Mulholland v. United States

25 Cl. Ct. 748, 69 A.F.T.R.2d (RIA) 1101, 1992 U.S. Claims LEXIS 159, 1992 WL 77875
CourtUnited States Court of Claims
DecidedApril 20, 1992
DocketNo. 645-85T
StatusPublished
Cited by9 cases

This text of 25 Cl. Ct. 748 (Mulholland v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mulholland v. United States, 25 Cl. Ct. 748, 69 A.F.T.R.2d (RIA) 1101, 1992 U.S. Claims LEXIS 159, 1992 WL 77875 (cc 1992).

Opinion

OPINION

REGINALD W. GIBSON, Judge:

This individual tax refund case is before the court on defendant’s second motion for summary judgment. Plaintiffs did not file a cross-motion as they emphatically contend that there are genuine issues of material fact. Jurisdiction in this court is premised on section 6532(a)1 and section 7422(a)2 of the Internal Revenue Code of 1954, 26 U.S.C. §§ 6532(a) and 7422(a), and the Tucker Act, 28 U.S.C. § 1491.3

While the complaint, as filed, averred three counts, only Counts II and III were the subject of previous cross-motions for partial summary judgment by the parties, filed on January 23, 1987, and March 30, 1987, respectively. With respect to Count II, in its opinion dated January 30, 1989, the court granted defendant’s motion for summary judgment, but as to Count III, the court denied both the plaintiffs’ and the defendant’s motions inasmuch as it found that there were genuine issues of material fact. Mulholland v. United States, 16 Cl. Ct. 252, 265 (1989). Count I was not the subject of the parties’ cross-motion for partial summary judgment inasmuch as both parties conceded that there were genuine issues of material fact.

In view of the foregoing procedural posture following the court’s opinion on the cross-motions for partial summary judgment, Counts I and III were then “ripe” for a trial on the merits. Nevertheless, the defendant filed on January 30, 1990, without leave of court, a second “partial” motion for summary judgment which included both Counts I and III therein. For the reasons expressed below, the defendant’s second “partial” motion for summary judg[750]*750ment, respecting Counts I and III, shall be DENIED.

Facts

We will discuss only those facts pertinent to a ruling on defendant’s second partial motion for summary judgment. For a fuller explication of the overall facts in this case, see the January 30, 1989 opinion in Mulholland, supra.

Kenneth and Catherine Mulholland, plaintiffs/taxpayers herein, filed the instant tax refund suit seeking to obtain a refund of federal income taxes assessed by the Commissioner of Internal Revenue (Commissioner) against their joint individual income tax returns for the taxable years 1981 and 1982. The suit arose because the Commissioner concluded that the method of accounting (i.e., the Rule of 78’s method4) for deducting interest expense employed by Quincy Associates, Ltd. (Quincy), a limited partnership in which Kenneth Mulholland was a limited partner during subject taxable years, resulted in a claimed interest expense deduction in excess of the amount otherwise economically accruable and deductible pursuant to Rev.Rul. 83-84. As a result of this determination, the Commissioner disallowed the excess interest expense deduction on plaintiffs’ subject tax returns to the extent that the amount deducted pursuant to the Rule of 78’s exceeded the amount allegedly properly deductible under the economic accrual method5 for said taxable years inasmuch as it did not clearly reflect income. I.R.C. § 446(b).

In April of 1985, the plaintiffs paid the additional tax assessments and filed timely administrative refund claims with the Internal Revenue Service Center in Philadelphia, Pennsylvania. Subject refund claims were later denied on October 17, 1985. Shortly thereafter, the plaintiffs filed their complaint in this court, on October 30, 1985. Therein, they charged in their primary count, Count I, that the Commissioner erred in holding that Quincy was not entitled to deduct interest expenses calculated pursuant to the Rule of 78’s method of accounting, because such interest exceeded the amount accruable and deductible under the economic accrual method, i.e., the rationale of Rev.Rul. 83-84.6 In Count II, the plaintiffs averred that the Commissioner’s retroactive application of Rev.Rul. 83-84, and its simultaneous exemption of a certain group of taxpayers from said provisions, constituted an abuse of discretion under section 7805(b) of the Internal Revenue Code. Lastly, in Count III, plaintiffs alleged that if Quincy is re[751]*751quired, to change its accounting method for deducting interest expense under the Rule of 78’s to the economic accrual method, Quincy is entitled to avail itself of the benefits of the procedures outlined in Revenue Procedure 84-28, 1984-1 C.B. 475 (hereinafter Rev.Proc. 84-28).7

Specifically, in this court’s opinion of January 30, 1989, it held that, as to Count II, there were no genuine issues of material fact, and defendant is entitled to relief as a matter of law. Id. at 265. That is to say, the Commissioner did not abuse his discretion in applying the rationale of Rev.Rul. 83-84 retroactively, nor did he abuse his discretion in exempting a particular group of taxpayers from complying with said ruling. Id. at 261-65. Consequently, the court granted defendant’s motion for summary judgment with respect to Count II. With regard to Count III, the court found that “genuine issues of material fact are present.” Id. at 266. The court reached this conclusion based on the conflicting factual positions of the parties, as to when the revenue agent “raised” the issue of the propriety of the amount of the interest deductions claimed.8 Lastly, with respect to Count I, and fully aware that said count was not currently before the court at that time, we “deem[ed] the parties’ [knowing] failure to include such count for summary disposition to be a tacit admission that said count raises genuine issues of material fact.” Id. at 260. Moreover, the court noted that both parties stipulated “that Count I is not currently before the court because of genuine issues of material fact.” Id. at 254 n. 6.

After finding in favor of the defendant on Count II and unfavorably as to both parties on Count III, the court, in its pretrial order dated August 25, 1989, ordered, inter alia, (i) that discovery be completed by October 25, 1989; (ii) that the parties file their Appendix G submissions by December 29, 1989; and, (iii) that the pretrial conference was scheduled for January 8, 1990, at which time a firm trial date would be set. Later, by order of January 22, 1990, the court modified its previous order of October 25, 1989, in that the date of the parties’ Appendix G filings was enlarged to February 21, 1990, and that the pretrial conference would be held thereafter on February 28, 1990.

Despite the foregoing explicit procedural posture of the case, the defendant, on January 30, 1990, nevertheless, filed, without leave of court, a second motion for summary judgment on the remaining Counts I and III. In said motion, presently before the court, the defendant avers, contrary to its prior stipulation to the court, that there are no genuine issues of material fact as to Count I. This is so because the Commissioner properly determined (pursuant to 26 U.S.C. § 446

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Bluebook (online)
25 Cl. Ct. 748, 69 A.F.T.R.2d (RIA) 1101, 1992 U.S. Claims LEXIS 159, 1992 WL 77875, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mulholland-v-united-states-cc-1992.