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    United States v. Foster, 4th Cir. (2002)

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    The United States Court of Appeals for the Fourth Circuit issued an unpublished opinion affirming the district court's judgment ordering Crystal Foster and Robert Foster to return an erroneous tax refund issued by the IRS. The IRS had issued Crystal Foster a $500,000 tax refund in error after she claimed a $500,000 tax payment was made on her behalf, but no such payment was actually made. Crystal Foster distributed portions of the refund, including $100,000 to her father Robert Foster. The United States sued under 26 U.S.C. § 7405 to recover the erroneous refund. The district court found for the United States, and the Fourth Circuit affirmed, finding that the United States was entitled to recover the refund in district court

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    United States v. Foster, 4th Cir. (2002)

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    The United States Court of Appeals for the Fourth Circuit issued an unpublished opinion affirming the district court's judgment ordering Crystal Foster and Robert Foster to return an erroneous tax refund issued by the IRS. The IRS had issued Crystal Foster a $500,000 tax refund in error after she claimed a $500,000 tax payment was made on her behalf, but no such payment was actually made. Crystal Foster distributed portions of the refund, including $100,000 to her father Robert Foster. The United States sued under 26 U.S.C. § 7405 to recover the erroneous refund. The district court found for the United States, and the Fourth Circuit affirmed, finding that the United States was entitled to recover the refund in district court

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    Filed: 2002-12-03 Precedential Status: Non-Precedential Docket: 02-1086

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    The United States Court of Appeals for the Fourth Circuit issued an unpublished opinion affirming the district court's judgment ordering Crystal Foster and Robert Foster to return an erroneous tax refund issued by the IRS. The IRS had issued Crystal Foster a $500,000 tax refund in error after she claimed a $500,000 tax payment was made on her behalf, but no such payment was actually made. Crystal Foster distributed portions of the refund, including $100,000 to her father Robert Foster. The United States sued under 26 U.S.C. § 7405 to recover the erroneous refund. The district court found for the United States, and the Fourth Circuit affirmed, finding that the United States was entitled to recover the refund in district court

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    44 views6 pages

    United States v. Foster, 4th Cir. (2002)

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    Scribd Government Docs
    The United States Court of Appeals for the Fourth Circuit issued an unpublished opinion affirming the district court's judgment ordering Crystal Foster and Robert Foster to return an erroneous tax refund issued by the IRS. The IRS had issued Crystal Foster a $500,000 tax refund in error after she claimed a $500,000 tax payment was made on her behalf, but no such payment was actually made. Crystal Foster distributed portions of the refund, including $100,000 to her father Robert Foster. The United States sued under 26 U.S.C. § 7405 to recover the erroneous refund. The district court found for the United States, and the Fourth Circuit affirmed, finding that the United States was entitled to recover the refund in district court

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    of 6

    UNPUBLISHED

    UNITED STATES COURT OF APPEALS


    FOR THE FOURTH CIRCUIT
    UNITED STATES OF AMERICA,
    Plaintiff-Appellee,

    v.
    CRYSTAL FOSTER; ROBERT FOSTER,
    Defendants-Appellants,
    and
    REBECCA CARPENTER; PAMELA MIFFIN;
    1ST ADVANTAGE FEDERAL CREDIT
    UNION; WACHOVIA BANK, N.A.;
    MERCEDES-BENZ CREDIT
    CORPORATION,
    Defendants.

    No. 02-1086

    Appeal from the United States District Court


    for the Eastern District of Virginia, at Richmond.
    Richard L. Williams, Senior District Judge.
    (CA-01-783-3)
    Argued: October 31, 2002
    Decided: December 3, 2002
    Before WILKINSON, Chief Judge, and LUTTIG and
    MOTZ, Circuit Judges.

    Affirmed by unpublished per curiam opinion.


    COUNSEL
    ARGUED: David Lassiter, Jr., JEFFERSON & LASSITER, Richmond, Virginia, for Appellants. Gretchen M. Wolfinger, Tax Divi-

    UNITED STATES v. FOSTER

    sion, UNITED STATES DEPARTMENT OF JUSTICE, Washington,


    D.C., for Appellee. ON BRIEF: Eileen J. OConnor, Assistant Attorney General, Gilbert S. Rothenberg, Paul J. McNulty, United States
    Attorney, Tax Division, UNITED STATES DEPARTMENT OF
    JUSTICE, Washington, D.C., for Appellee.

    Unpublished opinions are not binding precedent in this circuit. See


    Local Rule 36(c).

    OPINION
    PER CURIAM:
    The Internal Revenue Service ("IRS") issued Crystal Foster a sizeable refund in the year 2001. Shortly thereafter, the IRS concluded
    that the refund was erroneous and brought suit in federal district court
    to recover the refunded amount. The district court held that the refund
    was in error and ordered Crystal Foster, and others who it found had
    received portions of the refund from Crystal, to return the funds.
    Crystal, and her father Robert, appealed. Finding no error in the rulings of the district court, we affirm.
    I.
    The testimony and evidence at the preliminary injunction hearing
    and at the bench trial established the following. Around July of 2001,
    Crystal Foster filed her income tax return for tax year 2000. Crystals
    tax return reflected total income of $3429. On her return, Crystal also
    claimed that a $500,000 tax payment had been made on her behalf as
    described on her Form 2439. Her Form 2439 showed $500,000 in
    undistributed long-term capital gains from a registered investment
    company (RIC) or real estate investment company trust (REIT),
    although the RIC/REIT was not identified on the form. J.A. 140.
    Crystals return stated that the $500,000 should be refunded to her.
    The IRS sent a letter to Crystal requesting the name of the
    RIC/REIT. The letter was returned to the IRS with a notation on the

    UNITED STATES v. FOSTER

    bottom identifying the RIC as "US Department of Treasury, Black


    Capital Investments." J.A. 137. Subsequently, on October 29, 2001,
    the IRS issued a United States Treasury check to Crystal in the
    amount of the requested refund of $500,000, plus $7534.95 in interest. Crystal received the check and proceeded to disburse portions of
    it to several others, including $100,000 to her father Robert Foster.
    Upon further investigation, the IRS realized that "Black Capital
    Investments" did not exist under the auspices of the United States
    Treasury, or otherwise. Neither had any RIC or REIT withheld
    $500,000 and paid that amount to the IRS on behalf of Crystal. Realizing its mistake, on November 20, 2001, the United States filed a
    complaint in federal district court seeking recovery of the funds from
    both Crystal and Robert, among others. The United States obtained a
    preliminary injunction to prevent the Fosters from dissipating the proceeds of the refund. The Fosters filed a motion to dismiss for lack of
    jurisdiction, which the district court denied. The district court also
    denied the Fosters motion for recusal. After a bench trial, the district
    court entered judgment in favor of the United States and ordered that
    the funds be returned. The Fosters appealed.
    II.
    On appeal, the Fosters argue that the district court erred in denying
    their motion to dismiss. Though the Fosters never specified the federal rule on which they were relying, their motion to dismiss was
    apparently one for lack of subject matter jurisdiction. We review de
    novo the denial of a motion to dismiss under Rule 12(b)(1). See Puryear v. County of Roanoke, 214 F.3d 514, 517 (4th Cir. 2000).
    The Fosters moved to dismiss on the ground that the United States
    failed to send them a notice of deficiency before commencing suit.
    This failure allegedly deprived the Fosters of the opportunity to challenge the assessment in Tax Court. The United States argues that it
    had a choice of mechanisms by which to recover the erroneous
    refund; it could either bring suit in district court pursuant to 26 U.S.C.
    7405, as it did here, or it could issue a notice of deficiency and pursue administrative collection procedures.
    The Fosters argument is wholly without merit. Section 7405
    states, in relevant part:

    UNITED STATES v. FOSTER

    (a) Refunds after limitation period.Any portion of a tax


    imposed by this title, refund of which is erroneously made,
    within the meaning of section 6514, may be recovered by
    civil action brought in the name of the United States.
    (b) Refunds otherwise erroneous.Any portion of a tax
    imposed by this title which has been erroneously refunded
    (if such refund would not be considered as erroneous under
    section 6514) may be recovered by civil action brought in
    the name of the United States.
    26 U.S.C. 7405. On its face, the statute clearly allows for the collection of an erroneous refund in district court. The only restriction on
    the ability of the United States to bring such a suit is the statute of
    limitations provided by section 7405(d), which is generally two years.
    See 26 U.S.C. 6532(b). In Singleton v. United States, 128 F.3d 833
    (4th Cir. 1997), we noted that the government can elect to collect in
    district court an erroneous refund through section 7405, provided it
    does so within the specified limitations period, or it can issue a notice
    of deficiency and pursue administrative collection procedures. Id. at
    837; see also OBryant v. United States, 49 F.3d 340, 342-43 (7th Cir.
    1995) ("There are two ways in which the IRS can recover an erroneous payment to a taxpayer. It can either file suit under 7405, the
    erroneous refund suit provision, or pursue the post-assessment collection procedures . . . ( 6303 notice and demand, followed by judicial
    and/or administrative action)." (footnote omitted)); Rushlight Automatic Sprinkler Co. v. United States, 294 F.2d 572, 573-74 (9th Cir.
    1961) (examining the predecessor statute to section 7405 and concluding that the government was entitled to maintain an action under
    that statute for recovery of an erroneous refund without first following
    the deficiency notice procedures). In this case, the United States opted
    to proceed under section 7405, and thus no notice of deficiency was
    required. Because the United States commenced suit well within the
    two year limitations period, the district court had subject matter jurisdiction over the case.
    III.
    The Fosters also challenge the sufficiency of the evidence at trial.
    In order for the United States to prevail in its section 7405 action

    UNITED STATES v. FOSTER

    against Crystal Foster, it had to establish: 1) that a refund of a sum


    certain was made, 2) that the recovery action was timely, and 3) that
    Crystal Foster was not entitled to the refund. See, e.g., United States
    v. Commercial Natl Bank of Peoria, 874 F.2d 1165, 1169 (7th Cir.
    1989). In addition, the United States was obliged to show that Robert
    was a transferee of Crystal in the amount of $100,000. This court may
    only set aside the district courts factual findings if they are clearly
    erroneous. Fed. R. Civ. P. 52(a).
    The Fosters do not challenge the district courts findings that the
    refund suit was timely, that the refund was erroneous, and that Robert
    Foster was a transferee of the alleged amount. They contend only that
    there was insufficient admissible evidence on which the court could
    find that Crystal received and cashed the refund check.
    The Fosters argument is once again without merit. The United
    States showed that the IRS issued an erroneous refund to Crystal Foster. See, e.g., J.A. 117-18 ("Q: And is there anything in those exhibits
    that shows that a refund was sent? A: Yes. In exhibit 2 there is an
    indication on 10 A 2001 that a hold was reversed and refund issued
    on 10/29/02 in the amount of $507,534.95. Q: Should that refund
    have been issued? A: No."). The United States adduced circumstantial
    evidence that Crystal Foster received and cashed the refund check.
    See J.A. 120 ("Q: But do you know if Mrs. Foster actually physically
    received a refund check from you? A: Refund was issued in her name,
    and it was cashed."). In addition, Crystal Fosters attorney, Mr. Lassiter, admitted the she had received the money. At the preliminary
    injunction hearing, Mr. Lassiter said that "she received the check for
    $500,000." J.A. 30; see also J.A. 29 (Lassiter: "They got the check
    and simply didnt leave it in the bank to sit. . . ."). The United States
    case was essentially uncontroverted, as the Fosters chose not to put
    on any probative evidence or witnesses at the preliminary injunction
    hearing or at the bench trial. Given the evidence presented, it cannot
    be said that the district courts factual conclusions were clearly erroneous.*
    *The Fosters also appeal the district courts denial of their motion for
    recusal. The Fosters do not assert any extrajudicial source of bias, and
    the remarks of the district court fall well short of displaying a "deepseated favoritism or antagonism that would make fair judgment impossible." Liteky v. United States, 510 U.S. 540, 555 (1994). We accordingly
    affirm the district courts denial of their motion.

    UNITED STATES v. FOSTER

    The judgment of the district court is affirmed.


    AFFIRMED

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