claim for Refund asserted that the gift tax liability was overstated because it failed to reduce the value of the stock by the amount of the built-in capital gains tax liability and the 2007 Supplemental Claim for Refund asserts a different theory, "namely that the donees paid the decedent's 1999 gift taxes and not the decedent's estate." Doc. # 11 at 3.*fn1

Plaintiff contends that this Court has subject matter jurisdiction to resolve this action because the 2007 Supplemental Claim for Refund is a valid amendment to the timely filed 2003 Claim for Refund. Plaintiff contends that the 2007 supplemental claim does not differ in substance from the 2003 claim because both claims "dealt with the same issue and claim, namely the value of the stock gifts in January of 1999." Doc. # 10 at 4. Plaintiff asserts that the 2007 supplemental claim should be "deemed effective and to relate back to the claim of April 12, 2003, and the entire payment on December 17, 1999 of $346,254, falls within the 26 U.S.C.A. 6511(b)(2)(a) requirement." Id. Plaintiff asserts that the 2003 claim was "still alive and well" on March 16, 2007 because no statutory disallowance was issued by the United States. Id. at 3. Plaintiff contends that the United States cannot "claim surprise or inadequate time to review the original refund claim" because the 2003 claim and the 2007 supplemental claim address the same issue, namely "the value of the stock gifts." Doc. # 10 at 5.*fn2

STANDARD OF REVIEW

A motion to dismiss under Fed. R. Civ. P. 12(b)(1) challenges the jurisdiction of the court over the subject matter of the complaint. "Federal courts are courts of limited jurisdiction and possess 'only that power authorized by the Constitution and Statute.'" Sandpiper Vill. Condo. Ass'n, Inc. v. Louisiana-Pacific Corp., 428 F.3d 831, 841 (9th Cir. 2005) (quoting Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994)). Federal courts are presumptively without jurisdiction over civil actions, and it is the plaintiff's burden to persuade the ...


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