United States District Court, D. Connecticut
RULING ON CROSS-MOTIONS FOR SUMMARY JUDGMENT (DOC.
NOS. 29 & 30)
C. HALL UNITED STATES DISTRICT JUDGE
plaintiff, Migdalia Bonilla (“Ms. Bonilla”)
brings this action, pursuant to section 7422 of title 26 of
the United States Code, seeking recovery of federal income
taxes and related interests and penalties, against the
defendant, the United States of America. Complaint
(“Compl.”) (Doc. No. 1) at 1. Before this court
are the parties' Cross-Motions for Summary Judgment.
See Bonilla's Motion for Summary Judgment (Doc.
No. 29) (“Bonilla Mot. Summ. J.”); United States
of America's Motion for Summary Judgment (Doc. No. 30)
(“U.S. Mot. Summ. J.”).
reasons stated below, Ms. Bonilla's Motion for Summary
Judgment (Doc. No. 29) is denied, and the
United States of America's Motion for Summary Judgment
(Doc. No. 30) is granted.
STANDARD OF REVIEW
motion for summary judgment, the moving party bears the
burden of establishing the absence of any genuine issue of
material fact. Zalaski v. City of Bridgeport Police
Dep't, 613 F.3d 336, 340 (2d Cir. 2010). If the
moving party satisfies that burden, the nonmoving party must
set forth specific facts demonstrating that there is a
genuine issue for trial. Wright v. Goord, 554 F.3d
255, 266 (2d Cir. 2009). A genuine issue exists where the
evidence is such that a reasonable jury could decide in the
nonmoving party's favor. See, e.g., Rojas v.
Roman Catholic Diocese of Rochester, 660 F.3d 98, 104
(2d Cir. 2011) (citing Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 252, (1986)).
court's role at summary judgment “is to determine
whether genuine issues of material fact exist for trial, not
to make findings of fact.” O'Hara v. Nat. Union
Fire Ins. Co. of Pittsburgh, 642 F.3d 110, 116 (2d Cir.
2011). Unsupported allegations do not create a material issue
of fact and cannot overcome a properly supported motion for
summary judgment. See Weinstock v. Columbia Univ.,
224 F.3d 33, 41 (2d Cir. 2000). Additionally, the evidence
the court considers in ruling on a motion for summary
judgment must be admissible evidence, or evidence that could
be readily reduced to an admissible form at trial. See
LaSalle Bank National Ass'n v. Nomura Asset Capital
Corp., 424 F.3d 195, 205 (2d Cir. 2005); Santos v.
Murdock, 243 F.3d 681, 683 (2d Cir. 2001)
(“Affidavits submitted to defeat summary judgment must
be admissible themselves or must contain evidence that will
be presented in an admissible form at trial.”)
(citation omitted). If the evidence is merely colorable, or
is not significantly probative, summary judgment may be
granted. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 249-50 (1986).
as here, both parties come before the court on cross-motions
for summary judgment, the court is not required to grant
judgment as a matter of law for either side. See Ricci v.
DeStafano, 530 F.3d 88, 109-10 (2d Cir. 2008).
“Rather the court must evaluate each party's motion
on its own merits, taking care in each instance to draw all
reasonable inferences against the party whose motion is under
consideration.” Id. at 110.
Bonilla was married to Robert Bonilla (“Mr.
Bonilla”) in 1986. United States' Local Rule 56(a)2
Statement of Facts in Opposition to Summary Judgment (Doc.
No. 38-1) (“U.S. Opp. Facts”) ¶ 1. Mr.
Bonilla was a professional baseball player. Id.
¶ 2. On February 23, 1994, Mr. Bonilla incorporated
Bobby Bo Investments, Inc. (“BBI”), a Florida
for-profit corporation. Id. ¶ 3. Mr. Bonilla
created BBI to hold investments for him; he chose the name
BBI because people called him “Bobby Bo” when he
played baseball. Id. ¶ 4. As of February 23,
1994, Mr. Bonilla was the sole shareholder, officer,
director, and president of BBI; Mr. Bonilla was President of
BBI in 1994. Id. ¶ 6. According to a website
for the State of Florida Division of Corporations, BBI was
administratively dissolved on August 25, 1995. Id.
¶ 8. At that time, Mr. Bonilla was the sole shareholder,
director, and officer of BBI. Id. ¶ 9. There is
no record on the Florida government website of BBI being
reinstated since August 25, 1995. Id. ¶ 10.
Bonilla and Mr. Bonilla were divorced on May 22, 2009,
pursuant to the Memorandum of Decision of the Connecticut
Superior Court (“2009 Divorce Decree”).
Id. ¶ 11. As part of the 2009 Divorce Decree,
the Court ordered that ownership of certain companies,
including BBI, “shall be divided equally” between
Mr. Bonilla and Ms. Bonilla within 30 days. Id.
¶ 12. On April 28, 2010, Ms. Bonilla filed a Motion for
Contempt, stating that “[no] division of these assets
has occurred.” Id. ¶ 13. At a hearing in
May 2010, Mr. Bonilla's counsel represented to the court
that Mr. Bonilla was willing to give Ms. Bonilla all of the
companies “other than Bobbie Bo Investment which is his
name, ” and made other references as to Mr. Bonilla
wanting to keep BBI. Id. ¶ 16. Mr. Bonilla also
filed a Motion to Amend the 2009 Divorce Decree requesting,
inter alia, to keep BBI. Id. ¶ 17.
December 14, 2010, the Superior Court held a hearing in the
divorce proceedings (“December 2010 Hearing”).
Id. ¶ 20. Between the May 2010 Hearing and the
December 2010 Hearing, no physical shares or securities of
BBI were transferred to Ms. Bonilla. Id. ¶ 19.
At the December 2010 Hearing, the parties agreed that Ms.
Bonilla “will actually be the owner” and
“will have ownership” of BBI. Bonilla Local Rule
56(a)2 Statement of Facts in Opposition to Summary Judgment
(Doc. No. 37-1) (“Bonilla Opp. Facts”) at 2
¶ 6. The parties agreed that Ms. Bonilla and her
attorney would bear the burden of effectuating the transfer
of interests. Id. at 3 ¶ 7. At the conclusion
of the December 2010 Hearing, the court so ordered the
proceedings, stating, “I'll sign the transcript.
And that'll be the order of the court. . . . But for now,
so ordered.” Id. at 3 ¶ 9.
affidavits filed by Mr. Bonilla in the divorce proceedings
noted that BBI held his interest in Performance Imaging.
Id. at 5 ¶ 14. BBI contributed money to
Performance Imaging, but the contributions were made from Mr.
Bonilla's personal income. Id. at 6 ¶ 18.
Performance Imaging was formed in 1996, after BBI had been
administratively dissolved. Id. at 4 ¶ 12. The
initial investment in Performance Imaging was $100, 000.
Id. at 5 ¶16. BBI has not made any
contributions to Performance Imaging since 2000. Id.
at 6 ¶20. Since 2000, other than sending documents,
including Schedules K-1 (“K-1s”) to Performance
Imaging's investor members and communications regarding
the K-1s, there has been no communication between Performance
Imaging and its investor members. Id. at 7 ¶
23. Performance Imaging has never made income distributions
to its members, nor has it covered members' tax costs.
Id. at 8 ¶¶ 28-29. Performance
Imaging's financial documents list BBI's share of
Performance Imaging's profit, lost, and capital as 69.51
percent. Id. at 10 ¶ 42.
the 2010 and 2011 tax years, BBI was an S Corporation.
Id. at 10 ¶ 39.BBI did not file any tax return
for the 2009, 2019, and 2011 tax years. Id. at 10
¶ 37. Ms. Bonilla was provided with Performance
Imaging's Schedule K-1 for BBI for the 2009 tax year, by
email, on September 16, 2010. Id. at 11 ¶ 44.
On September 30, 2011, Ms. Bonilla's attorney sent
Performance Imaging a copy of the Divorce Decree and a
transcript of the December 2010 Hearing. Id. at 11
¶ 45. In response to a request from Performance Imaging
for “the address for [BBI] for Ms. Bonilla” to
which to send Performance Imaging's 2010 tax return, Ms.
Bonilla's attorney provided Performance Imaging with Ms.
Bonilla's address. Id. at 12-13 ¶ 49.
Performance Imaging's K-1s for BBI for the tax years 2010
through 2016 list BBI's address as Ms. Bonilla's
residence. Id. at 13 ¶ 51. Ms. Bonilla
forwarded the K-1s to her accountant. Id. at 13
Imaging's K-1s for BBI for the 2010 and 2011 tax years
reported that BBI's share of business income was $908,
871 and $61, 112, respectively. Id. at 15 ¶ 57.
The IRS concluded that Performance Imaging's ordinary
business income in 2010 and 2011 was $1, 122, 706 and $79,
294, respectively. Id. at 15 ¶ 58. Ms. Bonilla
did not report any portion of BBI's share of Performance
Imaging's income on her 2010 and 2011 tax returns.
Id. at 15 ¶ 59. After a tax examination of
Performance Imaging, the IRS increased Ms. Bonilla's
ordinary income for the 2010 and 2011 tax years by $780, 393
and $55, 117, respectively, equal to 69.51% of Performance
Imaging's corrected 2010 and 2011 ordinary business
income. Id. at 15 ¶ 59. The IRS assessed taxes
against Ms. Bonilla for the 2010 and 2011 tax years of $235,
783 and $19, 291, respectively. Id. at 15-16
¶¶ 60-61. Including fees and penalties, the IRS
claimed that Ms. Bonilla owed the IRS $323, 164.42 for the
2010 tax year, and $21, 871.74 for the 2011 tax year.
See U.S. Opp. Facts ¶¶ 87, 90.
Bonilla paid the full amounts claimed by the IRS, on April
11, 2016. Id. ¶ 92. She filed a refund claim
with the IRS on the same date. Id. ¶ 93. The
IRS denied the administrative claim on October 3, 2016.
Id. ¶ 94. The government conceded, on April 4,
2018, that $372, 023 of the $780, 393 increase to Ms.
Bonilla's income for the 2010 tax year was incorrect, and
directed the IRS to partially abate the tax, penalties, and
fees levied against Ms. Bonilla. Id. ¶ 95. The
IRS conceded that Ms. Bonilla was entitled to a partial
credit to her 2010 tax liability, but no credit to her 2011
tax liability. Id. ¶¶ 95-98.
March 8, 2019, the court heard oral argument on the pending
Motions for Summary Judgment.
initial matter, the government argues that this court is
without jurisdiction to hear certain of Ms. Bonilla's
arguments. Under the variance doctrine, codified at section
7422 of title 26 of the United States Code and its
accompanying regulations, a taxpayer bringing suit under
section 7422 “may not raise different grounds than
those brought to the IRS” in the prior administrative
refund claim. Magnone v. United States, 902 F.2d
192, 193 (2d Cir. 1990). “The taxpayer . . . need only set
forth facts in the claim sufficient to enable the IRS to make
an intelligent review of the claim. However, the grounds for
the refund must be at least impliedly contained in the
application for refund.” Carione v. United
States, 291 F.Supp.2d 141, 146 (E.D.N.Y. 2003) (citing
303 West 42nd St. Enterprises, Inc. v. I.R.S., 181
F.3d 272, 278 (2d Cir.1999) and Burlington Northern Inc.
v. United States, 231 Ct.Cl. 222, 684 F.2d 866, 868
(1982)) (quotation marks omitted).
government's view, the “variance doctrine”
precludes this court's review of Ms. Bonilla's
arguments that (1) BBI could not have acquired an interest in
Performance Imaging because BBI had been administratively
dissolved; and (2) that the December 2010 divorce hearing was
an unenforceable “agreement to agree.”
See United States' Response in Opposition (Doc.
No. 38) (“USA Reply in Opp.”) at 6. The
government argues that Ms. Bonilla failed to sufficiently set
forth these arguments in her administrative claim for refund.
Bonilla argues in response that (1) the government's
reading of the variance doctrine is “overly narrow and
restrictive, ” and (2) her arguments in her
administrative claim were “[a]t the very least . . .
facts sufficient to enable the IRS to make an intelligent
administrative review” into BBI's corporate status
and whether “under any legal theory or grounds, ”
Ms. Bonilla owned BBI in 2010 and 2011. Bonilla Reply in
Support of Plaintiff's Motion for Summary Judgment
(“Bonilla Reply in Supp.”) (Doc. No. 42) at 5.
Administrative Claim, Ms. Bonilla argued that, irrespective
of the 2010 Divorce Decree, Mr. Bonilla had “failed to
provide [Ms. Bonilla] with a stock certificate transferring
his shares in [BBI] . . . or other corporate documents
regarding the business or effecting the transfer of his
ownership interests in the business to [Ms. Bonilla].”
Govt. Exhibit 38, Administrative Claim for Refund (Doc. No.
38-10) (“Admin. Claim”) at 1. Ms. Bonilla also
noted in the Administrative Claim that, a Florida corporation
with the same name as BBI was dissolved on August 25, 1995,
and that interests in a dissolved corporation “were not
effectively transferred to [Ms. Bonilla] . . . in December
2010. Id. Ms. Bonilla added that her alleged tax
liability arose from the separate IRS audit of
“Performance Imaging, LLC[, ] which [BBI] appears to
own an interest in.” Id. at 1-2. Finally, Ms.
Bonilla stated that her disagreement with her purported tax
liability was focused on “a non-partnership item that
was beyond the scope of the TEFRA audit of Performance
Imaging, LLC - that being the ownership of [BBI]” and
the “clearly erroneous assertion that [Ms. Bonilla]
owned [BBI] during the years at issue.” Id. at
Bonilla's Administrative Claim was therefore focused on
three related issues: (1) whether the divorce proceedings
involving her and Mr. Bonilla transferred the ownership of
BBI between Mr. Bonilla and Ms. Bonilla; (2) whether Ms.
Bonilla was the owner of BBI during the 2010 and 2011 tax
years; and (3) whether the IRS acted beyond the scope of the