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Keywords

statuteappealhearingmotionsummary judgmentstatute of limitationsmotion for summary judgment
respondent

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Tarutis v. Commissioner of Revenue, 393 N.W.2d 667

Facts

In 1984, the Commissioner of Revenue assessed additional state income taxes for 1976 and 1977 against taxpayers Whitney E. Tarutis and Eva G. Tarutis. The taxpayers appealed to the Minnesota Tax Court, claiming the assessments were barred by the statute of limitations. The Commissioner denied these allegations and asserted collateral estoppel as an affirmative defense, referencing a prior United States Tax Court decision that disallowed the same deductions in the taxpayers' federal income tax returns. The Tax Court denied the taxpayers' motion for summary judgment but granted the motion to strike the Commissioner's defense.

By orders issued August 30, 1984, the Commissioner of Revenue assessed additional state income taxes for 1976 and 1977 against respondent taxpayers, Whitney E. Tarutis and Eva G. Tarutis, his wife.

Issue

Whether the Tax Court erred in striking the Commissioner's affirmative defense of collateral estoppel in the taxpayers' appeal of the reassessment of their state income taxes.

We hold it was error for the tax court to strike the commissioner's affirmative defense of collateral estoppel.

Rule

Collateral estoppel may be asserted as an affirmative defense when the issue is identical to one in a prior adjudication, there was a final judgment on the merits, the estopped party was a party or in privity with a party to the prior adjudication, and the estopped party was given a full and fair opportunity to be heard on the adjudicated issue.

Collateral estoppel may be asserted as an affirmative defense in these proceedings.

Analysis

The court found that the issues regarding the deductibility of certain farm losses and property expenses were identical to those previously adjudicated in the United States Tax Court. It noted that there was a final judgment on the merits in the prior action and that the taxpayers were parties to that adjudication. The court concluded that the taxpayers had a full and fair hearing in the prior action, thus supporting the Commissioner's defense of collateral estoppel.

Here the commissioner has made a showing that the issues in this case involving the deductability of certain farm losses and property expenses are identical to the issues which were before the United States Tax Court.

Conclusion

The Supreme Court reversed the Tax Court's decision, holding that it was an error to strike the Commissioner's affirmative defense of collateral estoppel.

Reversed.

Who won?

The Commissioner of Revenue prevailed in the case because the Supreme Court determined that the Tax Court erred in striking the affirmative defense of collateral estoppel.

The commissioner, appearing before us by certiorari, claims it was error to strike his affirmative defense.

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