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United States v. Stiles

United States District Court, W.D. Pennsylvania

December 2, 2014

UNITED STATES OF AMERICA,
v.
DAVID STILES, et al., Defendant.

MEMORANDUM OPINION

JOY FLOWERS CONTI, Chief District Judge.

The United States of America ("United States" or "government") filed the above-captioned case against David Stiles and Virginia Stiles (collectively the "Stiles" or "defendants") to reduce to judgment tax assessments filed against the Stiles pursuant to 31 U.S.C. § 3713, for depleting the Estate of Julia Stiles ("estate") before paying the estate's tax liability. (ECF No. 33 at 1.) Presently before this court is the United States' motion for summary judgment. (ECF No. 32.) The United States argues that it is entitled to judgment as a matter of law with respect to the Stiles' tax liabilities and to satisfy the tax liabilities the court should order the foreclosure of a tax lien the United Stated filed on property owned by the Stiles. (ECF No. 32 at 1.) After considering all the submissions, the court concludes that there is no dispute that the Stiles depleted an estate before paying the estate's tax liability. The court will GRANT the United States' motion for summary judgment and order the foreclosure of the lien.

I. FACTUAL BACKGROUND

It should be noted that the Stiles failed to submit a responsive statement of facts as required by Local Rule of Civil Procedure 56 and this court's case management order dated April 24, 2014. W.D. Pa. LCvR 56; (ECF No. 29). The factual background is to be derived from the undisputed evidence of record and the disputed evidence of record viewed in the light most favorable to the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

A. Factual Background[1]

1. Estate Tax Liability

After Julia Stiles died in 2002, David Stiles was appointed executor of her estate. (ECF No. 35 ¶ 9.) The tax return for the estate was not filed until June 2008. (Id. ¶ 10.) On June 9, 2008, a delegate of the Secretary of the Treasury Internal Revenue Service of the United States ("IRS") assessed federal income taxes, interest, and penalties against the estate in the amount of $2, 093, 091.[2] (ECF No. 35 ¶ 11; ECF No. 35-4.) The estate also owed $12, 936 to the Register of Wills and $110, 635 to the Delaware Division of Revenue. (ECF No. 35 ¶ 12.) The estate's primary assets consisted of real estate in Wilmington, Delaware, and an investment account with Janney Montgomery Scott, LLC. (Id. ¶ 13.) Around the time of Julia Stiles' death her account with Janney Montgomery Scott, LLC., was worth $2, 303, 547. (Id. ¶ 14.) The real property in Delaware was sold in August 2002, for $379, 000 and the proceeds were distributed shortly after the sale. (Id. ¶ 15.) The IRS did not receive any proceeds from the sale of real property located in Wilmington, Delaware. (Id. ¶ 16.)

Between 2002 and 2005, David Stiles distributed approximately $775, 000 from the estate to himself, and $425, 000 to each of his two sisters. (Id. ¶ 19) (citing Estate of Stiles v. Lilly, No. 09C-07-198 MJB, 2011 WL 5299295, at *5-6 (Del. Super. Ct. Oct. 27, 2011). At the beginning of April 2008, the estate's investment account with Janney Montgomery Scott, LLC., was worth $1, 787, 660. (ECF No. 35 ¶ 20; ECF No. 35-5). In April 2008, David Stiles distributed $110, 635 from the estate to the Delaware Division of Revenue. (ECF No. 35 ¶ 21; ECF No. 35-5 at 7.) Michael Stumpo, a Revenue Officer for the IRS, stated that as of March 31, 2014, the estate still owes the United States $71, 762.39. (ECF No. 35 ¶ 22); (Stumpo Decl. ¶ 6).

2. Income Tax Assessed Against the Stiles

As of March 31, 2014, the IRS determined that the Stiles still owed the United States the following amounts for income tax assessments:

1. For the 2007 tax period: $4, 989.07
2. For the 2008 tax period: $27, 072.48
3. For the 2009 tax period: $20, 298.65
4. For the 2010 tax period: $84.84

(ECF No. 35 ¶ 1); (Stumpo Decl. ¶ 1.)

Interest on the income tax assessments has been assessed under 26 U.S.C. §§ 6601(a) and (b), from the date that the Stiles' tax liabilities became due, at the rate set forth in 26 U.S.C. § 6621(a). (ECF No. 35 ¶ 2; ECF No. 35-1 at 2.) Penalties under 26 U.S.C. § 6651, for the years 2007, 2008, and 2009 have been assessed against the Stiles for their failure to timely pay the amount of tax due. (ECF No. 35 ¶ 3; ECF No. 35-1 at 2.) Penalties under 26 U.S.C. § 6654, for the years 2008 and 2009 have been assessed against the Stiles for their failure to make required estimated tax payments. (ECF No. 35 ¶ 3; ECF No. 35-1 at 2, 4.) An accuracy-related penalty has been assessed against the Stiles under 26 U.S.C. § 6662, for the year 2007. (ECF No. 35 ¶ 3; ECF No. 35-1 at 4.)

The IRS properly submitted notice and demand for payment to the Stiles. (ECF No. 35 ¶ 6; ECF No. 35-1). The Stiles failed to fully pay the tax assessments. (ECF No. 35 ¶ 7.) The total income taxes owed by the Stiles for tax years 2007, 2008, 2009, and 2010 as of March 31, 2014, is $52, 445.04. (ECF No. 35 ¶ 8); (Stumpo Decl. ¶ 5).

3. The United States' Tax Lien and Foreclosure Action Against the Stiles

In May 1994, Walter R. Allen, Jr. and Donna M. Allen conveyed to the Stiles real property located at 3840 Route 40 in Washington, Pennsylvania ("Washington Property"). (ECF No. 35 ¶ 23) (citing ECF No. 35-10). In September 2009, the Stiles entered into an oil, gas, and coalbed methane gas lease with Range Resources - Appalachia, LLC. ("Range Resources"). (ECF No. 35 ¶ 24) (citing ECF No. 25 ¶ 1.) Under the lease, the Stiles receive an annual payment from Range Resources until the property begins to produce commercially viable natural resources, then the Stiles will receive one-eighth of the sales proceeds paid to Range Resources. (ECF No. 35 ¶ 25) (citing ECF No. 25-1 and ECF No. 25-2.) On June 18, 2010, the United States filed a Notice of Federal Tax Lien with the Prothonotary in Washington County, Pennsylvania against the Stiles with respect to their income tax liabilities for tax years 2007 and 2008. (ECF No. 35 ¶ 26.)

B. Procedural Background

On January 28, 2013, the government filed a complaint against the Stiles, PNC Bank, the Washington County Tax Claim Bureau, and Range Resources. (ECF No. 1.) PNC Bank, the Washington County Tax Claim Bureau, and Range Resources have ...


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