Pryde v. United States
15-878
| Fed. Cl. | Dec 15, 2017Background
- Marc and Lisa Pryde loaned Marc approximately $4.4 million to Michael Mastro across several promissory notes (2006–2008); Mastro made interest payments but later filed bankruptcy and was criminally indicted for bankruptcy-related fraud.
- Plaintiffs sought to deduct losses from the Mastro loans on their 2009 tax return as bad business debts (I.R.C. § 166) or theft losses (I.R.C. § 165), and to carry back a 5-year NOL to 2004 and carry forward to 2005, claiming $876,352 in refunds for 2004–2009 (2009 already resolved for $36,000).
- WHBAA (2009) expanded the 5-year NOL carryback for 2008–2009 NOLs and required a specific election statement filed by the due date for the taxpayer’s last taxable year beginning in 2009; Revenue Proc. 2009-52 prescribes the statement content and attachment requirements.
- Plaintiffs filed several amended 2009 returns in 2011 and another in 2013 asserting the losses; IRS records show the original 2009 return filed May 28, 2010 did not include the required 5-year carryback election.
- The Court held cross-motions for summary judgment and ruled that plaintiffs failed to timely file the required 5-year carryback election with their 2009 return and failed to timely file amended returns for 2004 and 2005, and therefore are not entitled to the claimed refunds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether bankruptcy/court findings bind the government here via claim or issue preclusion, judicial estoppel, or judicial notice | Pryde: prior bankruptcy/criminal proceedings establish Mastro’s fraud/insolvency and should preclude relitigation or bind the government | U.S.: government was not party to bankruptcy; doctrines inapplicable; judicial notice cannot be used for truth of other courts’ findings | Court: denied preclusion, judicial estoppel, and judicial notice requests — government not bound |
| Whether Pryde timely made the 5‑year NOL carryback election required by WHBAA/Rev. Proc. 2009‑52 | Pryde: accountant says the election was included with original 2009 return filed May 2010 | U.S.: IRS records show no election on the May 2010 return; plaintiffs’ copies are unsigned/undated and contradict earlier testimony | Court: held election was not timely filed; plaintiffs failed to overcome IRS records and testimony inconsistencies |
| Whether amended returns for 2004 and 2005 were timely filed to claim carrybacks | Pryde: contends returns were prepared/mailed timely (2004); seeks refunds for 2004 and 2005 | U.S.: IRS certified transcripts show amended returns filed April 18, 2011 (after deadline) | Court: held amended 2004 and 2005 returns untimely; plaintiffs failed to provide reliable evidence of timely filing |
| Whether plaintiffs are entitled to deductions as bad business debt or theft loss (merits) | Pryde: losses qualify as bad business debt or theft loss given Mastro’s fraudulent conduct | U.S.: disputes applicability and factual issues; also contends procedural defects bar relief | Court: did not reach merits because procedural defects (untimely election and amended returns) preclude recovery |
Key Cases Cited
- United States v. Clintwood Elkhorn Mining Co., 553 U.S. 1 (U.S. 2008) (jurisdiction/administrative refund claim requirement)
- Janis v. United States, 428 U.S. 433 (U.S. 1976) (taxpayer bears burden to prove amount of refund)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (summary judgment/genuine issue standard)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (U.S. 1986) (inferences on summary judgment)
- Parklane Hosiery Co. v. Shore, 439 U.S. 322 (U.S. 1979) (offensive collateral estoppel considerations)
- Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313 (U.S. 1971) (issue preclusion principles)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (moving party burden on summary judgment)
- Dana v. E.S. Originals, Inc., 342 F.3d 1320 (Fed. Cir. 2003) (elements for collateral estoppel)
- Cunningham v. United States, 748 F.3d 1172 (Fed. Cir. 2014) (claim preclusion standards)
- Phillips/May Corp. v. United States, 524 F.3d 1264 (Fed. Cir. 2008) (res judicata discussion)