Summary judgment denied in business owners’ tax appeal

Reminding the parties that the summary judgment procedure is not a substitute for trial, the Indiana Tax Court has denied an attempt by the Indiana Department of State Revenue to end a long-running tax dispute.

Paul and Carol Elmer initiated their original tax appeal in October 2011. They filed after the revenue department did not allow them to deduct their business expenses and uncollectible debt from their assessed Indiana adjusted gross income tax for the 2005, 2006, 2007 and 2008 tax years.

The revenue department asserted that it found the Elmers had improperly taken a deduction for an uncollectible debt in 2008. The department also determined the deductions taken for their vehicle, contract labor, operation and management costs were not valid business expense deductions.

Subsequently, the department filed a motion for summary judgment in October 2013.

The Indiana Tax Court has denied the motion in Paul J. Elmer and Carol A.N. Elmer v. Indiana Department of State Revenue, 49T10-1110-TA-00064.

In particular, the Tax Court found there are genuine issues of material fact regarding the economic substance of the Elmers’ business transactions as well as whether the deducted expenses can be described as the ordinary and necessary business expenses.  

“In this case, the parties’ designated evidence invites the Court to resolve factual disputes and conflicting inferences, assess the credibility of witnesses, and determine where the preponderance of the parties’ designated evidence lies,” Senior Judge Thomas Fisher wrote. “This, however, is improper because the summary judgment procedure is not a substitute for trial, a means for resolving factual disputes or conflicting inferences that arise from undisputed facts, or a tool for deciding where the preponderance of the evidence lies before the evidence has been fully presented.”