United States v. Tom I. Lincir

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘O’ JS-6

Case No. 2:19-cv-09709-CAS-KSx Date June 1, 2021

Title UNITED STATES OF AMERICA v. TOM I. LINCIR

Present: The Honorable CHRISTINA A. SNYDER

Catherine Jeang Laura Elias N/A

Deputy Clerk Court Reporter / Recorder Tape No.

Attorneys Present for Plaintiffs: Attorneys Present for Defendants:

Melissa Briggs Robert Horwitz

Proceedings: UNITED STATES’ MOTION FOR SUMMARY JUDGMENT (DKkt.

19, filed on April 26, 2021)

DEFENDANT TOM I. LINCIR’S MOTION FOR SUMMARY

JUDGMENT PURSUANT TO FED. R. CIV. PRO. 56 (Dkt. 20, filed

on April 26, 2021)

I. INTRODUCTION

On November 11, 2019, the government filed suit against defendant Tom I. Lincir

to reduce certain federal tax assessments to judgment. Dkt. 1 (“Compl.”).

On April 26, 2021, the parties filed cross-motions for summary judgment. Dkts. 19

(“Gov’t MSJ’”), 20 (“Def. MSJ”): see dkt. 21, request for judicial notice (“Def. RJN”). The

parties opposed on May 3, 2021, dkts. 25 (“Gov’t Opp.”), 26 (“Def. Opp.”); see dkt. 28,

supplemental request for judicial notice (“Def. Supp. RJN”), and replied on May 10, 2021,

dkts. 30 (“Def. Reply’), 31 (“Gov’t Reply”).! The Court held a hearing on June 1, 2021.

Defendant requests that the Court take judicial notice of certain filings in this case,

and his underlying Tax Court cases (Tax Court Docket Nos. 22934-89 and 13205-05L).

Def. RJN. The Court GRANTS this request and takes judicial notice of the public and

undisputed court files and record. See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th

Cir. 2001). Defendant also requests that the Court take judicial notice of a declaration and

its attachments that he filed in this case (Docket 20-2, Declaration of Robert S. Horwitz).

Def. Supp. RJN. But, on a motion for summary judgment, a court considers evidence in

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘O’ JS-6

Case No. 2:19-cv-09709-CAS-KSx Date June 1, 2021

Title UNITED STATES OF AMERICA v. TOM I. LINCIR

Having carefully considered the parties’ arguments and submissions, the Court finds

and concludes as follows.

II. BACKGROUND

Unless otherwise noted, the following facts are uncontroverted. See dkts. 19-1,

government’s statements of uncontroverted facts and conclusions of law (“Govt SUF”),

25-1, government’s statement of genuine disputes (“Gov’t SDF’), 27, defendant’s

statement of genuine disputes of material fact (“Def. SDF’).

A. Underpayment of Taxes

In 1999, the Tax Court adjudicated the underlying tax liabilities at issue in this case,

which are owed for tax years 1978, 1979, 1980, 1981, and 1982. Gov’t SUF No. 4; see

Lincir v. Comm’r, 77 T.C.M. (CCH) 1614, T.C. Memo 1999-98 at 12-14 (T.C. 1999). In

a decision dated October 2, 2000 (“2000 Decision”), The Tax Court found defendant and

his former spouse, Diane Lincir, liable for substantial tax deficiencies along with

negligence penalties, increased interest on underpayments, and substantial underpayment

penalties. Gov’t SUF No. 5. The Tax Court specifically rejected “the notion that

petitioners [were] naive and trusting individuals who were led astray by bad tax advice.”

Id. The Ninth Circuit affirmed. Id. Nos. 6, 11: see Lincir v. Comm’r, 32 F. App’x 278,

280 (9th Cir. 2002).

In conformity with the 2000 Decision, on February 28, 2001, the Internal Revenue

Service (“IRS”) assessed income taxes and penalties against defendant and Diane for the

years at issue totaling $5,497,437.30. Gov’t SUF Nos. 9, 10, 12. These assessments were

recorded on the IRS’ Official Record, Certificates of Assessments, Payments and Other

Specified Matters (4340) (“Form 4340”). Id. No. 9.

Defendant challenged the propriety of the interest assessed against him, and on

November 10, 2009, the Tax Court entered a decision in which it ordered the interest

reduced by $473,041.15 due to interest netting (“2009 Decision”). Id. Nos. □□□□□□

Nevertheless, by December 12, 2019, the total liabilities owed by defendant had increased

the record, including declarations. Fed. R. Civ. P. 56(c). Accordingly, the Court DENIES

defendant’s request as unnecessary.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘O’ JS-6

Case No. 2:19-cv-09709-CAS-KSx Date June 1, 2021

Title UNITED STATES OF AMERICA v. TOM I. LINCIR

to $12,557,294.20. Id. No. 18. (Defendant disputes this amount, Def. SDF § 4, as

discussed below, see infra § II.B.4.)

B. Offers in Compromise

Defendant has submitted at least three offers in compromise (“OIC”) to the IRS since

2010. An OIC is an offer made by a taxpayer to the Secretary of the Treasury to settle any

case arising under the internal revenue laws, for an amount that is less than the full amount

outstanding. See 26 U.S.C. (“I.R.C.”) § 7122(a). OICs can be based on: (1) doubt as to

liability (taxpayer disputes correct amount of tax liability), (2) doubt as to collectability

(tax liability exceeds taxpayer’s assets and income), or (3) promotion of effective tax

administration (collection of full tax liability would cause taxpayer economic hardship, or

contravene public policy or equity). 26 C.F.R. (Treas. Reg.”) § 301.7122-1(b)(1)(3).

1. ~~ First OIC

Defendant’s First OIC was dated September 20, 2010, and was submitted on behalf

of defendant by his then-attorney, Angelo Falcone, who has since passed away. Gov’t SUF

Nos. 19-20. Falcone was one of defendant’s attorneys in fact under powers of attorney

(“POA”), authorized to represent him before the IRS. The second relevant attorney in fact

under a POA was Joseph A. Broyles.

The First OIC was ostensibly based on doubt as to liability and was submitted on

IRS Form 656-L, Offer in Compromise (Doubt as to Liability) 1-2006. Gov’t SUF Nos.

21, 23; see dkt. 19-4, Declaration of Melissa Briggs (“Briggs Decl.”), Exh. C at 17. It

offered to pay $1,262,049.00 to settle defendant’s liabilities.

The First OIC was apparently received by the IRS at its Brookhaven Service Center,

located in Holtsville, New York, on September 29, 2010.2 As of September 29, 2010, the

? Diane has since obtained “innocent spouse relief’ pursuant to R.C. § 6015(c) for

the majority of these liabilities. Gov’t SUF No. 12; see Diane C. Lincir v. Comm’r, No.

10138-04 (Jan. 3, 2013, corrected Sept. 9, 2013).

3 The Brookhaven campus and the Memphis, Tennessee campus are home to the

Centralized Offer in Compromise (“COIC”) units, which “complete initial processing” of

OICs. Internal Revenue Manual (“IRM”) § 5.8.3.1.6 (02-09-2018).

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

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Case No. 2:19-cv-09709-CAS-KSx Date June 1, 2021

Title UNITED STATES OF AMERICA v. TOM I. LINCIR

IRS’ Form 4340s for defendant’s account denote “Processable OIC pending.” Gov’t SUF

No. 26; see dkt. 19-2, Declaration of Phillip Conrad (“Conrad Decl.”), Exh. A (“Form

4340s”) at 7, 27, 43, 58, 71.

When defendant sent the First OIC to the Brookhaven Service Center, he also

attached a Request for Abatement (Form 843). Gov’t SDF Nos. 12, 14. (The Request for

Abatement was also apparently sent to the IRS Fresno Service Center, in Fresno,

California. Gov't SDF No. 12.) This Request for Abatement was premised on the

argument that interest should be abated because of what defendant claimed was the IRS’

“unreasonable delay” pursuant to .R.C. § 6404(e) and (g). Gov’t SDF No. 13.

On October 14, 2010, IRS Tax Examiner Sonia R. Rodriguez, located in

Brookhaven, sent a letter to defendant stating that the First OIC “can be processed,” and

that the IRS would “investigate [his] offer and contact [him] by November 14, 2010 with

any questions or to request additional information.” Dkt. 20-2, Declaration of Robert S.

Horwitz (“Horwitz Decl.”), Exh. 4 at 23.

The parties cite to several entries in the IRS’ Integrated Collection System (“ICS”),

which is a computerized system used by the IRS for various purposes, including

collections. Gov’t SUF No. 30. One ICS entry by an unnamed Revenue Officer (“RO”),

entered on October 18, 2010, recounts an exchange between the RO and Rodriguez.

According to ICS records, Rodriguez communicated that “[t]he OIC does not apparently

reflect doubt as to the underlying tax liability, [but] rather seeks to get the interest abated.”

Conrad Decl., Exh. E at 2. Rodriguez apparently “hald] spoken to POA Broyles and

advised that the Service does not abate interest.” Id. She further “indicated that she

need|ed] [an] F657 from [the RO] to reflect a recommendation that the OIC be returned as

it was submitted to avoid collection and therefore was submitted solely to delay

collection.”* Id. at 2-3. Rodriquez apparently stated that “[s]he will then discuss the matter

with her supervisor to determine if they will return the OIC.” Id. at 3. Subsequently, the

4 Form 657, Offer in Compromise Revenue Officer Report, is an IRS form that

“serves to establish coordination between the field Collection RO group, the field OIC

group and the COIC sites.” IRM § 5.8.3.14 (11-05-2020). Form 657 includes information

regarding the basis for the OIC, any investigative steps that have been taken, and whether

the offer appears to have been submitted to delay collection, among other things. Id.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘O’ JS-6

Case No. 2:19-cv-09709-CAS-KSx Date June 1, 2021

Title UNITED STATES OF AMERICA v. TOM I. LINCIR

RO reported that he prepared a Form 657 for Rodriguez, which he “|s]ubmitted to [Group

Manager] [Mary Kay] Pittner for approval.” Id. at 3; see Conrad Decl., Exh. F at 3.

An ICS entry dated October 20, 2010, states that the RO spoke with AC [undefined]

Ben Peeler, who indicated that Falcone “did not want to pull the OIC, rather he want[ed]

the Service to look at it.” Horwitz Decl., Exh. 17 at 73. Accordingly, Peeler advised the

RO to provide a Form 657 to the COIC, which the RO apparently faxed to Rodriguez in

Brookhaven. Id. Rodriguez confirmed she received the Form 657, and “advised that she

will be preparing a memo for her supervisor’s approval to return the OIC in the next few

days,” and that she would “‘advise when that ha[d] been done.” Id. Defendant points out

that there is no ICS entry stating that Rodriguez did in fact prepare such a memo. Def.

SDF 4 11.

On October 22, 2010, IRS Team Leader Christine Thomas, apparently in

Brookhaven, sent a letter to Falcone regarding the First OIC. See Briggs Decl., Exh. C at

19-20. (Thomas 1s apparently Rodriguez’s supervisor. See Horwitz Decl., Exh. 17 at 83.)

This letter stated, in relevant part: “We cannot process and/or further investigate the offer

for the following reason: Your case is currently assigned to Revenue Officer E. Kelly.”

Briggs Decl., Exh. C at 20. The letter identified Rodriguez as the “person to contact.” Id.

The Form 4340s for defendant’s accounts reflect that, as of October 22, 2010, the

“OIC [was] no longer pending because [it was] returned or rejected.” Form 4340s at 7, 27,

43,58, 71.

Despite the COIC in Brookhaven ostensibly having returned the First OIC, other

IRS offices apparently were unaware of this action. For instance, on October 26, 2010,

IRS Department Manager Rebecca H. Henderson, in Atlanta, Georgia, sent a letter to

defendant referencing tax years 1980 and 2002. Horwitz Decl., Exh 6 at 26. This letter

thanked defendant for his September 24, 2010 correspondence, and stated, in relevant part:

“We haven’t resolved this matter because we haven’t completed all the research necessary

for a complete response. We will contact you again within 45 days to let you know what

action we are taking. You don’t need to do anything further now on this matter.” Id.

(Henderson apparently referenced the wrong date, as the First OIC was dated September

20, 2010, and was received September 29, 2010.)

Additionally, on November 2, 2010, Peeler apparently emailed the unnamed RO and

indicated, among other things, that “he hoped [the RO] could get the issue of the OIC

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘O’ JS-6

Case No. 2:19-cv-09709-CAS-KSx Date June 1, 2021

Title UNITED STATES OF AMERICA v. TOM I. LINCIR

resolved (returned) so that we can start to get some cooperation” from defendant. Horwitz

Decl., Exh. 17 at 75.

And on November 17, 2010, Ron Manvilla, Accounts Management Operation

Manager in Kansas City, Missouri, sent defendant a letter apparently referencing the tax

years at issue, among others. Horwitz Decl., Exh. 7 at 30. This letter thanked defendant

for his September 10, 2010 Form 656-L (OIC), and Form 843 (request for abatement), and

stated that the correspondence would be sent to the COIC in Memphis, Tennessee because

“that office can best process your request and answer your questions.” Id. at 30, 32.

(Again, Manvilla apparently referenced the wrong date.)

Nevertheless, the next day, November 18, 2010, the unnamed RO “[s|poke with. . .

Falcone” about the OIC, apparently for the first ttme. Conrad Decl., Exh. E at 4. It appears

the RO informed Falcone, among other things, that “[t]he OIC ha[d] been returned”

because “[t]he determination was made that COIC could not process the OIC and that it

was submitted solely to delay collection.” Id. at 5. The RO explained to Falcone that the

COIC “does not have the ability to abate interest,” which was the basis for the OIC. Id.

To that end, the RO encouraged Falcone to re-submit the Request for Abatement to the

Fresno Service Center in case the original submission had been forwarded to the COIC in

Brookhaven. Id. Falcone said he would. Id. After the RO explained that the IRS would

enforce collection of defendant’s liabilities considering his significant financial assets, the

RO apparently “advised very clearly” that “|t]he Service ha[d] returned the OIC” because

“It]he OIC was determined to have been submitted solely to delay collection.” Id. at 6.

The RO then directed Falcone to submit certain documents related to the collection efforts

by December 10, 2010. Id. at 7. Indeed, the next day, on November 19, 2010, the RO

issued a Form 9297 to Falcone and defendant, which formally requested a series of

documents pertaining to defendant’s financial assets and real estate holdings. Id. at 7-9.

Also on November 19, 2010, the unnamed RO communicated with Falcone and

Broyles about the OIC. Specifically, Falcone and Broyles left the RO a telephone message

apparently stating that they “want[ed] to resubmit the OIC to [the RO] with the 843 claim

[the request for abatement]... .” Id. at 10. The RO apparently returned the call and left a

telephone message reiterating to Falcone that “the OIC was returned,” and that “[i]t will be

returned again if it is submitted under doubt as to liability seeking abatement of interest.”

Id. at 10. Further, the RO advised that any request for abatement should be filed with the

Fresno Service Center, and that “the Service will proceed with collection of the liabilities

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘O’ JS-6

Case No. 2:19-cv-09709-CAS-KSx Date June 1, 2021

Title UNITED STATES OF AMERICA v. TOM I. LINCIR

as they are unless the Service at some point determines that an abatement of interest is

appropriate.” Id.

On November 23, 2010, the RO received a telephone message from Broyles, who

stated he had complaints regarding certain statements the RO had made with regard to re-

filing an OIC. Horwitz Decl., Exh. 17 at 83. The RO apparently returned the call that day,

and informed Broyles that the OIC had been “handled and returned by COIC Brookhaven,”

and that Broyles should therefore contact Rodriguez’s supervisor, Thomas. Id.

In a series of correspondence over the months from June 23, 2011, to July 10, 2012,

the IRS denied defendant’s Request for Abatement under I.R.C. § 6404(e) and (g), the

purported basis for the First OIC. Gov’t SDF Nos. 20-26.

2. Second OIC

While defendant and the IRS were corresponding regarding the Request for

Abatement, defendant submitted the Second OIC, dated October 21, 2011. Gov’t SUF No.

35; see Conrad Decl., Exh. D at 6-9. This OIC was submitted on Form 656, Offer in

Compromise (Rev. 3-2011), on the basis of doubt as to collectability. Conrad Decl., Exh.

D at 6. It offered to settle defendant’s liabilities for $1,352,275.00. Id. at 7. However, in

a letter accompanying the Form 656, Falcone wrote that “the offer in the Form 656, Offer

in Compromise is contingent on failure of the IRS to approve the Request for Abatement.”

Horwitz Decl., Exh. 18 at 93.

The Second OIC was received at the IRS’ San Diego Office on October 26, 2011,

and by the IRS’ Memphis Service Center on November 4, 2011. Gov’t SDF No. 30. As

of November 8, 2011, the Form 4340s for defendant’s account denote “Processable OIC

pending.” Form 4340s at 9, 27, 44, 58, 73.

According to the ICS records, in April 2012, several IRS personnel discussed the

Second OIC, and determined at least one other pending investigation—namely Diane’s

innocent spouse proceedings—prevented their considering the OIC. Conrad Decl., Exh. D

at 34. Unlike with the First OIC, there is no mention of a Form 657. Nevertheless, on May

31, 2012, the unnamed RO apparently “[a]dvised [Falcone] that [the] OIC was going to be

returned for other investigations pending.” Conrad Decl., Exh. D at 26.

And on June 5, 2012, IRS Group Manager D. L. Beeman sent letters to defendant

and Falcone stating: “We have closed our file on your offer and are returning your Form

656, Offer in Compromise for the following reason(s): Other investigations are pending

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘O’ JS-6

Case No. 2:19-cv-09709-CAS-KSx Date June 1, 2021

Title UNITED STATES OF AMERICA v. TOM I. LINCIR

that may affect the liability sought to be compromised or the grounds upon which it was

submitted.”* Conrad Decl., Exh. D at 3—5. The letter bore the notation “SB Letter Return

(AOIC) (5-2012),” and originated from the IRS Group 32 OIC in Glendale, California.®

Id. at 3.

ICS records from June 5, 2012, report that a “return letter was dated and mailed to

[defendant] and POA on 06/05/2012,” and states, “closing AOIC and ICS as a return.”

Conrad Decl., Exh. E at 12. Another entry that day states, “OIC returned.” Id. A copy of

the Second OIC is marked, “Returned 06/05/2012,” and the IRS administrative file for the

Second OIC has a closure sheet stating, “Return Letter: 6/5/2012.” Conrad Decl., Exh. D

at 2,6. And as with the First OIC, the Form 4340s for defendant’s account denote, as of

June 5, 2012, “[p]rocessable OIC no longer pending because returned or rejected.” Form

4340s at 10, 29, 45, 59, 73.

Despite the Second OIC having been returned on June 5, 2012, on June 15, 2012,

defendant sent a Form 656-PPV (March 2009), Offer in Compromise — Periodic Payment

Voucher, to the Memphis COIC in connection with his Second OIC. Briggs Decl., Exh. C

at 65. Attached was a check for $5,000. Id. at 67. The Memphis office received the Form

656-PPV on June 21, 2012, and returned it the next day, on June 22, 2012. Id. at 64. On

the Form 3699 (Rev. January 1983), Return of Documents to Taxpayer, which returned the

periodic payment voucher, a box marked “Offer Closed” is checked. Id.

On June 26, 2012, the unidentified RO spoke on the telephone with defendant’s POA

(unspecified which), and apparently “discussed [the] return.” Conrad Decl., Exh. E at 13.

The RO noted that, “|a|pparently [the] offer [was] being returned.” Id.

> Defendant does not dispute that the IRS sent a letter to defendant, but does dispute

that it sent a letter to Falcone. Although the record contains a letter from the IRS to Falcone

dated June 5, 2012, defendant contends it lists the wrong address for Falcone. Def. SDF

917.

° The Automated OIC (“AOIC”) system is a “[c]omputer application where offers

in compromise are recorded and monitored from receipt to closure.” IRM § 1.4.52.1.6 (03-

22-2019).

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘O’ JS-6

Case No. 2:19-cv-09709-CAS-KSx Date June 1, 2021

Title UNITED STATES OF AMERICA v. TOM I. LINCIR

Several weeks later, on July 18, 2012, the RO reported that Falcone faxed him an

index of business appraisal, apparently “under the impression that the OIC was still open,

and the OIC specialist was waiting for his valuation.” Id. The RO apparently “reminded

[Falcone] [the OIC specialist] told him [the] offer was being returned, and a letter was sent

on 6/5 ....” Id. Falcone apparently stated he “had never received” the letter, and that he

“want|ed] to resubmit [the] offer... .” Id. The RO, however, noted that “the issues

outlined by the OIC specialist ha[d] not been resolved,” namely, the innocent spouse

investigation was still pending. Id. The RO told Falcone he “would contact him once [he]

discuss|ed] the case w/ Counse[]].” Id.

Although there is no record of the RO contacting Falcone after the July 18, 2012

telephone call, on August 2, 2012, Falcone faxed another business appraisal to the RO, this

one valuing defendant’s business at zero dollars. Id. at 14.

Then, on October 31, 2012, the RO apparently returned a call to defendant’s POA

(unspecified which), in which the POA “indicated [defendant] wanted to submit another

OIC.” Id. at 18. The ICS records do not elaborate on this conversation.

On November 20, 2012, the RO received a telephone call from Falcone informing

him that Diane had settled with the IRS, and that defendant would like to submit another

OIC “which would stipulate that Diane will release her half of the equity in property if

[the] IRS settles w/ |defendant].” Id. at 19. The RO apparently told Falcone that he would

review any OIC he submitted. Id.

3. Third OIC

After the Second OIC had been returned, defendant filed the Third OIC, dated

February 11, 2013. See Conrad Decl., Exh. F at 5-8. Like the Second OIC, this OIC was

submitted on Form 656, Offer in Compromise (Rev. 3-2011), on the basis of doubt as to

collectability. Id. at 5. It offered to settle defendant’s liabilities for $141,505.00. Id. at 6.

The Third OIC was received by the IRS on February 14, 2013. Horwitz Decl., Exh.

19 at 101. (The Third OIC is stamped as received on March 4, 2013, but it appears this is

the date it was received in the Brookhaven COIC. Gov’t SUF No. 65.) As of March 5,

2013, the Form 4340s for defendant’s account for each year at issue denote “Processable

OIC pending.” Form 4340s at 10, 30, 45, 59, 73. (It appears the Form 4340s were updated

once the OIC arrived in Brookhaven.)

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Case No. 2:19-cv-09709-CAS-KSx Date June 1, 2021

Title UNITED STATES OF AMERICA v. TOM I. LINCIR

According to the ICS records, on February 26, 2013, the unnamed RO “[rleviewed

the offer,” and concluded, based on the amount offered, that it was “frivolous.” Conrad

Decl., Exh. E at 23. The RO apparently “[p|repared [a Form] 657 indicating [the] offer

was submitted to delay collection,” which he “forwarded to [the Group Manager].” Id.

That same day, the RO spoke with Falcone on the telephone and informed him that “the

offer was frivolous.” Id. at 24.

On February 28, 2013, the RO apparently faxed the Form 657 to the Group Manager,

“who signed the document.” Id. And on March 1, 2013, the RO apparently mailed the

OIC to the Brookhaven COIC. Id.

On March 5, 2013, IRS Process Examiner Manager C. DiBiasi, apparently at the

Brookhaven COIC, sent a letter to defendant stating: “We have closed our file on your

offer and are returning your Form 656, Offer in Compromise for the following reason(s):

We have determined that your offer was submitted solely to hinder or delay our collection

actions which are expected to collect significantly more than the amount you have offered.”

Conrad Decl., Exh. F at 1. Like the letter retuning the Second OIC, the March 5, 2013

letter is marked “SB Letter Return (AOIC) (5-2012).” Id. DiBiasi also sent a letter to

Broyles attaching a copy of the correspondence to defendant.’ Id. at 2.

As with the Second OIC, in the record 1s a copy of the Third OIC stamped, “Return

March 5, 2013.” Id. at 5. Also as with the Second OIC, the record contains a Form 657,

signed by RO P. Brannen and approved by Pittner, noting that the Third OIC “appear[s] to

have been submitted ‘solely to delay’ collection... .” Id. at 3. The Form 4340s for

defendant’s account denote “Processable OIC no longer pending because returned or

rejected” as of March 5, 2013. Form 4340s at 11, 30, 45, 59, 73. However, unlike the

Second OIC, there does not appear to be an ICS entry stating, “offer returned,” or “closing

AOIC and ICS as a return.” See Conrad Decl., Exh. E at 12, 25.

7 Defendant does not dispute that the IRS sent a letter to Broyles, but states that

defendant himself “has no recollection of recerving the March 5, 2013 letter.” Def. SDF

There is a letter from the IRS to defendant dated March 5, 2013, in the record. See

Conrad Decl., Exh. F at 1.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘Oo’ JS-6

Case No. 2:19-cv-09709-CAS-KSx Date June 1, 2021

Title UNITED STATES OF AMERICA v. TOM I. LINCIR

4. Disputes as to Amount of Liabilities

The OICs notwithstanding, defendant disputes that the $12,557,294.20 sought by the

government has been properly calculated. Def. SDF 4.5. Specifically, defendant argues

the IRS never abated the interest as ordered in the 2009 Decision. Defendant contends,

appears that [the IRS], on the date it abated interest, reassessed the same amount of

interest, and thus did not comply with the Tax Court’s memorandum opinion and decision.”

Id. { 4.

Defendant now moves for summary judgment on the ground that the First OIC was

never returned, and thus was accepted by operation of law. The government moves for

summary judgment on the ground that the Tax Court’s rulings are binding.

Ii. LEGAL STANDARD

Summary judgment is appropriate where “there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.

56(a). The moving party bears the initial burden of identifying relevant portions of the

record that demonstrate the absence of a fact or facts necessary for one or more essential

elements of each claim upon which the moving party seeks judgment. See Celotex Corp.

v. Catrett, 477 U.S. 317, 323 (1986).

If the moving party meets its initial burden, the opposing party must then set out

specific facts showing a genuine issue for trial in order to defeat the motion. Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 250 (1986): see also Fed. R. Civ. P. 56(c), (e). The

nonmoving party must not simply rely on the pleadings and must do more than make

“conclusory allegations [in] an affidavit.” Lujan v. Nat’] Wildlife Fed’n, 497 U.S. 871,

888 (1990): see also Celotex, 477 U.S. at 324. Summary judgment must be granted for the

moving party if the nonmoving party “fails to make a showing sufficient to establish the

existence of an element essential to that party’s case, and on which that party will bear the

burden of proof at trial.” Celotex, 477 U.S. at 322: see also Abromson v. Am. Pac. Corp.,

114 F.3d 898, 902 (9th Cir. 1997).

In light of the evidence presented by the nonmoving party, along with any

undisputed facts, the Court must decide whether the moving party is entitled to judgment

as a matter of law. See T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d

626, 631 & n3 (9th Cir. 1987). When deciding a motion for summary judgment, “the

inferences to be drawn from the underlying facts . . . must be viewed in the light most

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CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘Oo’ JS-6

Case No. 2:19-cv-09709-CAS-KSx Date June 1, 2021

Title UNITED STATES OF AMERICA v. TOM I. LINCIR

favorable to the party opposing the motion.” Matsushita Elec. Indus. Co. v. Zenith Radio

475 U.S. 574, 587 (1986) (citation omitted); Valley Nat’l Bank of Amz. v. A.E.

Rouse & Co., 121 F.3d 1332, 1335 (9th Cir. 1997). Summary judgment for the moving

party is proper when a rational trier of fact would not be able to find for the nonmoving

party on the claims at issue. See Matsushita, 475 U.S. at 587.

IV. DISCUSSION

At issue here is whether the IRS accepted the First OIC by operation of law. If it

did, then summary judgment cannot be entered for the government, as defendant’s

liabilities would be reduced to only $1,262,049.00. Ifthe IRS did not accept the First OIC,

then the Court must determine whether the government has established that summary

judgment should be entered for the amount of the liabilities determined by the Tax Court.

The Court addresses each issue in turn.

A. Acceptance of First OIC

1. Regulatory Scheme

Section 7122 of the Internal Revenue Code (“Section 7122”) authorizes the

compromise of any civil or criminal case arising under the internal revenue laws. I.R.C.

§ 7122(a). At issue here is Section 7122(f), which provides that an OIC “shall be deemed

to be accepted . . . if such offer is not rejected by the Secretary before the date which is 24

months after the date of the submission of such offer.” LR.C. § 7122(f).

The requirements for rejecting an offer are set forth in Treasury Regulations,

section 301.7122-1 (“Section 301.7122-1”), promulgated pursuant to Section 7122(d)(1).

Section 301.7122-1(f)(1) states that “[a]n offer to compromise has not been rejected until

the IRS issues a written notice to the taxpayer or his representative, advising of the

rejection, the reason(s) for rejection, and the right to an appeal.” The parties do not dispute

that, in this case, the IRS did not issue such notice to defendant. The first question before

the Court, then, is whether a “return” of an offer constitutes a “rejection” under Section

7122(f).

Although Section 7122(f) makes no mention of “returned” OICs, Section 7122(d)

and certain IRS regulations and guidance do. For instance, Section 7122(d)(3)(C) states

that an OIC which does not meet certain requirements “may be returned to the taxpayer as

unprocessable.” LR.C. § 7122(d)(3)(C). Section 301.7122-1(d)(2), in turn, establishes that

“la|n offer returned following acceptance for processing is deemed pending only for the

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period between the date the offer is accepted for processing and the date the IRS returns

the offer to the taxpayer.” Treas. Reg. § 301.7122-1(d)(2): see Rev. Proc. 2003-71 § 5.06

(same). Finally, IRS Notice 2006-68, which provides guidance on Section 7122, addresses

returns in the context of Section 7122(f), specifically. It states that “[a|n offer will not be

deemed to be accepted if the offer is, within the 24-month period, . . . returned by the

Service to the taxpayer as nonprocessable or no longer processable,” among other things.

IRS Not. 2006-68 § 1.07. At least one Ninth Circuit case has cited to IRS Notice 2006-68

for this proposition. See Brown v. Comm’r of Internal Revenue, 826 F. App’x 673, 674

(9th Cir. 2020) (holding that taxpayer’s “offer was not accepted by operation of law under

26 U.S.C. § 7122(f)” because “[t]he IRS returned [his] offer well before 24 months had

elapsed since the submission of the offer-in-compromise” (citing IRS Not. 2006-68

§ 1.07)). Accordingly, a return operates as a rejection under Section 7122(f).8

The Court now addresses whether there is a triable issue in fact as to whether the

IRS returned the First OIC.

2. Return of First OIC

Defendant argues that the First OIC was submitted at the latest on September 29,

2010, and that the IRS failed to return or reject it by September 29, 2012. Def. MSJ at 17.

Defendant contends the October 22, 2010 letter is insufficient to constitute a return, and

that there is no record of the IRS sending any other letter sufficient to constitute a return.

Id. at 16. Furthermore, defendant argues the IRS records regarding the First OIC lack

formal internal documentation that the OIC was returned, such as a Form 657, a closure

sheet, or a copy of the OIC stamped “returned.” Id. Finally, defendant argues the IRS’

treatment of his Second and Third OICs support the notion that the IRS did not consider

the First OIC returned or rejected. Id. at 17.

The government responds that the IRS is not required to use “magic words” to return

an OIC, and that a letter can effectuate a return even if it does not use the term “return.”

Gov’t Opp. to MSJ at 5. In the government’s view, “the language of § 7122 and Treasury

8 Initially, defendant appeared to argue that a return did not function as a rejection

for purposes of Section 7122(f), see Def. MSJ at 13, but has since abandoned that argument,

see Def. Reply at 1-2.

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Regulations demonstrates that the term ‘return’ is intertwined with the term

‘nonprocessable,’” and that, therefore, when the October 22, 2010 letter stated the OIC

could not be processed, it effectuated a return. Id. Additionally, the government argues

that the language in the October 22, 2010 letter is immaterial because a taxpayer does not

even have to receive a letter returning an OIC for the OIC to be returned—what counts is

that the IRS mailed the letter. Id. at 6 (citing Rev. Proc. 2003-71).

There is limited guidance on what constitutes a “return.” The only statutory or

regulatory guidance of which this Court is aware is found in Revenue Procedure 2003-71,

which “supplements and clarifies the procedures identified in § 301.7122-1.” Rev. Proc.

2003-71 § 2.02. According to the Revenue Procedure, “[a]n offer to compromise is

considered to be returned on the day the Service mails, or personally delivers, a written

letter to the taxpayer informing the taxpayer of the decision to return the offer.” Rev. Proc.

2003-71 § 5.06.

Revenue Procedure 2003-71 does not require that the IRS use “magic words” to

effectuate the return. The fact that a return becomes effective the day the Service “mails”

the letter further indicates that there is no magic word requirement—the return is effective

even before the taxpayer received it. See United States v. Thompson, 596 F. Supp. 2d 538,

542 (E.D.N.Y. 2009) (addressing rejection of OIC, concluding defendant’s allegation that

he “never actually received the IRS’s rejection letter is entirely immaterial, as ‘[r]ejection

[of an offer-in-compromise] 1s effective as of the date on the rejection letter|,|’ not as of

the date it is received.” (quoting Rev. Proc. 2003-71 § 9.01) (alterations in original)).

Although the Court is aware of no cases specifically addressing whether a letter must

include certain language to be effective as a return, the only case of which the Court is

aware to have addressed whether a rejection required magic words found that it did not.

See In re Hobbs, No. 95-5131XS, 1996 WL 468979, at *4 (Bankr. N.D. Iowa June 5, 1996)

(“The Treasury Regulations prescribe no particular formality for rejection of an offer in

compromise other than notice in writing. [Citation.] A letter from the IRS taking a position

legally inconsistent with the notion of a pending offer should be construed as terminating

the pendency of the offer, notwithstanding the IRS’s failure to use specific words

prescribed in the Internal Revenue Manual.”).

The question, then, is whether the October 22, 2010 letter “informed [defendant] of

the decision to return the offer.” The letter stated: “We cannot process and/or further

investigate the offer... .” This, on its face, informed defendant that the offer would not

be considered. See Mason v. Comm’r of Internal Revenue, T.C.M. (RIA) 2021-064 (T.C.

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2021) (“When an OIC is returned, the IRS has not considered it on the merits ... .”). The

fact that it explained the offer would not be acted upon because “[the] case is currently

assigned to Revenue Officer E. Kelly” is of no moment. This statement did not suggest

the offer was, in fact, being considered—it does not actually reference the offer. Even if

the October 22, 2010 letter left defendant unclear as to why the IRS could not process or

investigate his OIC, it was unambiguous on the point that IRS could not consider the OIC.

Finally, the letter did not suggest it was a preliminary decision that may be revisited

pending certain developments. See United States v. McGee, 993 F.2d 184, 186 (9th Cir.

1993) (no rejection where “letter was merely notice of a proposed rejection,” concluding,

““Ti|f we do not hear from you within 15 days, we will have to send you a formal rejection

of your offer in compromise’” (alteration in original)). Thus, the October 22, 2010 letter

sufficiently documented and informed defendant of the IRS’ decision not to consider the

First OIC, and thus effectuated a return of the offer.

Defendant’s arguments to the contrary are not persuasive. First, defendant argues

that stating the IRS “cannot process” an offer is not equivalent to stating that the offer 1s

returned. Def. Reply at 2. But the relevant question is not whether the IRS used the term

“return” or a synonym for “return”; the question is whether the October 22, 2010 letter

informed defendant of the IRS’ decision that it would not consider the First OIC, which,

as discussed above, it did. In any event, the statutes and regulations referring to returns of

OIC clearly indicate that OICs are returned when they are “nonprocessable” or “no longer

processable.” See LR.C. § 7122(d)(3)(C):; IRS Not. 2006-68 § 1.07: Rev. Proc. 2003-71

§ 5.04(4); see also Treas. Regs. § 301.7122-1(d)(2); Rev. Proc. 2003-71 § 5.06.

Second, defendant argues that because the October 22, 2010 letter 1s phrased in the

alternative, it could read: “We cannot . . . further investigate the offer... .” Def. Reply at

3. Because neither Section 301.7122-1(d)(2) nor Revenue Procedure 2003-71 § 5.04

mention “inability to investigate” as a reason the IRS can return an OIC, defendant argues,

a letter informing a taxpayer that the IRS cannot investigate an OIC cannot operate as a

return of the OIC. Id. This argument is also unpersuasive because, again, the relevant

question is whether, taken as a whole, the October 22, 2010 letter informed defendant of

the IRS’ decision that it could not process the First OIC. A letter stating that the OIC

cannot be further investigated sufficiently informs the reader that the OIC will not be

considered. Furthermore, there is no reason to believe that Section 301.7122-1(d)(2) or

Revenue Procedure 2003-71 § 5.04 list the only reasons the IRS can return an OIC. In fact,

the text of the Procedure clearly establishes that it is not conclusive. For instance, Section

301.7122-1(d)(2) notes the IRS may return an OIC if the taxpayer fails to submit additional

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information requested by the IRS, which is not listed in Revenue Procedure 2003-71

§ 5.04; and Revenue Procedure 2003-71 § 5.04 states the IRS may return an OIC if the

taxpayer files for bankruptcy, which Section 301.7122-1(d)(2) does not. In any event, the

October 22, 2010 letter was not the first time the IRS referred to “investigating”

defendant’s OIC. The October 14, 2010 letter stated that the IRS would “investigate [the]

offer and contact [defendant] by November 14, 2010... .” So when defendant received

the October 22, 2010 letter, stating the IRS “cannot . . . further investigate” the offer, he

was effectively informed of the IRS’ decision to return the offer.

The conclusion that the October 22, 2010 letter sufficiently informed defendant of

the IRS’ decision to return the First OIC such as to avoid Section 7122(f) is in keeping with

the legislative intent behind that section. Section 7122(f) was added to the Internal

Revenue Code by the Tax Increase Prevention and Reconciliation Act of 2005 (“TIPRA”),

P.L. 109-222, May 17, 2006, 120 Stat 345. The TIPRA Conference Report acknowledges

ongoing delay in responding to OICs, observing that the IRS at that time took up to 18

months to review them. Accordingly, the addition of Section 7122(f) was characterized as

“provid[ing] that an offer is deemed accepted if the IRS does not make a decision with

respect to the offer within two years from the date the offer was submitted.” H.R. Conf.

Rep. 109-455, 234, 2006 U.S.C.C.A.N. 234, 421. This suggests that Congress’ intent was

for Section 7122(f) to encourage the IRS to take timely action on OICs, which the IRS did

in this case. The IRS promptly took internal action on the First OIC, was in regular contact

with defendant’s attorneys in fact regarding the offer, and promptly notified defendant it

would not be processed. In these circumstances, finding that the October 22, 2010 letter

was deficient for purposes of Section 7122(f) would be inconsistent with the statute’s

purpose.

Indeed, beyond the text of the October 22, 2010 letter itself, the circumstances

surrounding the letter support the conclusion that the IRS decided to return the First OIC.

First, ICS records show that IRS personnel assigned to the OIC and defendant’s case

discussed returning the First OIC and took steps toward returning it, such as preparing a

Form 657. See Conrad Decl., Exh. E at 2, 3: Horwitz Decl., Exh. 17 at 73, 75. The Form

4340s also corroborate that the First OIC was returned on October 22, 2010. Form 4340s

at 7, 27, 43, 58, 71.

Furthermore, the circumstances around the First OIC support the conclusion that

defendant in fact knew the IRS had decided to return the offer. For instance, it appears the

IRS expressly informed Falcone and Broyles, on several occasions, that the First OIC had

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been returned. See Conrad Decl., Exh. E at 5, 6, 10; Horwitz Decl., Exh. 17 at 83. Falcone

was informed that collections would be proceeding, which is inconsistent with there being

a pending OIC. Conrad Decl., Exh. E at 6. Falcone and Broyles even apparently stated

that they “want[ed] to resubmit the OIC to [the RO],” which strongly suggests they knew

the First OIC had been returned. Id. at 10. And when, on July 10, 2012—stll before the

24-month window closed—defendant was informed that his Request for Abatement, which

was the basis for the First OIC, was denied, it would have been unavoidably clear that the

First OIC had, in fact, been returned. Finally, the fact that defendant submitted the Second

OIC roughly a year before the 24-month time limit also strongly suggests that he knew the

First OIC was not still pending.

It is the case that, as defendant points out, IRS offices in Atlanta and Kansas City,

on October 26, 2010, and November 17, 2010, respectively, sent letters to defendant that

suggested the First OIC was still being processed or considered. But neither of these letters

were sent by the contact persons identified in the October 22, 2010 letter, namely,

Rodriguez and Kelly, or anyone else involved with the OIC to that point. And, in

conversations as late as November 23, 2010, Falcone and Broyles were expressly told that

the First OIC had been returned, as mentioned above. Finally, the fact that defendant’s

POAs said they wanted to “resubmit” the OIC, and in fact did submit the Second OIC,

compels the conclusion that defendant knew the First OIC was returned.

In sum, as discussed above, the October 22, 2010 letter was, standing alone,

sufficient to inform defendant that the First OIC had been returned. The circumstances

surrounding that letter and the OIC further support this conclusion. As such, defendant has

not raised a genuine dispute of fact on this issue. Accordingly, the First OIC was not

pending for more than 24-months, and was thus not accepted by operation of law.’

° Tn its tentative order, the Court noted that the Second OIC arguably operated as a

matter of law to revoke the First OIC. See 1 Corbin on Contracts § 2.20 (2020) (“[T]he

making of a new offer involving the same subject matter, communicated to the offeree,

will end the power to accept the original offer, without using any express words of

revocation.”). At oral argument, counsel for defendant argued that, because defendant

presented the Second OIC as being contingent upon the IRS’ rejection of the Request for

Abatement, it did not operate to revoke the First OIC. However, because the parties did

not brief this issue and because determination of this issue is not necessary to the Court’s

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B. Underlying Liabilities

The government argues that defendant cannot re-litigate his underlying liabilities in

this Court because the Tax Court has already rendered a judgment, which is preclusive

here. Gov’t MSJ at 7; see Russell v. United States, 592 F.2d 1069, 1072 (9th Cir. 1979).

The government further argues that the $12,557,294.20 liability it seeks to reduce to

judgment 1s in accord with the Tax Court’s decision. Gov’t MSJ at 7. It points out that the

Form 4340s submitted match the liabilities as determined by the Tax Court’s 2000

decision, as well as the abatements ordered in the 2009 Decision. Id. at 7-8.

Defendant responds that there is a genuine dispute of material fact as to whether the

IRS in fact abated defendant’s interest liabilities as required by the Tax Court’s 2009

decision. Def. Opp. at 7. Defendant questions why it took the IRS roughly a year to abate

the interest after the 2009 Decision. Def. Opp. at 8. More significantly, though, defendant

argues that the Form 4340s in the record show that the IRS re-assessed the interest the same

day as, or within days of, abating it. Id.

In the 2009 decision, the Tax Court ordered defendant’s outstanding interest abated

by $473,041.15 for the tax years at issue. The decision document does not require any

particular amount to be abated from any specific years, nor does it require the abatement

be implemented by any particular date. The Form 4340s, however, suggest the IRS

determined to abate the interest as follows:

Tax Year Date Abated Amount Abated

1978 February 21, 2011 $ 460,463.08

1979 February 21, 2011 $ 5,951.96

1980 January 10, 2011 $ 1,907.57

1982 January 10, 2011 $ 4,718.54

Total: $ 473,041.15

Form 4340s at 8, 28-29, 43, 71.

conclusion, the Court proceeds without discussing the legal effect of the Second OIC on

the First OIC.

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Defendant disputes that the IRS actually made these abatements. With regard to tax

year 1978, defendant points out that the IRS both abated $460,463.08 and assessed

$460,463.07 on February 21, 2011, ostensibly negating the abatement. But this ignores the

fact that the IRS abated an additional $460,463.07 on February 7, 2011. This results in net

abatement of $460,463.08. As to tax year 1979, defendant points out that the IRS both

abated $5,951.96 and assessed $5,951.69 on February 21, 2011. But, again, this ignores

that fact that the IRS abated $5,951.69 on January 10, 2011. This leaves net abatement of

$5,951.96. Accordingly, the Form 4340s show that at least $466,415.04 in interest have

been abated.

Defendant’s argument for tax years 1980 and 1982 is somewhat different. With

respect to tax year 1980, defendant observes that the IRS abated $873,853.31 in interest on

January 3, 2011, and $1,907.57 on January 10, 2011. This amounts to a total of

$875,760.88 in abatements. But, also on January 10, 2011, the IRS assessed that amount—

$875,760.88—in interest. And for tax year 1982, the IRS abated $817,742.96 in interest

on January 3, 2011, and $4,718.54 on January 10, 2011. This amounts to a total of

$822,461.50 in abatements. As with tax year 1980, though, the IRS assessed that amount—

$822.461.50—also on January 10, 2011. Accordingly, defendant argues the $1,907.57

ostensibly abated from the tax year 1978 liabilities, and the $4,718.54 from the tax year

1979 liabilities, have not been abated.

Therefore, defendant’s argument is effectively that $6,626.11 of the $473,041.15

ordered abated by the Tax Court has not been abated. But defendant’s argument is not

supported by the evidence in the record, and relies on speculation. First, the Form 4340s

show numerous abatements and assessments of interest for the tax years in question, many

of which defendant has not factored into his analysis. Defendant has failed to show that

no other abatements amount to the remaining $6,626.11 ordered abated by the Tax Court.

See Nelson v. Pima Cmty. Coll., 83 F.3d 1075, 1081-82 (9th Cir. 1996) (“The mere

existence of a ‘scintilla’ of evidence is not enough to create a ‘genuine issue of material

fact’ in order to preclude summary judgment. [Citation.] Likewise, mere allegation and

speculation do not create a factual dispute for purposes of summary judgment.” (quotation

and citation omitted)). Defendant offers no evidence to defeat summary judgment.

Accordingly, the Court is presented with Form 4340s, which are presumed accurate,

showing four entries amounting to $473,041.15 in abatements—precisely the amount

ordered abated by the Tax Court. See Hansen v. United States, 7 F.3d 138 (9th Cir. 1993)

(“Form 4340 is probative evidence in and of itself and, ‘in the absence of contrary evidence,

[is] sufficient to establish that notices and assessments were properly made’” (quoting

UNITED STATES DISTRICT COURT

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Title UNITED STATES OF AMERICA v. TOM I. LINCIR

Hughes v. United States, 953 F.2d 531, 535 (9th Cir. 1992)) (alteration in original)). On

this record, there is no genuine issue of material fact that defendant’s outstanding liabilities

amount to $12,557,294.20, and summary judgment is properly granted for the government

in that amount.

V. CONCLUSION

In accordance with the foregoing, the Court GRANTS the government’s motion for

summary judgment, and DENIES defendant’s motion for summary judgment.

IT IS SO ORDERED.

00 17

Initials of Preparer CMI