120 T.C. No. 7
UNITED STATES TAX COURT
JAMES C. AND KATHERINE WILKINS, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10704-00. Filed February 26, 2003.
Ps claimed a refund of $80,000 on their 1998 Federal income tax return attributable to “black taxes” or so-called slavery reparations.
Held: The Internal Revenue Code does not provide a deduction, credit, or any other allowance for slavery reparations.
Held further: The doctrine of equitable estoppel is not a bar to R’s determination in this matter. Therefore, R’s Motion for Summary Judgment shall be granted.
James C. and Katherine Wilkins, pro sese.
Monica J. Miller, for respondent. - 2 -
OPINION
DAWSON, Judge: This case was assigned to Chief Special
Trial Judge Peter J. Panuthos, pursuant to the provisions of
section 7443A(b)(5) and Rules 180, 181, and 183.1 The Court
agrees with and adopts the opinion of the Chief Special Trial
Judge, which is set forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
PANUTHOS, Chief Special Trial Judge: This matter is before
the Court on respondent’s Motion for Summary Judgment, filed
pursuant to Rule 121. As explained in detail below, we shall
grant respondent’s motion.
Background
In February 1999, petitioners filed a Form 1040, U.S.
Individual Income Tax Return, for the taxable year 1998, on which
they reported wages of $22,379.85, total tax of $1,076, and tax
withholding of $2,388. Petitioners’ tax return included two
Forms 2439, Notice to Shareholder of Undistributed Long-Term
Capital Gains. The Forms 2439 stated that petitioners were
shareholders of a regulated investment company (RIC) or real
estate investment trust (REIT).2 The Forms 2439 identified the
1 Section references are to the Internal Revenue Code, as amended. Rule references are to the Tax Court Rules of Practice and Procedure. 2 Sec. 852(b)(1) and (3)(A) provides that tax will be (continued...) - 3 -
investment entity as “black investment taxes” and listed the
amount of tax paid by the entity on petitioners’ behalf as
$80,000.00. Petitioners entered $80,000.00 on Form 1040, line 63
(Other payments), and claimed a refund on a total overpayment of
$81,312. Respondent processed the tax return and promptly issued
to petitioners a refund check in the amount of $81,312.
On August 9, 2000, respondent sent a notice of deficiency to
petitioners for the taxable year 1998 which stated in pertinent
part:
It is determined that the amount reported as Other Payments on your tax return for the taxable year 1998 is not allowable because there is no provision in the Internal Revenue Code for a refundable tax credit for the payment of reparation for slavery. Therefore, your allowable Other Payments is $0.00 rather than $80,000.00 as shown on your return. Accordingly, your tax liability is increased by $80,000.00 for the tax year 1998.
Petitioners filed a timely (imperfect) petition and an amended
petition challenging the notice of deficiency described above.3
The amended petition states in pertinent part: “We request the
2 (...continued) imposed on the taxable income and capital gains of a regulated investment company (RIC). Sec. 852(b)(3)(D)(i) provides that the RIC’s shareholders “shall include, in computing his long-term capital gains in his return * * * such amount as the * * * [RIC] shall designate”. Sec. 852(b)(3)(D)(ii) provides that such shareholder “shall be deemed to have paid * * * the tax imposed” under sec. 852(b)(3)(A) and the shareholder shall be allowed a “credit or refund, as the case may be, for the tax so deemed to have been paid by him.” 3 At the time the petition was filed, petitioners resided in Satellite Beach, Florida. - 4 -
total amounts plus any penalties be dropped, due to negligence of
the I.R.S.”4 Respondent filed an answer to the amended
petition.5
As indicated, respondent moves for summary judgment.
Respondent avers that “Although there have been several
initiatives in Congress to study reparations proposals for
African-Americans, there is currently no provision in the tax law
that allows African-Americans to claim black investment taxes or
any type of tax credit or refund related to slavery reparations.”
Respondent also asserts that he has taken steps to combat the
“slavery reparation scam”.
Petitioners filed an Objection to respondent’s motion.
Petitioners contend that respondent’s motion should be denied
because respondent was “negligent in informing the public
specifically African-Americans of * * * [the slavery reparations]
4 Respondent did not determine that petitioners are liable for any addition to tax or penalty for the taxable year 1998. 5 Respondent initially filed a motion to dismiss for lack of jurisdiction, asserting that the notice of deficiency was invalid on the ground that respondent did not determine a deficiency in tax because sec. 6201(a)(3) authorized the immediate assessment of the $80,000 erroneously refunded to petitioners. When petitioners failed to file an objection, the Court granted respondent’s motion to dismiss. Respondent later moved to vacate the Court’s order of dismissal for lack of jurisdiction, asserting that the erroneous refund issued to petitioners is subject to the normal deficiency procedures set forth in secs. 6211-6216. The Court granted the motion to vacate, concluding that respondent determined a deficiency in petitioners’ Federal income tax. - 5 -
scam.” Petitioners assert that, when they first heard about
claims for slavery reparations, they researched the Internal
Revenue Service’s website and found no mention of a scam relating
to the matter. They also contend that they first learned that
their slavery reparations claim was not legitimate when they were
interviewed by an IRS special agent in July 1999. They maintain
that the special agent informed them that they did not need to
repay the $80,000 in question, but that he would appreciate their
assistance in prosecuting the promoter of the scam.
Discussion
Summary judgment is intended to expedite litigation and
avoid unnecessary and expensive trials. See Fla. Peach Corp. v.
Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may be
granted with respect to all or any part of the legal issues in
controversy “if the pleadings, answers to interrogatories,
depositions, admissions, and any other acceptable materials,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that a decision may be
rendered as a matter of law.” Rule 121(b); Sundstrand Corp. v.
Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th
Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988);
Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The moving
party bears the burden of proving that there is no genuine issue
of material fact, and factual inferences will be read in a manner - 6 -
most favorable to the party opposing summary judgment. See
Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v.
Commissioner, 79 T.C. 340, 344 (1982).
Based on our review of the record, we are satisfied that
there is no genuine issue as to any material fact and that
summary judgment may be rendered in respondent’s favor as a
matter of law.
We begin with the well-settled principle that tax deductions
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120 T.C. No. 7
UNITED STATES TAX COURT
JAMES C. AND KATHERINE WILKINS, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10704-00. Filed February 26, 2003.
Ps claimed a refund of $80,000 on their 1998 Federal income tax return attributable to “black taxes” or so-called slavery reparations.
Held: The Internal Revenue Code does not provide a deduction, credit, or any other allowance for slavery reparations.
Held further: The doctrine of equitable estoppel is not a bar to R’s determination in this matter. Therefore, R’s Motion for Summary Judgment shall be granted.
James C. and Katherine Wilkins, pro sese.
Monica J. Miller, for respondent. - 2 -
OPINION
DAWSON, Judge: This case was assigned to Chief Special
Trial Judge Peter J. Panuthos, pursuant to the provisions of
section 7443A(b)(5) and Rules 180, 181, and 183.1 The Court
agrees with and adopts the opinion of the Chief Special Trial
Judge, which is set forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
PANUTHOS, Chief Special Trial Judge: This matter is before
the Court on respondent’s Motion for Summary Judgment, filed
pursuant to Rule 121. As explained in detail below, we shall
grant respondent’s motion.
Background
In February 1999, petitioners filed a Form 1040, U.S.
Individual Income Tax Return, for the taxable year 1998, on which
they reported wages of $22,379.85, total tax of $1,076, and tax
withholding of $2,388. Petitioners’ tax return included two
Forms 2439, Notice to Shareholder of Undistributed Long-Term
Capital Gains. The Forms 2439 stated that petitioners were
shareholders of a regulated investment company (RIC) or real
estate investment trust (REIT).2 The Forms 2439 identified the
1 Section references are to the Internal Revenue Code, as amended. Rule references are to the Tax Court Rules of Practice and Procedure. 2 Sec. 852(b)(1) and (3)(A) provides that tax will be (continued...) - 3 -
investment entity as “black investment taxes” and listed the
amount of tax paid by the entity on petitioners’ behalf as
$80,000.00. Petitioners entered $80,000.00 on Form 1040, line 63
(Other payments), and claimed a refund on a total overpayment of
$81,312. Respondent processed the tax return and promptly issued
to petitioners a refund check in the amount of $81,312.
On August 9, 2000, respondent sent a notice of deficiency to
petitioners for the taxable year 1998 which stated in pertinent
part:
It is determined that the amount reported as Other Payments on your tax return for the taxable year 1998 is not allowable because there is no provision in the Internal Revenue Code for a refundable tax credit for the payment of reparation for slavery. Therefore, your allowable Other Payments is $0.00 rather than $80,000.00 as shown on your return. Accordingly, your tax liability is increased by $80,000.00 for the tax year 1998.
Petitioners filed a timely (imperfect) petition and an amended
petition challenging the notice of deficiency described above.3
The amended petition states in pertinent part: “We request the
2 (...continued) imposed on the taxable income and capital gains of a regulated investment company (RIC). Sec. 852(b)(3)(D)(i) provides that the RIC’s shareholders “shall include, in computing his long-term capital gains in his return * * * such amount as the * * * [RIC] shall designate”. Sec. 852(b)(3)(D)(ii) provides that such shareholder “shall be deemed to have paid * * * the tax imposed” under sec. 852(b)(3)(A) and the shareholder shall be allowed a “credit or refund, as the case may be, for the tax so deemed to have been paid by him.” 3 At the time the petition was filed, petitioners resided in Satellite Beach, Florida. - 4 -
total amounts plus any penalties be dropped, due to negligence of
the I.R.S.”4 Respondent filed an answer to the amended
petition.5
As indicated, respondent moves for summary judgment.
Respondent avers that “Although there have been several
initiatives in Congress to study reparations proposals for
African-Americans, there is currently no provision in the tax law
that allows African-Americans to claim black investment taxes or
any type of tax credit or refund related to slavery reparations.”
Respondent also asserts that he has taken steps to combat the
“slavery reparation scam”.
Petitioners filed an Objection to respondent’s motion.
Petitioners contend that respondent’s motion should be denied
because respondent was “negligent in informing the public
specifically African-Americans of * * * [the slavery reparations]
4 Respondent did not determine that petitioners are liable for any addition to tax or penalty for the taxable year 1998. 5 Respondent initially filed a motion to dismiss for lack of jurisdiction, asserting that the notice of deficiency was invalid on the ground that respondent did not determine a deficiency in tax because sec. 6201(a)(3) authorized the immediate assessment of the $80,000 erroneously refunded to petitioners. When petitioners failed to file an objection, the Court granted respondent’s motion to dismiss. Respondent later moved to vacate the Court’s order of dismissal for lack of jurisdiction, asserting that the erroneous refund issued to petitioners is subject to the normal deficiency procedures set forth in secs. 6211-6216. The Court granted the motion to vacate, concluding that respondent determined a deficiency in petitioners’ Federal income tax. - 5 -
scam.” Petitioners assert that, when they first heard about
claims for slavery reparations, they researched the Internal
Revenue Service’s website and found no mention of a scam relating
to the matter. They also contend that they first learned that
their slavery reparations claim was not legitimate when they were
interviewed by an IRS special agent in July 1999. They maintain
that the special agent informed them that they did not need to
repay the $80,000 in question, but that he would appreciate their
assistance in prosecuting the promoter of the scam.
Discussion
Summary judgment is intended to expedite litigation and
avoid unnecessary and expensive trials. See Fla. Peach Corp. v.
Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may be
granted with respect to all or any part of the legal issues in
controversy “if the pleadings, answers to interrogatories,
depositions, admissions, and any other acceptable materials,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that a decision may be
rendered as a matter of law.” Rule 121(b); Sundstrand Corp. v.
Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th
Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988);
Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The moving
party bears the burden of proving that there is no genuine issue
of material fact, and factual inferences will be read in a manner - 6 -
most favorable to the party opposing summary judgment. See
Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v.
Commissioner, 79 T.C. 340, 344 (1982).
Based on our review of the record, we are satisfied that
there is no genuine issue as to any material fact and that
summary judgment may be rendered in respondent’s favor as a
matter of law.
We begin with the well-settled principle that tax deductions
are a matter of legislative grace, and taxpayers must show that
they come squarely within the terms of the law conferring the
benefit sought. See Rule 142(a); INDOPCO, Inc. v. Commissioner,
503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292
U.S. 435, 440 (1934); Welch v. Helvering, 290 U.S. 111, 115
(1933). Petitioners concede that they did not make “other
payments” of $80,000 during 1998, and, therefore, they were not
entitled the refund claimed on their return. The Internal
Revenue Code simply does not provide a tax deduction, credit, or
other allowance for slavery reparations.
For purposes of the pending motion we assume that
petitioners’ assertions regarding the IRS website and their
interview with the special agent are true. Petitioners’
contentions are tantamount to an assertion of equitable estoppel.
Equitable estoppel is a judicial doctrine that precludes a party
from denying its own representations which induced another to act - 7 -
to his or her detriment. Hofstetter v. Commissioner, 98 T.C.
695, 700 (1992). The Court has recognized that estoppel is
applied against the Commissioner “with the utmost caution and
restraint.” Id.; Kronish v. Commissioner, 90 T.C. 684, 695
(1988); Boulez v. Commissioner, 76 T.C. 209, 214-215 (1981),
affd. 810 F.2d 209 (D.C. Cir. 1987); Estate of Emerson v.
Commissioner, 67 T.C. 612, 617 (1977). The taxpayer must
establish the following elements before equitable estoppel will
be applied against the Government: (1) A false representation or
wrongful, misleading silence by the party against whom the
estoppel is claimed; (2) an error in a statement of fact and not
in an opinion or statement of law; (3) the taxpayer's ignorance
of the truth; (4) the taxpayer's reasonable reliance on the acts
or statements of the one against whom estoppel is claimed; and
(5) adverse effects suffered by the taxpayer from the acts or
statements of the one against whom estoppel is claimed. Norfolk
S. Corp. v. Commissioner, 104 T.C. 13, 60 (1995), affd. 140 F.3d
240 (4th Cir. 1998). Estoppel requires a finding that the
taxpayer relied on the Government's representations and suffered
a detriment because of that reliance. Id.
Petitioners’ allegations do not satisfy the traditional
requirements of estoppel. Respondent’s alleged failure to
identify slavery reparations claims as a scam on its website does
not amount to a false representation or wrongful, misleading - 8 -
silence. Moreover, we conclude that it was unreasonable as a
matter of law for petitioners to base their $80,000 refund claim
on the lack of a warning on respondent’s website regarding
slavery reparations claims. See, e.g., Johnson v. Commissioner,
T.C. Memo. 1993-272 (paying a refund to the taxpayers did not
estop the Commissioner from later determining a deficiency in the
same year on the ground that the transaction underlying the
taxpayers’ refund claim was a sham).
We likewise conclude that the special agent’s remarks to
petitioners, that they would not be required to repay the refund,
do not warrant the application of equitable estoppel against
respondent. The special agent’s statement was not a statement of
fact but rather was one of law. Further, we are not convinced
that petitioners suffered a detriment as a result of the special
agent’s statement. See, e.g., Nolte v. Commissioner, T.C. Memo.
1995-57 (holding taxpayers did not suffer any significant
detriment as the result of Commissioner’s earlier erroneous
statement that tax liability for years in question was “paid in
full” because taxpayers would have been liable for deficiencies
whether or not Commissioner made the misstatement), affd. by
unpublished opinion 99 F.3d 1146 (9th Cir. 1996). - 9 -
Consistent with the preceding discussion, we shall grant
respondent’s Motion for Summary Judgment.
To reflect the foregoing,
An Order and decision will
be entered for respondent.