United States District Court, D. Massachusetts
For United States of America, Plaintiff: Wallace D. Dennis, LEAD ATTORNEY, U.S. Department of Justice, Washington, DC.
For James B. Hughes, Defendant: Amanda M. Baer, Mirick, O'Connell, DeMallie & Lougee, LLP, Westborough, MA; Kenneth C. Pickering, Mirick, O'Connell, DeMallie & Loungee, LLP, Worcester, MA.
For Massachusetts Department of Revenue, Defendant: Eileen Ryan McAuliffe, LEAD ATTORNEY, Massachusetts Department of Revenue, Litigation Bureau, Boston, MA.
For Jayne M. Hughes, Defendant: Robert S. White, LEAD ATTORNEY, Bourgeois White, LLP, Worcester, MA.
TIMOTHY S. HILLMAN, DISTRICT JUDGE.
The United States seeks a judgment against the Defendant James B. Hughes (" Hughes" ) for his 1999, 200, 2001, 2002, 2003, 2004 and 2006 federal income tax liabilities. In addition, they seek to establish federal tax liens on three properties belonging to Hughes and his sister Jayne Hughes who is also a defendant. They have moved for summary judgment against both. For the reasons set forth below, that motion is denied.
For the seven tax years in question Mr. Hughes elected not to file any federal income tax returns. This failure prompted the United States to file Certificates of Assessment, Payments, and Other Specified matters (" Certificates of Assessment" ) for each year in question. These Certificates of Assessment, the United States argues, are a substitute for tax returns, presumptive proof of the tax due and shift the burden of proving otherwise to the taxpayer. After the United States brought this lawsuit, Hughes proffered tax returns for the years in question. These tardy tax returns show a zero tax liability as opposed to the United States assessments of slightly more than $1,600,000.00. Because of the preclusive effect of the Certificates of Assessment, the United States refused to accept for filing Hughes' tax returns. In addition, Hughes commissioned the opinion of the accountant who prepared the returns to testify as an expert witness that Hughes owes no taxes. That witness, Patrick Crowley, prepared the late returns largely from two sources; brokerage records given to him by Hughes, and Jayne Hughes' tax returns which showed rental income from the three residential properties that Hughes owns jointly with Ms. Hughes . Hughes has submitted Crowley's opinion in the form of an affidavit in opposition to this motion.
The brokerage records are voluminous, approximately 750 pages, and some date
back to the mid-1990's. According to Hughes they are the original records that he received from the brokerage houses via United States mail. They were presented to the court in more or less chronological order and reflect purchases and sales of stocks and bonds from many brokerage houses. These records are significant to Hughes because they supply the cost basis for the stock sales. Hughes contends that the IRS prepared the substitute returns based in large part ...