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Von Erdmannsdorff v. Indiana Department of State Revenue

Tax Court of Indiana

June 3, 2016

JOHN AND SYLVIA VON ERDMANNSDORFF, Petitioners,
v.
INDIANA DEPARTMENT OF STATE REVENUE, Respondent

          ATTORNEYS FOR PETITIONERS: RANDAL J. KALTENMARK, ZIAADDIN MOLLABASHY, BARNES & THORNBURG LLP, Indianapolis, IN.

         ATTORNEYS FOR RESPONDENT: GREGORY F. ZOELLER, INDIANA ATTORNEY GENERAL; JESSICA R. GASTINEAU, ANDREW T. GREIN, KYLE C. FLETCHER, DEPUTY ATTORNEYS GENERAL, Indianapolis, IN.

Page 622

          ORDER ON RESPONDENT'S MOTION FOR SUMMARY JUDGMENT AND PETITIONERS' COUNTER-MOTION FOR PARTIAL SUMMARY JUDGMENT[1]

         Martha Blood Wentworth, Judge.

         John and Sylvia von Erdmannsdorff challenge the Indiana Department of State Revenue's assessments of adjusted gross income tax (AGIT) for the 2000 through 2009 tax years (" years at issue" ). The matter is currently before the Court on the Department's Motion for Summary Judgment and the von Erdmannsdorffs' Counter-Motion for Partial Summary Judgment.[2] The Court consolidates and restates the issues as follows:

I) Whether the von Erdmannsdorffs rebutted the presumption of correctness afforded to the Department's best information available (BIA) assessments; and if so,
II) Whether the Department erred in calculating the von Erdmannsdorffs' Indiana adjusted gross income by combining the gross receipts but failing to account for the additional business expense deductions.

         Upon review, the Court finds in favor of the von Erdmannsdorffs.

         FACTS AND PROCEDURAL HISTORY

         During the years at issue, the von Erdmannsdorffs were Indiana residents and thus were required to report their annual incomes and losses on Indiana income tax returns. (See, e.g., Pet'rs' Des'g Evid., App. 1, Stip. Facts ¶ 18.) Mrs. von Erdmannsdorff did not work outside of the couple's home. (Pet'rs' Des'g Evid., App. 6, Ex. 4-P ¶ 5.) Mr. von Erdmannsdorff, however, owned and operated a sole proprietorship, known as " Von's Shops," and a real property rental business. (See Pet'rs' Des'g Evid., Apps. 1 and 6, Stip. Facts ¶ 1, Ex. 4-P ¶ 7.)

         Between 2000 and 2006, Von's Shops conducted its business from two separate sites that were located on the same street in West Lafayette, Indiana. (See Pet'rs' Des'g Evid., App. 6, Ex. 4-P ¶ 6.) One site, which was comprised of a single building, sold comic books and rented VHS movies. (See Pet'rs' Des'g Evid., App. 6, Ex. 4-P ¶ ¶ 6, 9, 11.) The other site, which consisted of the first floor, basement, and attic of four interconnected buildings, sold new and used books, music in vinyl and CD formats, VHS and DVD movies, beads, greeting cards, and a variety of other items. (See Pet'rs' Des'g Evid., Apps. 1, 6, and 13, Stip. Facts ¶ 2, Ex. 4-P ¶ 6, Ex. 11-P(H).) This site also offered VHS and DVD movies for rent from 2006 to 2009. (See Pet'rs' Des'g Evid., Apps. 1 and 6, Stip. Facts ¶ 2, Ex. 4-P ¶ ¶ 6, 11.)

         Mr. von Erdmannsdorff's rental business was comprised of a single commercial building and one or more buildings that

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contained four residential apartment units. (See Pet'rs' Des'g Evid., App. 6, Ex. 4-P ΒΆ 7.) In operating this business, Mr. von Erdmannsdorff leased the properties to his tenants, but did not provide any additional services in connection with those ...


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