TONY W. SMITH and SHIRLENA SMITH, Petitioners,
INDIANA DEPARTMENT OF STATE REVENUE, Respondent.
ATTORNEY FOR PETITIONERS: JAMES K. GILDAY GILDAY &
ASSOCIATES, P.C. INDIANAPOLIS, IN
ATTORNEYS FOR RESPONDENT: CURTIS T. HILL, JR. ATTORNEY
GENERAL OF INDIANA WINSTON LIN DEPUTY ATTORNEY GENERAL
ORDER ON PETITIONERS' MOTION FOR PARTIAL SUMMARY
Blood Wentworth, Judge.
Smith and Shirlena Smith have appealed, among other things,
the Indiana Department of State Revenue's assessments of
Indiana adjusted gross income tax (AGIT) for 2005 through
2007 and 2009 through 2014. The matter, currently before the
Court on the Smiths' Motion for Partial Summary Judgment
("Motion"), presents the following issue of first
impression: whether the Department's modifications to the
Smiths' AGIT liabilities for 2005 through 2007 (the
"years at issue") were limited to the modifications
made by the Internal Revenue Service (the "IRS") to
resolve the federal audit for those years. Upon review, the
Court finds that the Department's modifications were
limited to the final modifications made by the IRS to resolve
the federal audit for those years.
AND PROCEDURAL HISTORY
following facts are not in dispute. The Smiths timely filed
their federal income tax returns for 2005 through 2007,
reporting that they were professional gamblers with income
and deductions associated with that trade. (See
Pet'rs' Resp. Opp'n Resp't Mot. Partial Summ.
J. ("Pet'rs' Resp. Br.") at 4 (citing First
Jt. Stip. Facts ("Stip.") ¶¶ 3-5),
Confd'l Ex. A ¶ 5, Confd'l Exs. A-1 to A-3.) The
Smiths also filed Indiana nonresident income tax returns for
those years. (Pet'rs' Resp. Br. at 4 (citing Stip.
¶¶ 3-5), Confd'l Ex. A ¶ 6, Confd'l
Exs. A-4 to A-6.)
subsequently audited the Smiths' federal income tax
returns for the years at issue, examining their status as
professional gamblers. (See Resp't Mem. Supp.
Mot. Partial Summ. J. ("Resp't Br."), Ex. C at
50; Pet'rs' Resp. Br., Confd'l Ex. B ¶ 7,
Confd'l Ex. B-2.) The IRS reported its audit findings to
the Smiths by issuing a Revenue Agent Report
("RAR") for 2005 and 2006 on November 19, 2008, and
an RAR for 2007 on September 15, 2009. (See
Resp't Br., Ex. C at 50, Confd'l Ex. D ¶ 3,
Confd'l Ex. D-1 at 1359.) The Smiths' RARs were
accompanied by a "30-Day Letter" that provided the
time and manner for the Smiths to indicate to the IRS whether
they agreed or disagreed with the adjustments. (See
Resp't Br. at 6 (citing
("Sample 30-Day Letter")), Ex. C at 58.) The Smiths
disagreed with the adjustments on the RARs and initiated an
appeal with the IRS. (See Resp't Br., Ex. C at
January 21, 2011, the IRS executed the Smiths' Form
870-AD "Offer to Waive Restrictions on Assessment and
Collection of Tax Deficiency and to Accept
Overassessment," which settled the matter. (See
Resp't Br., Ex. C at 51, 54; Pet'rs' Resp. Br.,
Confd'l Ex. A ¶¶ 11(b), 12(b), Confd'l Ex.
A-10.) The settlement reflected adjustments to the
Smiths' federal tax liabilities for 2005 through 2007
that were contained on separate tax forms that accompanied
the Form 870-AD. (See Pet'rs' Resp. Br.,
Confd'l Ex. A ¶ 12(c)-(d), Confd'l Exs. A-11 to
years later, while investigating the Smiths' Indiana AGIT
liability for a different tax period, the Department learned
of the Smiths' federal audit for the years at issue.
(See Resp't Br., Confd'l Ex. D ¶ 3,
Confd'l Ex. D-1 at 1359.) The Department expanded its
audit to include the years at issue and ultimately adjusted
the Smiths' Indiana AGIT liabilities for 2005 through
2007 based on the federal adjustments in the RARs.
(See Resp't Br., Confd'l Ex. D ¶ 3,
Confd'l Ex. D-1.) On August 8, 2016, the Department
issued Proposed Assessments against the Smiths for the years
at issue. (Resp't Br., Confd'l Ex. A at 168-73.)
Smiths, believing that the Department's adjustments
should have reflected their Form 870-AD adjustments rather
than the adjustments in their RARs, amended their Indiana
income tax returns for the years at issue on September 12,
2016. (See Pet'rs' Des'g Evid. Supp.
Resp. Opp'n Resp't Mot. Partial Summ. J.
("Pet'rs' Des'g Evid.") ¶ 4, Stip.
¶¶ 3-4; Pet'rs' Resp. Br., Confd'l Ex.
A ¶ 19, Confd'l Ex. B ¶ 15.) On October 7,
2016, the Smiths protested the Department's Proposed
Assessments, and on November 29, 2017, the Department issued
a Letter of Findings denying their protest. (Pet'rs'
Des'g Evid. ¶ 4, Stip. ¶¶ 18, 22.)
January 8, 2018, the Smiths incorporated their claims
regarding the years at issue in a pending original tax
appeal. On January 11, 2019, the Smiths moved for
partial summary judgment. On February 20, 2019, the Court
held a hearing on the Smiths' Motion. Additional facts
will be supplied as necessary.
judgment is proper only when the designated evidence
demonstrates that no genuine issue of material fact exists
and the moving party is entitled to judgment as a matter of
law. Ind. Trial Rule 56(C). A genuine issue of material fact
exists when facts concerning an issue that would dispose of
the case are disputed or when undisputed facts support
conflicting inferences as to the ...