NORA L. MIHELICK, Plaintiff-Appellant,
UNITED STATES OF AMERICA, Defendant-Appellee.
from the United States District Court for the Middle District
of Florida D.C. Docket No. 2:16-cv-00741-SPC-MRM
CARNES, Chief Judge, and ROSENBAUM and DUBINA, Circuit
ROSENBAUM, CIRCUIT JUDGE.
above the main entrance of the Internal Revenue Service
office in Washington, D.C., is a quotation from Supreme Court
Justice Oliver Wendell Holmes Jr.: "Taxes are what we
pay for a civilized society." Civil servants at the
IRS pursue an honorable mission, Washington Post,
(last visited June 18, 2019). An admirable outlook, yet even
Justice Holmes would likely agree that it is uncivilized to
impose taxes on citizens for income they did not ultimately
receive. But that is precisely the result the government asks
us to uphold today.
they were married, Nora Mihelick and her ex-husband Michael
Bluso earned and paid taxes on income from Gotham Staple
Company ("Gotham"). After the couple divorced, they
learned they had to return $600, 000 of the income they had
received from Gotham. This meant that the couple had paid
income taxes on $600, 000 they turned out not to have.
the two had equally benefitted from and contributed to the
income at issue, they agreed to split the liability evenly,
consistent with Ohio law: Bluso would return $300, 000 and
Mihelick the other $300, 000. So Bluso returned the full
$600, 000, and Mihelick reimbursed him for half that amount.
under 26 U.S.C. § 1341-which allows a taxpayer who paid
taxes on what he erroneously believed to be his income to
recoup those unnecessary tax payments-Bluso recovered the
taxes he had previously paid on the $300, 000. But when
Mihelick tried to do the same thing for the taxes she had
paid on the other since-returned $300, 000, the government
denied her request, simply because she had paid the money to
Bluso instead of returning the money directly herself.
§ 1341, though, Mihelick had just as much of a right to
recover the taxes she previously paid on the $300, 000 she
received and then gave back as did Bluso to recover the taxes
he paid on his $300, 000 that he returned. So we reverse the
district court's entry of summary judgment for the
government and remand for further proceedings consistent with
Nora Mihelick and her ex-husband Michael Bluso married in
Ohio in 1978. From 1999 to 2004, the couple lived in Ohio and
worked at Gotham Staple Company, a closely held Ohio
corporation owned by Bluso's family. Mihelick worked for
the company, planning events, caring for and maintaining the
homes of Bluso's parents, and handling administrative
tasks. Bluso was the chief executive officer of Gotham at the
time, and he eventually became majority shareholder as well.
Both Mihelick and Bluso earned income for their roles at
Gotham, and the couple filed joint tax returns that included
Bluso's income during those years. The couple likewise
paid taxes on the taxable income they earned from Gotham
during that time.
September 2004, Mihelick filed for divorce. While the divorce
was pending, Pamela Barnes-one of Bluso's sisters, who
was a minority shareholder at Gotham-sued Bluso, Gotham, and
others. Among other things, Barnes claimed that Bluso had
breached his fiduciary duties by excessively compensating
himself at Gotham's expense.
was not a party to the litigation, but Bluso wanted Mihelick
to share any resulting liability from Barnes's lawsuit.
To Bluso, Mihelick had also reaped the benefits of his
compensation, so she should share the burdens of his
compensation as well.
first, Mihelick opposed the idea of sharing liability for the
Barnes litigation-she wanted the separation agreement to
provide that she was "not liable for anything that Pam
Barnes comes up with." But when Bluso threatened to have
a judge decide Mihelick's responsibility, Mihelick
relented and agreed to share liability for the Barnes
some back and forth between the parties about how to divide
the liability, they agreed to Article 5 of their separation
agreement, which provided that any liability from the Barnes
litigation would be considered a marital liability for which
Bluso and Mihelick would be jointly and severally liable.
Specifically, the section clarified that the liability
"arose all or in part from the acquisition of marital
assets," and that since the marital assets had been
equally divided, the liability "shall be deemed to be a
marital liability," too.
and Bluso finalized their divorce on August 31, 2005, but the
Barnes litigation continued. Eventually, in 2007, Bluso
settled with Barnes. Under the terms of the settlement, Bluso
disclaimed any wrongdoing but paid Barnes $600, 000 to settle
her excess-compensation claims.
paying Barnes $600, 000, Bluso took a tax deduction for $300,
000. When asked whether he considered deducting the entirety
of his $600, 000 payment to Barnes, Bluso explained that he
did not feel that it was right to do so, since Mihelick had
to shoulder the burden of the other half of the $600, 000
payment and since the couple had shared benefits and
liabilities evenly during the marriage:
[T]he divorce decree said she would have to pay back half of
it since she, you know, benefited in half, and all these
1040s you gave me both my name and her name is on it. We both
paid income tax on that. We paid income tax on her salary.
She paid income tax on my salary. When I paid back the money
to my sister, that was for excess compensation. I only felt
that I was due $300, 000 of it . . . .
accordingly looked to Mihelick to cover her half of the $600,
000 liability, but Mihelick again resisted paying. So Bluso
withheld alimony for a month and threatened to deprive her of
more support. After contentious negotiations between
Mihelick's lawyer and Bluso, and after Mihelick's
lawyer advised her that she had an "obligation" to
pay, Mihelick finally acquiesced and paid Bluso $300, 000 in
meantime, Bluso successfully obtained tax relief for his
$300, 000 payment. Viewing herself in the same position as
Bluso, Mihelick then sought tax relief for her $300, 000
payment. On her 2009 tax return, she pursued a tax refund
under 26 U.S.C. §§ 1341 and 165. But unlike what it
had done with Bluso, the IRS denied Mihelick's claim for
a refund. Mihelick sought relief in court. The district court
agreed with the government and granted summary judgment
against Mihelick. Mihelick now appeals.
STANDARD OF REVIEW
review de novo the grant of summary judgment and construe the
evidence and draw all reasonable inferences in the light most
favorable to the nonmoving party." Ziegler v. Martin
Cty. Sch. Dist., 831 F.3d 1309, 1318 (11th Cir. 2016).