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HP Distribution, LLC v. United States

United States District Court, D. Kansas

May 5, 2015

HP DISTRIBUTION, LLC, and TANNER CUNNINGHAM, Petitioners,
v.
UNITED STATES OF AMERICA, Respondent.

REPORT AND RECOMMENDATION

TERESA J. JAMES, Magistrate Judge.

NOTICE

Within fourteen (14) days after being served with a copy of this Report and Recommendation, any party, pursuant to 28 U.S.C. § 636(b)(1) and Fed.R.Civ.P. 72(b)(2), may file written objections to this Report and Recommendation. A party must file any objections within the fourteen-day period if that party wants to have appellate review of the proposed findings of fact, conclusions of law, or recommended disposition. If no objections are timely filed, no appellate review will be allowed by any court.

I. NATURE OF THE MATTER BEFORE THE COURT

By Order dated October 30, 2014 (ECF No. 3), District Judge Julie A. Robinson referred this case to the undersigned Magistrate Judge. At the time of the referral, the only pending matter was Petitioners HP Distribution, LLC and Tanner Cunningham's Petition to Quash Summons (ECF No. 1). Respondent later filed its Motion of the United States for Summary Judgment (ECF No. 11).[1] Both the Petition and the Motion for Summary Judgment are now before the undersigned Magistrate Judge for a report and recommendation.[2]

In their Petition, Petitioners ask the Court to quash two Financial Records Summonses issued by the Internal Revenue Service (IRS) to Corefirst Bank & Trust and JPMorgan Chase Bank. These summonses request records and account information relating to HP Distribution, LLC and Tanner Cunningham for the period January 1, 2012 to September 1, 2014.[3] Petitioners assert that the summonses are overbroad, that Petitioner Tanner Cunningham is not liable for any of the taxes alleged to be owed, and that the IRS has provided no explanation for seeking documents that fall outside the tax periods at issue. After reviewing the Motion for Summary Judgment and the supporting and responsive briefs, the Court recommends that the district judge grant the motion and deny the Petition.

II. FINDINGS OF FACT

The following facts are uncontroverted.[4]

A. The Summonses

On October 8, 2014, the Internal Revenue Service (IRS) issued Financial Records Summonses to two financial institutions, CoreFirst Bank & Trust and JPMorgan Chase Bank, seeking financial records of HP Distribution, LLC. Each summons is captioned "In the matter of Tanner Cunningham, Member, HP Distribution LLC, " and each seeks financial records of HP Distribution, LLC.[5] Each summons describes the periods to which it applies as "Form 2290 for the periods ending July 31, 2013 and October 31, 2013 and Form 941 for the quarterly period ending March 31, 2014."[6] More specifically, each summons requests the following documents relating to HP Distribution LLC for the period from January 1, 2012 to September 1, 2014: (1) bank signature cards, (2) corporate resolutions, (3) bank statements, (4) six cancelled checks issued each month, and (5) loan applications, agreements, and related records submitted by, entered into by, or in effect during the time period. In addition, each summons requests a copy of all deposit items from January 1, 2012 to December 31, 2012.[7]

B. The Partnership

Craig Cunningham ("Craig") was the general partner of HP Distribution, LLP ("The Partnership") until it was dissolved in the second quarter of 2012. Craig managed the finances of The Partnership and was in charge of making timely tax deposits. Craig's son, Petitioner Tanner Cunningham ("Tanner"), was an employee of The Partnership and in charge of trucking operations.

The Partnership currently owes employment taxes (Form 941) for the periods ending March 31, 2011, June 30, 2011, and June 30, 2012; highway use taxes (Form 2290) for the periods ending December 31, 2009, December 31, 2010, and December 31, 2012; and FUTA taxes (Form 940) for the periods ending December 31, 2011, and December 31, 2012.

Craig was responsible for paying to the IRS the taxes which The Partnership withheld from its employees' paychecks. The Partnership failed to pay to the IRS the withholdings from its employees for the periods ending March 31, 2011, and June 30, 2011. The IRS, therefore, assessed a trust fund recovery penalty (TFRP) under 26 U.S.C. § 6672 against Craig for those periods. As of ...


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