September 5, 1995
Before the Court are Defendant's Motion for Summary Judgment (Document No. 7) and Plaintiff's Cross-Motion for Summary Judgment (Document No. 12). For the reasons stated below, Plaintiff's motion for summary judgment will be denied and Defendant's motion for summary judgment will be granted.
I. FACTUAL BACKGROUND
This is an action by plaintiff, Alon International, Inc. ("Alon"), against defendant United States of America (the "Government") to recover an overpayment of federal income tax and interest thereon for the taxable year ended December 31, 1989. Jurisdiction is alleged pursuant to 28 U.S.C. § 1346(a)(1).
Alon is a "foreign sales corporation" under 26 U.S.C. §§ 921-927. Alon Processing, Inc. ("Processing") is the "related supplier corporation" to Alon. During the tax year 1989, both Alon and Processing were solely owned by Morris Weinbaum and his wife. During the tax year 1989, Processing was a Subchapter S corporation.
On January 1, 1990, Nukem GmbH, a German corporation, purchased the stock of both Alon and Processing from Morris Weinbaum. As a Subchapter S corporation cannot be owned by a nonresident alien, Nukem GmbH terminated the Subchapter S election of Processing on January 1, 1990, and began reporting income from Processing as a Subchapter C corporation.
In August, 1992, Nukem GmbH filed an amended corporate tax return (Form 1120FSC) on behalf of Alon for the tax year 1989 and also filed an amended information return (Form 1120S) for Processing. Additionally, Nukem GmbH issued amended Forms K-1 (Shareholder's Share of Income, Credits and Distributions, etc.) to Mr. Weinbaum.
In its refund claim, Alon alleged that its income was overreported and that the income of Processing, the related supplier, was underreported by a corresponding amount. The effect of the amended return of Alon and the amended information return of Processing was to obtain a refund of tax for 1989 for Nukem GmbH, and corresponding increase in tax for 1989 for Morris Weinbaum, the former sole shareholder and owner of Processing.
By letters dated September 4, 1992, and September 24, 1992, Morris Weinbaum's accountant and lawyer, respectively, informed the Internal Revenue Service and Nukem GmbH that Mr. Weinbaum did not consent to the filing of an amended return for Alon or an amended information return for Processing for the year 1989.
The parties cross move for summary judgment pursuant to Federal Rule of Civil Procedure 56 because of an asserted absence of any genuine issues of material facts. Alon contends it is entitled to a recovery of an overpayment of federal income tax and interest thereon paid to the IRS on its 1989 tax return. The Government contends provisions of the Internal Revenue Code clearly proscribe the redetermination filed by Alon on behalf of Processing.
II. SUMMARY JUDGMENT STANDARD
Rule 56(c) of the Federal Rules of Civil Procedure reads, in pertinent part, as follows:
[Summary judgment] shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.