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Popovich v. Indiana Dept. of State Revenue

Indiana Tax Court

September 18, 2014

NICK POPOVICH, Petitioner,
v.
INDIANA DEPARTMENT OF STATE REVENUE, Respondent

Page 406

ORDER ON PETITIONER'S MOTION FOR TRIAL RULE 37 SANCTIONS, INCLUDING JUDGMENT AND FEES.

FOR PETITIONER: JAMES K. GILDAY, GILDAY & ASSOCIATES, P.C., Indianapolis, IN.

FOR RESPONDENT: GREGORY F. ZOELLER, INDIANA ATTORNEY GENERAL; JOHN P. LOWREY, DEPUTY ATTORNEY GENERAL, Indianapolis, IN.

OPINION

Page 407

Martha Blood Wentworth, Judge.

This matter concerns Nick Popovich's motion for default judgment, costs, and attorney's fees as sanctions for the Indiana Department of State Revenue's purported spoliation of evidence and discovery abuses. The Court denies Popovich's motion.

BACKGROUND FACTS

On January 10, 2005, Popovich signed his 2003 Indiana Full-Year Resident Individual Income Tax Return, placed it with a mailing insert into an envelope, sealed the envelope, and directed a temporary employee to mail it to the Department. (See Pet'r Mot. Trial Rule 37 Sanctions, Incl. J. & Fees (" Pet'r Mot. Sanctions" ), Ex. A ¶ ¶ 7-8, Ex. B at 2-6.) Popovich expected the employee to mail the return certified, return receipt requested, but she sent it through the regular U.S. mail. (See Pet'r Mot. Sanctions, Ex. A ¶ 9.)

Sometime that same month, Popovich's ex-wife directed her employee to mail her 2003 Indiana Full-Year Resident Individual Income Tax Return to the Department.[1] (See Pet'r Mot. Sanctions, Ex. C ¶ 6, Ex. D ¶ ¶ 2-3.) On February 1, 2005, the employee mailed the return to the Department certified, return receipt requested, number 7001 2510 0004 5406 1415. (See Pet'r Mot. Sanctions, Ex. D ¶ 3.) The employee subsequently superimposed a copy of the return receipt number onto a copy of the return and mailed that document to Popovich's ex-wife. (See Pet'r Mot. Sanctions, Ex. C ¶ 7, Ex. D ¶ 5.)

Thereafter, the Department audited Popovich. On January 28, 2008, the Department issued Proposed Assessments against him for additional income tax, interest, and penalties for the 2003 through 2005 tax years. Popovich filed a protest. During the Department's protest hearing on March 27, 2009, Popovich asked to see his 2003 transmittal envelope and certain other documents because he believed that the 2003 Proposed Assessment was untimely and thus invalid. (See Pet'r Mot. Sanctions at 3-4.) The hearing officer agreed to notify Popovich once the envelope was retrieved from storage. (See Pet'r Mot. Sanctions at 4.)

On April 27, 2009, Popovich sent a letter to the hearing officer inquiring about the retrieval of his 2003 transmittal envelope, but the hearing officer did not respond. (See Pet'r Reply Mot. Compel, Ex. R at 3; Pet'r Mot. Sanctions at 4.) The Department issued a Letter of Findings on August 3, 2010, explaining that the 2003 Proposed Assessment was issued timely because Popovich's 2003 transmittal envelope showed that his return was mailed on February 1, 2005. (See Pet'r Pet., Ex. A at 4; Pet'r Reply Mot. Compel, Ex. R at 3.)

On October 4, 2010, Popovich initiated an original tax appeal that challenged, among other things, the timeliness of the Department's 2003 Proposed Assessment against him. (See Pet'r Pet. ¶ ¶ 10-13.) Popovich subsequently served the Department with his first set of discovery requests, specifically seeking the production of his 2003 through 2005 transmittal envelopes. (See Pet'r Mot. Compel, Ex. A at 58-60.) On July 8, 2011, the Department produced photocopies of a mailing insert and a transmittal envelope bearing the

Page 408

certified mailing number of 7001 2510 0004 5406 1415 indicating a February 1, 2005, mailing date. (See Pet'r Mot. Sanctions, Ex. E.) In addition, the Department explained that it could not produce Popovich's 2004 and 2005 transmittal envelopes because it did not have them.[2] (See Pet'r Mot. Compel, Ex. A at 58-60.)

On August 26, 2011, Popovich asked the Department to arrange a time for him to inspect the originals of his 2003 through 2005 Indiana tax returns and their transmittal envelopes because he suspected that the Department had produced his ex-wife's 2003 transmittal envelope in error. (See Pet'r Mot. Compel, Ex. B at 1, 8-9; Hr'g Tr. at 41-42, 49.) Popovich did not inform the Department of his suspicion, but instead attempted to " get to the bottom" of things by using different discovery tools. (See Hr'g Tr. at 42-46.) As a result, about two weeks later, Popovich sent the Department a letter to renew his request to inspect. (See Pet'r Mot. Compel, Ex. D at 1.) The Department responded on September 26, 2011, explaining that Popovich could inspect the original documentation when it had finished collecting it. (See Pet'r Mot. ...


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