Sullivan v. United States
128 Fed. Cl. 556
| Fed. Cl. | 2016Background
- James D. Sullivan, sole owner of B&N Properties of Pender, received proceeds from multiple June 1, 2006 real-estate sales and did not file a 2006 tax return, expecting like‑kind exchange treatment.
- The IRS prepared a substitute return and assessed 2006 tax liability; after audit, the final assessment for 2006 was $244,552 plus interest and penalties; official account showed $196,463.82 still owed when suit was filed.
- $45,000 in escrow funds originally paid to Sullivan were distributed to the United States after an interpleader action in federal district court and credited to Sullivan’s tax account.
- Sullivan sued in the Court of Federal Claims seeking (1) a refund of the $45,000 and (2) an injunction preventing IRS collection of his 2006 taxes; he later withdrew an unlawful‑seizure claim.
- The Government moved to dismiss for lack of subject‑matter jurisdiction, arguing Sullivan had not fully paid the tax and had not exhausted administrative refund remedies; the Court considered whether section 7422 and other law permit jurisdiction and relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Court has jurisdiction over Sullivan's tax refund claim | Sullivan sought return of $45,000 credited to IRS and implied a refund claim | Sullivan has not fully paid the assessed 2006 tax and did not file an administrative refund claim as required by 26 U.S.C. § 7422 | Dismissed for lack of jurisdiction: plaintiff had not paid in full or pursued administrative remedies |
| Whether the Court may enjoin IRS collection of taxes | Sullivan requested injunctive relief to stop collection of 2006 tax balance | IRC bars suits to restrain assessment or collection; Court of Federal Claims lacks authority to enjoin IRS collections | Injunctive relief denied for lack of jurisdiction under 26 U.S.C. § 7421 |
| Whether a money‑mandating source supports a money damages claim | Plaintiff sought money damages (refund) implicitly under tax refund scheme | Government: only § 7422 supplies money‑mandating authority and its prerequisites were unmet | No money‑mandating source applicable because statutory preconditions (payment/administrative claim) were not satisfied; jurisdiction lacking |
| Whether equitable relief (tolling or other) is available absent a money judgment | Sullivan requested tolling and other equitable relief | Without a valid money claim against the United States, Court has no jurisdiction to grant equitable relief | Equitable requests denied because no cognizable money claim existed |
Key Cases Cited
- Flora v. United States, 357 U.S. 63 (establishes full‑payment and administrative claim prerequisites for tax refund suits)
- United States v. Clintwood Elkhorn Mining Co., 553 U.S. 1 (Section 7422 is the statutory scheme governing tax refund suits)
- Ledford v. United States, 297 F.3d 1378 (payment in full is prerequisite to refund claim)
- RadioShack Corp. v. United States, 566 F.3d 1358 (limits on courts’ authority to enjoin tax assessment/collection)
- RHI Holdings, Inc. v. United States, 142 F.3d 1459 (Tucker Act jurisdictional principles requiring separate money‑mandating source)