Estate Tax Crazy

[LPC]

The 8th Circuit decision is brief and to the point:

James A. Widtfeldt,
Plaintiff - Appellant,
v.
Commissioner of Internal Revenue; James Daugherty,
Defendants - Appellees.

United States Court of Appeals
For the Eighth Circuit

Appeal from United States District Court
for the District of Nebraska -- Omaha

Submitted: June 16, 2014
Filed: June 23, 2014
[Unpublished]

Before BYE, COLLOTON, and BENTON, Circuit Judges.

PER CURIAM.

James Widtfeldt appeals the district court's[1] dismissal of his pro se action, in which he alleged, among other things, that defendants attempted to violate a tax court order by pursuing tax collection against him. He sought damages and injunctive relief. Upon careful review, see Pagonis v. United States, 575 F.3d 809, 812 (8th Cir. 2009), we conclude that dismissal was proper: sovereign immunity shields defendants from Widtfeldt's claim for money damages, see F.D.I.C. v. Meyer, 510 U.S. 471, 474 (1994), and his attempt to enjoin tax collection is prohibited by the Anti-Injunction Act, see 26 U.S.C. § 7421(a). Accordingly, we affirm.

FOOTNOTES

[1] The Honorable Joseph F. Bataillon, United States District Judge for the District of Nebraska.

END OF FOOTNOTES

[notorial dissent]

I thought they'd already driven a stake through this thing, guess it didn't take. Isn't he about due for vex lit status after all this? It would seem he is trying to re-litigate the same case repeatedly with exactly the same results each time.

I'm also not to sure at this point that his windings are wrapped very tightly any more.

[LPC]

Here is the other District Court decision referred to in the previous opinion above:

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEBRASKA

JAMES WIDTFELDT,
Plaintiff,
vs.
DOUGLAS POLSKY, line agent; FRANKLIN WEBER, appeals agent and successor to Arthur Welp, appeals agent; JAMES DAUGHERTY, IRS agent; INTERNAL REVENUE SERVICE; and UNITED STATES TREASURY,
Defendants.

CASE NO. 8:13CV132

MEMORANDUM AND ORDER

This matter is before the Court on the Defendants’ Motion to Dismiss (Filing No. 6). For the reasons stated below, the Motion will be granted.

BACKGROUND

On April 24, 2013, Plaintiff James Widtfeldt filed his pro se Complaint against five Defendants, Douglas Polsky, Franklin Weber[1], James Daugherty, the Internal Revenue Service (“IRS”), and the United States Treasury.[2] On July 8, 2013, the Defendants filed their Motion, along with a brief in support of their Motion. (See Filing Nos. 6, 7.) Widtfeldt has not responded to the Defendants’ Motion or brief within the time permitted under the Court’s local rule. See NECivR 7.1(b)(1).

SUMMARY OF THE COMPLAINT

Widtfeldt’s allegations are difficult to decipher. The caption of his Complaint suggests that he asserts a claim pursuant to 42 U.S.C. § 1983 for the violation of his civil rights; a claim pursuant to the Thirteenth, Fourteenth, and Fifteenth Amendments of the United States Constitution for the IRS’s efforts to “create slavery”; and a takings clause claim pursuant to the Fifth Amendment to the United States Constitution for the taking of his property. (Filing No. 1 at 1.) The only relief he seeks in his Complaint, however, is a determination that he does not owe any taxes, and a refund of $192,000 in taxes he allegedly paid in 1999-2000, with interest and penalties. (Id. at 9.) He also requests that penalties be assessed against the Defendants “in the Bill Gates, Warren Buffet [sic], et al category, in the hundreds of billions of dollars payable to James Widtfeldt.” (Id.)

DISCUSSION

The Defendants’ seek the dismissal of Widtfeldt’s Complaint on various grounds, including sovereign immunity, lack of subject matter jurisdiction, failure to state a claim, and improper service.

“Sovereign immunity is a jurisdictional question which the government can raise at any time.” Arneson v. Callahan, 128 F.3d 1243, 1245 n.3 (8th Cir. 1997). “The jurisdictional bar of sovereign immunity operates when a suit threatens to impose liability on the United States for money or property or to engender some form of coercive injunctive relief,”[3] unless the United States has unequivocally and expressly waived its immunity from suit. Jones v. I.R.S., 216 F. Supp. 2d 955, 958 (D. Neb. 2002); United States v. Nordic Vill. Inc., 503 U.S. 30, 33 (1992). It applies to a plaintiff’s claims against “the United States, its agencies, and its officers in their official capacities.” Jones, 216 F. Supp. 2d at 958 (citing FDIC v. Meyer, 510 U.S. 471, 475 (1994); United States v. Sherwood, 312 U.S. 584, 586 (1941)), aff'd, 60 F. App'x 642 (8th Cir. 2003). “The party bringing suit against the United States bears the burden of proving that sovereign immunity has been waived.” James v. United States, 970 F.2d 750, 753 (10th Cir. 1992) (citing McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 188 (1936)).

Widtfeldt’s Complaint reflects that he is suing United States agencies and officers in their official capacities, and that the relief he requests is in the form of monetary damages and equitable relief that would restrain the assessment and collection of taxes. Therefore, the Defendants are entitled to immunity from suit with respect to Widtfeldt’s claims unless Widtfeldt can show that the Defendants unequivocally and expressly waived their immunity from suit. He has, however, failed to point to any authority, allege any facts, or present any evidence, that tends to show the Defendants waived their immunity from suit with respect to his claims.

Although, “[t]he United States has given its consent to be sued for refunds of federal taxes,” it has done so “in a carefully articulated statutory scheme,” Hansen v. United States, 248 F.3d 761, 763 (8th Cir. 2001), and Widtfeldt has failed to allege or present evidence suggesting that he complied with that carefully articulated statutory scheme. See id. at 764 (“[T]he Supreme Court held that in order for refund to be maintained, the taxpayer must have paid the disputed tax in full and have ‘duly filed’ an administrative claim for a refund.”); See also 26 U.S.C §§ 6511(a) (“Claim for . . . refund of an overpayment of any tax imposed by this title . . . shall be filed by the taxpayer within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later[.]”), 7422(a) (“No suit . . . shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected . . . until a claim for refund or credit has been duly filed with the Secretary[.]”)

Because sovereign immunity is jurisdictional in nature and Widtfeldt has failed to direct the Court to anything showing that the Defendants waived their sovereign immunity with respect to his claims, subject-matter jurisdiction is lacking. The Defendants’ Motion will be granted, and all claims the Plaintiff has asserted against the Defendants will be dismissed with prejudice. The Court need not address the Defendants’ alternative grounds for dismissal. Accordingly,

IT IS ORDERED:

1. The Defendants’ Motion to Dismiss (Filing No. 6) is granted;

2. The Plaintiff’s Complaint (Filing No. 1) is dismissed with prejudice; and

3. A separate Judgment will be entered.

Dated this 5th day of August, 2013.
BY THE COURT:
s/Laurie Smith Camp
Chief United States District Judge

Footnotes:

[1] The Defendants note that the only time Franklin Weber’s name appears in Widtfeldt’s Complaint is in the case caption. (Defs.’ Br., Filing No. 7 at 8 n.6.)

[2] The Defendants’ assert that the United States should be substituted for all of the named Defendants, because the IRS and the Treasury are agencies of the United States and cannot be sued in their own name and because the individual Defendants are being sued in their official capacities as IRS employees. (See id. at 3 n.3, 7-8.)

[3] See also 26 U.S.C. § 7421(a) (“[N]o suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.”); Widtfeldt v. Neb. State Bar Ass'n, No. 8:11CV367, 2012 WL 1247116, at *5 (D. Neb. Apr. 13, 2012), aff'd, No. 12-2176 (8th Cir. Feb. 5, 2013)

End of Footnotes

[LPC]

Final note:

Widtfeldt has three other appeals pending in the 8th Circuit, two of which are appeals from the Tax Court, and appear to be collection due process actions.

James Widtfeldt v. CIR, Court of Appeals Docket #: 14-2382, filed 06/12/2014, on appeal from the Tax Court, No. 4288-14L (decided 06/09/2014).

Estate of Gusteva Widtfeldt v. Commissioner of IRS, Court of Appeals Docket #: 14-2444, filed on 06/18/2014, on appeal from the Tax Court, No. 4745-14L.

I may look up the Tax Court decisions later, but I'm sure it's just more of the same.

[notorial dissent]

I don't know, maybe it's just me, but it seems like all his stuff reads almost identically. It has all certainly gotten the same results in court.

[LPC]

I don't know, maybe it's just me, but it seems like all his stuff reads almost identically. It has all certainly gotten the same results in court.

The IRS and the Tax Court are finally beginning to realize the same thing.

The last two cases he filed in Tax Court, Nos. 4288-14L and No. 4745-14L, were both dismissed because they were deemed to be "duplicative" of another petition previously filed, No. 005604-14L, which is still pending. (And which seems to have a real lawyer involved. Wayne Robert Johnson of Los Angeles?) So Widtfeldt is appealing his right to file duplicative actions. (Also, he failed to file timely responses to the motions to dismiss.)

And the two cases he filed before that, Nos. 016502-12L and 010242-12L, were both dismissed for lack of jurisdiction, because the IRS had not yet made a determination on a collection action. And Widtfeldt appealed those orders also (and lost, of course).

The guy seems to be flailing wildly, throwing anything he can find against the wall, hoping something will stick.

[notorial dissent]

I think it is fairly obvious now why they guy lost his license to practice law if this is any indication of his expertise. I am also beginning to think he needs to have his wiring checked as there seems to be some severe problems there as well. I'm not altogether sure he could pass a competency hearing if it came to it.

[LPC]

Widtfeldt has tried again, this time in the US Court of Federal Claims, which dismissed his claim on jurisdictional grounds, finding that he had already litigated the same estate tax issues in Tax Court. (To me, that's a decision on the merits of res judicata, and not jurisdictional, but I often disagree with the federal courts use of the word "jurisdiction.")

I'm not going to bother to post the whole opinion, but those who are curious can view it through the court's website.

James Widtfeldt v. United States, No. 14-008T (US Ct. Fed. Cls. 7/2/2015).

[operabuff]

Widtfeldt has tried again, this time in the US Court of Federal Claims, which dismissed his claim on jurisdictional grounds, finding that he had already litigated the same estate tax issues in Tax Court. (To me, that's a decision on the merits of res judicata, and not jurisdictional, but I often disagree with the federal courts use of the word "jurisdiction.")

No. 14-008T (US Ct. Fed. Cls. 7/2/2015).

I don't see that there's much room for disagreement - section 6512 is a jurisdictional statute which prevents the CFC and district courts from hearing refund cases when the Tax Court has previously considered (or is currently considering) the matter. The court has to have jurisdiction before it can consider a merits based defense like res judicata.

It's all pretty much moot - how many possible ways can Widtfeldt lose?

1. The court doesn't have jurisdiction.

2. If it did have jurisdiction, he'd lose on res judicata.

3. If it did have jurisdiction and didn't apply res judicata, he'd lose because his arguments are frivolous.

[fortinbras]

I have tried to track down citations for all the Widtfeldt decisions mentioned:

1. The first one, Widtfeldt v. Commissioner of Internal Revenue (hereafter CIR), Tax Court, 5/13/11, I cannot find anywhere but it clearly existed and was affirmed by ...
2. Widtfeldt v. CIR (8th Cir. 4/25/2012), 469 Fed.Appx 511, 109 AFTR2d 1947.

3. Widtfeldt v. Ponte (D.Neb. 8/12/2012) 110 AFTR2d 5648, 2012 US Tax Cases ¶ 50529 and this was affirmed by ...
4. Widtfeldt v. Ponte (8th Cir. 5/8/2012) 504 Fed.Appx 549, 111 AFTR2d 1930.

5. Widtfeldt v. CIR (D.Neb 9/5/2013) 113 AFTR2d 2642, which was affirmed by ...
6. Widtfeldt v. CIR (8th Cir. 6/16/14) 565 Fed.Appx 577, 113 AFTR2d 2643.

The Federal Claims decision issued three days ago, on July 2, can also be read at:
http://law.justia.com/cases/federal/dis ... /29207/23/

Reliable sources made clear that in his name the combination of "dt" occurs twice, never "td", although his name gets misspelled in the body of the some decisions. Trying to find additional cases listed by his misspelled name crapped out.

PLEASE if anyone knows a publication, or website, with the text of that first decision (Tax Ct, May 13, 2011), PLEASE tell me where to find it!

[operabuff]

It looks to be a bench opinion - so it won't appear in any reporter.

Here's a link to the text from the Tax Court's website:

https://www.ustaxcourt.gov/UstcDockInq/ ... ID=5509673

[fortinbras]

I am very grateful.
Though you may not believe me, this particular decision did not come up for me when I put the name in the Tax Court website search engine. I am grateful you gave me the exact URL.

I will add that Widtfeldt seems to have gotten into trouble by trying to shield his own inheritance from the inheritance taxes AFTER he inherited it. That's a bit like trying to turn scrambled eggs into sunny-side up. His parents should have done some estate planning (with a better lawyer than James) while they were alive. The estate tax (the inheritance tax) is actually spoken of, by lawyers, as a "voluntary" tax - because there are several clear options for the testator to minimize or avoid the estate tax in contriving ways to transfer the estate to his intended heir, so neglecting these options is a voluntary act that will subject the estate to taxation.

[JamesVincent]

(with a better lawyer than James)

Heh?

[fortinbras]

with a better lawyer than their son, James Widtfeldt,.....

[grixit]

IANAL, but when i did some reading on family trusts, it seemed to me that given how easily you can avoid or at least severely minimize inheritance taxes by forming one, it seemed almost as if the purpose of the tax was to encourage the forming of trusts.

[LPC]

I will add that Widtfeldt seems to have gotten into trouble by trying to shield his own inheritance from the inheritance taxes AFTER he inherited it. That's a bit like trying to turn scrambled eggs into sunny-side up. His parents should have done some estate planning (with a better lawyer than James) while they were alive.

My recollection of the pleadings I read is that Widefeldt had valuation issues about the farmland his parents owned, which led him to some very weird allegations about Lyme's disease.

The estate tax (the inheritance tax) is actually spoken of, by lawyers, as a "voluntary" tax - because there are several clear options for the testator to minimize or avoid the estate tax in contriving ways to transfer the estate to his intended heir, so neglecting these options is a voluntary act that will subject the estate to taxation.

Something I know something about.

In the long run, yes.

In the short run, no.

I can go into the details in you want, but there is no silver bullet. Yes, you can pretty much avoid the federal estate tax if you've got 20-30 years to work on it, but if you've got 5-10 years to work on it, you're dead meat (literally as well as figuratively).

[LPC]

IANAL, but when i did some reading on family trusts, it seemed to me that given how easily you can avoid or at least severely minimize inheritance taxes by forming one, it seemed almost as if the purpose of the tax was to encourage the forming of trusts.

Not sure what you mean by "family trusts," but if you're talking about what have been known as "bypass trusts" or "credit shelter trusts," the tax savings were pretty much eviscerated by the "portability" of the federal estate tax unified credit, allowing the "deceased spousal unused exclusion amount" to be inherited by a surviving spouse, and so reducing the need for trusts in many estate plans, that was introduced in the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 and made permanent by the American Taxpayer Relief Act of 2012.

[grixit]

I mean the kind of trust such that there is no one person who owns major assets, such as a house, separately, which then pass on to the others when they die.

[Arthur Rubin]

I mean the kind of trust such that there is no one person who owns major assets, such as a house, separately, which then pass on to the others when they die.

My recollection is that it doesn't help. It depends on the details of the trust whether moving assets or assigning income to the trusts is a nullity for estate tax purposes, or triggers gift tax reporting.

This is a close to a professional opinion as you'll find on this site....

[LPC]

I mean the kind of trust such that there is no one person who owns major assets, such as a house, separately, which then pass on to the others when they die.

My recollection is that it doesn't help. It depends on the details of the trust whether moving assets or assigning income to the trusts is a nullity for estate tax purposes, or triggers gift tax reporting.

That is correct.

If you take property you own and transfer it to a trust, but reserve the income from the property or the use of the property, the property is still subject to federal estate tax at death under IRC section 2036. (Even states that impose inheritance taxes separate from the federal estate tax, such as Pennsylvania, have similar rules, because otherwise the tax would be too easy to avoid.)

And the initial transfer would trigger gift tax reporting, because the retention of the income or use of the property is considered to have zero value for federal gift tax purposes under IRC section 2702. So the trust accomplishes nothing because you've made a taxable gift and the property is still subject to estate tax. (But there is no double tax, because there are estate tax rules that retroactively nullify the gift after the donor dies with the gift still part of the taxable estate, so there would--for example--be a credit for any gift tax paid.)

There is an exception for a gift of a residence to a "qualified personal residence trust" (or QPRT), but that only creates a gift tax discount. The trust is for a term of years, and the gift to the remaindermen gets a discount based on current interest rates and the length of the trust. If you outlive the trust, you're homeless because the house passes to the remaindermen, but if you die during the term of the trust then you've accomplished nothing because the house is still part of the taxable estate under section 2036. So the goal is to figure out a term of years that ends the day before you die.

Now, a parent can set up a trust for a child for life, so that there is no tax on the trust upon the child's death, but even that might be subject to federal generation-skipping tax. Or, the trust turns out to be a waste of time and money because there wouldn't have been any tax at the child's death even if the child had gotten the inheritance outright.

So, as I said before, the federal estate tax can be avoided given enough time, but it's not so easy to do in the short run.