The opinion of the court was delivered by: WOLIN
This case arises out of Harriet Malkin's ("plaintiff") challenge of the Internal Revenue Service's ("IRS") assessment of income taxes and penalties against her. The United States moves the Court to dismiss the case for lack of subject matter jurisdiction. The Court has decided this case without oral argument.
Plaintiff is fifty years old and resides in Upper Saddle River, New Jersey with her husband, Barry Malkin, of twenty-eight years. Barry Malkin is a certified public accountant. They have a son named Leo who is twenty-one years old. Plaintiff graduated from college with a degree in English. At the time of her marriage, plaintiff was working for McGraw-Hill. She started as a secretary and eventually rose to editor of college textbooks, including accounting and business-related books.
Plaintiff believes that the man is the breadwinner and that he should provide for his family. She thought that Barry fit that mold, and that he "is someone who provides and tries to take care of his family." (Pl. Dep. 134:11 to 135:3). Plaintiff's marriage, however, has been unhappy from the beginning because Barry did not tell her the truth regarding his financial situation and because he was a credit card junky who was heavily in debt. In fact, they received urgent letters from collection agents early in their marriage.
When they got married, they lived off his income, and she placed her pay checks in a savings account as security because she "was damned if he was going to have control over every last nickel" to pay his debts. Barry has and continues to make payments for the mortgage, maintenance of the house, life insurance, utilities, loans for plaintiff's car, and plaintiff's car insurance.
Prior to her marriage, plaintiff relied on her parents to prepare her income tax returns. Once she got married, she relied on Barry to prepare and file income tax returns for her because he was her husband, a certified public accountant, and a "professional tax preparer." From 1970 to 1980, plaintiff provided Barry with information about her income and expenses so that he could prepare joint tax returns. Plaintiff consented to and signed those returns, but she never reviewed them. She also contends that she signed numerous financial documents over the years without reviewing them.
In 1981 or 1982, plaintiff left McGraw-Hill because of a medical disability. At the time, her salary was approximately $ 15,000 per year. She now receives $ 7,100 per year in disability income. Plaintiff suffers from endogenous depression and is still under the care of a psychiatrist. Her mental condition may also be the cause of her numerous physical ailments. In 1985, plaintiff stayed in an institution for two months on account of her medical illness. During the tax years in question, plaintiff took anti-depression medications, including Tranxene and Nardil.
Between 1980 and 1992, Barry continued to prepare joint tax returns for himself and plaintiff. During that time, plaintiff provided Barry with lists detailing her income and expenses so that he could prepare the joint tax returns. From 1982 to 1992, Barry signed plaintiff's name to the joint tax returns because he was under a deadline and because plaintiff never asked to review them. According to plaintiff, she expressly told Barry not to sign her name to the joint tax returns. Plaintiff also was under the impression that she had no tax liability because she had limited income and excessive medical expenses.
During 1980 to 1992, Barry included plaintiff's income and expenses on the joint tax return, and he claimed her as an exemption. Plaintiff's income included her disability income from McGraw-Hill, income from a joint fund they maintained with Merrill Lynch, and plaintiff's free-lance editing business. Her expenses included medical costs, social security self-employment tax, interest paid by Barry on a car loan for plaintiff, interest for their mortgage, and charitable contributions.
Plaintiff estimates her assets to be worth $ 100,000. She obtained a large portion of her assets in 1989 when her mother passed away. Plaintiff's residence is worth approximately $ 400,000 to $ 430,000, and the remaining mortgage is $ 320,000.
Prior to 1993, plaintiff did not know that she had the option of filing a separate tax return under the category "married but filing separately." Plaintiff states that Barry never told her of that option, and that she learned about it on her own. In 1994, plaintiff began to file her own tax returns under married but filing separately.
Plaintiff first became aware that she and her husband had problems with the IRS in or around 1986. On January 14, 1993, plaintiff and Barry signed a stipulated decision in Barry and Harriet Malkin v. Commissioner (No. 33456-86). Subsequently, the U.S. Tax Court adopted the stipulated decision in which plaintiff and Barry admitted to having income tax deficiencies for tax years 1980 and 1981. She signed a similar stipulated decision for tax year 1982 (Barry and Harriet Malkin v. Commissioner (No. 9175-92)). Plaintiff asserts that Barry signed her name to pleadings in those cases without her authorization, knowledge, or consent.
In accordance with the first decision, the United States assessed $ 5,127.90 in income tax plus $ 15,985.01 in interest against plaintiff and Barry for tax year 1980. They did not pay that liability in full until January 1996. The United States also assessed $ 4,977.16 in income tax plus $ 13,332 in interest against them for tax year 1981. That liability was not paid in full until November 1996. As for tax year 1982, the United States assessed plaintiff and Barry $ 8,869.96 in income tax plus $ 18,405.90 in interest. That liability has not been fully paid, and an assessed balance remains of $ 21,040.48.
The United States has also made income, interest, and penalty assessments against plaintiff and Barry for tax years 1983 and 1986. Plaintiff and Barry have not fully paid those liabilities, and an assessed balance of $ 56,677.08 remains. Finally, the United States made interest and penalty assessments against plaintiff and Barry for tax years 1987 through 1992. Those liabilities have not been fully paid, and a balance of $ 76,044.11 remains.
On March 22, 1995, plaintiff filed Form 843, Claim for Refund and Request for Abatement, and Form 1040X, amended return, with the IRS requesting abatement or refund for tax years 1980, 1981, 1982, 1983, 1986, 1987, 1988, 1989, 1990, 1991, and 1992. On April 22, 1995, the IRS informed plaintiff that she did not have a deficiency for 1992. Despite that ruling, the IRS has persisted in serving levies to satisfy the unpaid balance for 1992. The IRS denied Barry Malkin's request for abatement for tax years 1988, 1990, and 1991. Plaintiff contends that the IRS did not act on her requests for abatement for those years because of Barry's application. The IRS has not acted on the remainder of plaintiff's requests.
On December 26, 1995, plaintiff filed a four-Count Complaint against the United States, and made an application for a temporary restraining order and preliminary injunction. In Count One, plaintiff requests a determination that the income tax assessments and the IRS's collection of those taxes for 1980 to 1983 and 1986 to 1992 should be declared the separate returns of her husband, not their joint returns, because she did not sign, prepare, authorize, or prepare them. Moreover, she asks the Court to determine that she has no liability for the outstanding balances. Count Two asks the Court to abate the civil penalties assessed against her for failing to file income tax returns on time for the years in question because she was ill and because her husband signed her name to avoid exacerbating her condition. In Count Three, plaintiff contends that she should not have to pay the taxes because she was an innocent spouse. Count Four seeks an injunction against the United States from collecting further money from plaintiff to satisfy the assessed taxes. Plaintiff also asks the Court to direct the IRS to release all federal tax levies and liens, to refund any money collected directly or indirectly from plaintiff, and to notify third parties that plaintiff is not subject to backup withholding.
The Court denied plaintiff's application for a temporary restraining order, and plaintiff later withdrew its request for a preliminary injunction because the two parties had entered into a "stand-still" agreement regarding certain investment securities.
Plaintiff contends that if the injunction is not issued, she will have no financial security; i.e, she will have no money to pay "predictable large expenses." According to her, those expenses include doctor bills, college tuition, and money to run the house. However, she admitted that she would not lose the ability ...