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United States v. Widtfeldt

United States District Court, D. Nebraska

September 17, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
JAMES WIDTFELDT, Defendant.

          MEMORANDUM AND ORDER

          Robert F. Rossiter, Jr. United States District Judge.

         This matter is before the Court on the government's Motion for Summary Judgment (Filing No. 36) against defendant James Widtfeldt[1] (“Widtfeldt”) with jurisdiction under 26 U.S.C. § 7402(a) and 28 U.S.C. § 1340. Widtfeldt opposes the government's motion and moves to dismiss (Filing No. 41) this case. For the reasons stated below, the government's motion is granted and Widtfeldt's motion is denied.

         I. BACKGROUND [2]

         In 2004, Gusteva Widtfeldt (“Gusteva”), Widtfeldt's mother, gifted Widtfeldt two parcels of real property-River Place and O'Neill Rental Houses-worth $1, 041, 987 (“gifted properties”). On February 8, 2006, Gusteva died. Widtfeldt, the executor of Gusteva's estate (“estate”), received or became titleholder to property included in the estate. Among that property were two parcels of real property referred to as Fink Place and Rock Falls Place, valued $896, 180 and $912, 128, respectively, at the time of Gusteva's death.

         The Internal Revenue Service (“IRS”) examined the estate and determined the estate owed both federal gift and estate taxes. The IRS discovered neither Gusteva nor the estate filed a federal gift-tax return for the gifted properties. Nor did the estate file a federal estate-tax return on Gusteva's death. For the gifted properties, the IRS determined the estate owed $305, 141 in gift tax, $68, 659.73 in late-filing penalties, and $76, 285.25 in late-payment penalties. See 26 U.S.C. § 6651(a)(1) and (2). Further, the IRS found the estate owed $170, 954 in estate tax and $34, 191 for an inaccuracy penalty, see Id. § 6662(a).

         On May 5, 2010, the IRS notified (Filing No. 38-2) Widtfeldt, as the estate's executor, of the tax deficiencies. Widtfeldt challenged the deficiencies in the United States tax court (“tax court”). When Widtfeldt filed (like here) several frivolous pleadings and raised numerous nonsensical arguments, the tax court warned him it would entertain a motion to dismiss from the IRS if he did not make a relevant argument.

         On April 26, 2011, the IRS filed a Motion to Dismiss for Failure to Properly Prosecute, which the tax court granted (Filing No. 38-6) on May 16, 2011 (“tax-court decision”). The tax court upheld the IRS's determinations of deficiencies, and the Eighth Circuit affirmed. See Widtfeldt v. Comm'r, 449 Fed.Appx. 561 (8th Cir. 2012) (unpublished per curiam).

         Based on the tax-court decision, on July 13, 2012, the IRS made assessments against the estate for the deficiencies. Despite the IRS issuing notice and demand for payment on Widtfeldt, as the estate's executor, the liabilities have not been paid. The record in this case shows the IRS attached a lien to the estate's property on March 19, 2013. As of May 15, 2019, the estate owed $813, 699.28 in gift tax and $394, 493.28 in estate tax.

         The government now seeks (1) a money judgment against Widtfeldt holding him personally liable for the unpaid federal gift and estate taxes, see 26 U.S.C. § 6324, and (2) enforcement of that judgment against real property owned by Widtfeldt, see Id. § 7403.

         II. DISCUSSION

         A. Standard of Review

          The Court must “grant summary judgment if the movant shows that 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). If the movant informs the Court of the basis for its motion and identifies the portions of the record showing the absence of a genuine dispute of material fact, the nonmovant must respond with evidence establishing “specific facts showing there is a genuine issue for trial.” Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986)).

         B. Tax Liability

         When estate tax is not paid, a lien attaches to the gross estate. 26 U.S.C. § 6342(a)(1). The recipient of the property included in the gross estate then becomes “personally liable for such [unpaid] tax” up to the value of the property at the time of the decedent's death. Id. § 6324(a)(2). Similarly, a lien attaches to a gift if gift tax is not paid. Id. § 6324(b). The donee of the gift then is “personally liable for such tax to the extent of the value of the gift.” Id.

         Here, Widtfeldt received numerous parcels of real property included in the estate as well as the gifted properties from Gusteva. The government argues Widtfeldt is personally liable for the estate's tax deficiencies confirmed in the tax-court decision. See Id. § 6324(a) and (b).

         Widtfeldt resists, insisting, without support, that he completely purchased Gusteva's property by 1994. In other words, Widtfeldt seeks to rehash the tax-court decision that the estate owes any taxes at all. The government, however, contends claim preclusion bars Widtfeldt from relitigating the tax-court decision.[3] The Court agrees.

         Under claim preclusion, “a final judgment on the merits of an action precludes the parties . . . from relitigating issues that were or could have been raised in that action.” Magee v. Hamline Univ., 775 F.3d 1057, 1059 (8th Cir. 2015) (quoting Knutson v. City of Fargo, 600 F.3d 992, 996 (8th Cir. 2010)). Claim preclusion applies if “(1) the first suit resulted in a final judgment on the merits; (2) the first suit was based on proper jurisdiction; (3) both suits involve the same parties (or those in privity with them); and (4) both suits are based upon the same claims or causes of action.” Id. (quoting Yankton Sioux Tribe v. U.S. Dep't of Health & Human Servs., 533 F.3d 634, 639 (8th Cir. 2008)). ...


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