Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Wheeler v. United States

United States District Court, E.D. Kentucky, Northern Division, Ashland

July 13, 2015

TIMOTHY WHEELER, Plaintiff,
v.
UNITED STATES OF AMERICA, Defendant.

MEMORANDUM OPINION AND ORDER

HENRY R. WILHOIT, Jr., District Judge.

This matter is before the Court upon Defendant United States' Motion for Partial Summary Judgment [Docket No. 33]. The matter has been fully briefed by the parties [Docket Nos. 33-1, 41 and 44]. For the reasons set forth herein, the Court finds that the Defendant is entitled to judgment to judgment as a matter of law with regard to the tax periods ending June 30, 2008, September 30, 2008, and December 31, 2008.

I.

In late 2006, Plaintiff Timothy Wheeler, along with several other individuals purchased a failing ambulance company, Portsmouth Ambulance Incorporated. [Complaint, Docket No, 1, ¶¶ 10 and 14]. Plaintiff initially invested $480, 000 and owned approximately 20% of its available shares. Id. at ¶ 17. Plaintiff served as the company's Secretary until August 2007, when he became its President. Id. at ¶ 28. Pursuant to Section 5.03 of the Portsmouth Ambulance Regulations, as President, Plaintiff possessed significant authority of the business:

The president shall be the chief executive officer of the Corporation and shall have active executive management of the operations of the Corporation, subject, however, to the control of the Board of Directors and shall have full authority to execute powers of attorney appointing other corporations, partnerships or individuals as agents of the Corporation, execute contracts on behalf of the Corporation, and shall cause the Corporate Seal of the Corporation to be affixed to any instrument requiring it. The President shall preside at all meetings of shareholders and discharge all the duties that devolve upon a presiding officer, and perform such other duties as may be prescribed from time to time by the Board of Directors or the Regulations.

[Docket No. 33-11, PAI Regulations].

By the spring of 2008, during Plaintiff's tenure as President, the company was in financial distress. He sought to alleviate the company's cash flow problem by personally loaning it approximately $100, 000. [Deposition of Timothy Wheeler, Docket No. 33-35, pg. 35]. Plaintiff persuaded the company's Secretary, Sriharsha Velury, to loan an additional $100, 000. [Deposition of Sriharsha Velury, Docket No. 33-38, pg. 48-49].

On October 27, 2008, the Government filed a federal tax lien against Portsmouth Ambulance for the payroll tax periods ending March 31, 2008, and June 30, 2008, in the amount of $356, 806.00. [Docket No. 1, ¶ 22].

The record is somewhat unclear as to when Plaintiff became aware that Portsmouth Ambulance had not paid accrued payroll taxes. Viewing the facts as most favorable to the non-moving party, in this instance, Plaintiff, it is certain that he knew of this failure by the end of 2008. [Docket No. 33-35, pg. 29]. At his deposition, Plaintiff testified that, in his view, he had only two options: (1) "shut the company down, take the revenue and pay the payroll taxes" or (2) "sell the company." Id. He chose the latter. He stated:

At the point when I was told they had to pay payroll taxes, and Medicare is basically not paying the company anymore, you know, back then, the decisions were: We have no revenue. How do I preserve 125 jobs and shareholder value? It had nothing to do with payroll taxes.

Id. at p. 30.

Having opted to sell the company, he took no meaningful action to ensure tax compliance. Plaintiff admitted that he declined to use his authority as president to write checks to cover the past due taxes. Id. at 120. Nor did he follow up with the company's accountant to make sure employment taxes were being paid. Id.

On January 6, 2009, the Government filed a second federal tax lien against Portsmouth Ambulance, this time for the payroll tax periods ending December 31, 2000, and September 30, 2002, and corporate return form 1120 for tax year 2005, in the amount of $222, 079.68, all as an "alter ego" of Urgent Care. [Docket No. 1, ¶ 23]. On February 9, 2009, the Government filed a third federal tax lien against Portsmouth Ambulance for taxes in the amount of $36, 382.51 for the tax period ending December 31, 2005. Id. at ¶ 24.

Despite its fiscal problems, Portsmouth Ambulance continued to operate until mid-2009. [Docket No. 1 at ¶ 30]. In the first three months of 2009, it paid over $300, 000 to its creditors, including $7, 000 to Plaintiff, as a partial repayment for his loan. [Docket No. 33-33, pg. 78 and 122], However, the taxes owing remained unpaid.

Although Plaintiff testified that he was "consumed" with finding a buyer for the company, however, a sale was never finalized. [Docket No. 33-35, pg. 29].

In April 2009, minority shareholders filed a derivative suit naming Plaintiff as defendant, and alleging that he had breached his fiduciary duties to the shareholders of Portsmouth Ambulance. [Docket No. 1, ¶ 26]. Plaintiff formally resigned as Portsmouth Ambulance's president on June 10, 2009. Id. at ¶ 28.

As a result of outstanding bank loans that could not be paid, on June 18, 2009, the bank seized Portsmouth Ambulance's remaining assets and sold it for $1 million. Id. at ¶¶ 28-31. Ultimately, $636, 587.40 went to the IRS. Id. at ¶ 32. This was distributed by the IRS as follows: Portsmouth Ambulance's liability for miscellaneous penalty in the amount of $38, 420.97; Portsmouth Ambulance's payroll tax liability for March 31, 2008, in the amount of $114, 775.19, which constituted a "non-trust fund" payment; Portsmouth Ambulance's payroll tax liability for June 30, 2008, in the amount of $59, 805.00 which constituted a "non-trust fund" payment; Portsmouth Ambulance's payroll tax liability for September 30, 2008, in the amount of $49, 575.00, which constituted a "non-trust fund" payment; Portsmouth Ambulance's payroll tax liability for December 31, 2008, in the amount of $40, 242.00, which constituted a "non-trust fund" payment; Urgent Care's payroll tax liability for December 31, 2000, in the amount of $110, 132.04; Urgent Care's payroll tax liability for September 30, 2002, in the amount of $140, 144.39; and finally, $83, 492.81 for Urgent Care's liability shown on form 1120 for tax year ending 2005. Id. In addition to these funds taken from the bank's sale of Portsmouth Ambulance, the IRS issued an assessment against Plaintiff personally in the amount of $451, 133.96. Id. at ¶ 33. This was the alleged "Trust Fund Portion" of Portsmouth Ambulance's tax liability that remained after the bank's sale of Portsmouth Ambulance, and it related to all four quarters of 2008. Id. ¶ 33. The IRS issued an additional assessment against Plaintiff in the amount of $32, 505.54 as a trust-fund recovery penalty for the Portsmouth Ambulance employment taxes for the quarterly period ending June 30, 2009. Id. at ¶ 54. Thus, the total assessments made against Plaintiff were $483, 639.50.

Plaintiff filed this civil action seeking an abatement of taxes wrongfully assessed against him in the amount of $483, 639.50. Defendant, United States of America filed a counterclaim, alleging that he is liable for the taxes of Portsmouth Ambulance, Inc. for employment taxes accruing from the four quarterly ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.