FOIAed documents allegedly revealed IRS orders to “shut down this failing business”
In March of 2015, more than twenty armed agents rolled up to Mii’s Bridal & Tuxedo in Garland, Texas.
The store’s owners, Tony and Somnuek Thangsongcharoen, were given two hours to cough up $10,000 to avoid seizure of their property for a tax bill of $31,422. When they were unable to provide the IRS with a check, agents proceeded with the seizure and auctioned off everything of value.
Mii’s Bridal & Tuxedo was opened in 1983 by the Thangsongcharoens, who immigrated from Thailand. They contend the tax bill that led to the agency’s drastic measures was not accurate, that they did not owe what the IRS claimed, and that for the tax year in question, their store ran a “net operating loss carryover, not a taxable amount.”
The Thangsongcharoens claim the improper asset seizure and auction left them destitute. In March of this year, the couple sued the IRS for $1.8 million.
Among the allegations:
- Taxes the IRS claimed the Thangsongcharoen’s owed were not accurate
- IRS took $7,834 not subject to the seizure
- IRS auctioned off property not belonging to the Thangsongcharoen’s
- An agent improperly purchased assets at the auction
- IRS intentional marked down prices of inventory to claim expensive storing costs, allowing for hasty auction
Jason Freeman, attorney for the Thangsongcharoens, FOIAed documents pertaining to the seizure and claims correspondence revealed orders to “shut down this failing business,” according to a report in the Dallas Morning News.
The hastiness of the auction is another point of contention. Rather than post a public notice and wait ten days (standard procedure), the IRS team used a regulation allowing immediate seizure of property that could “perish or waste” as justification for the immediate auction.
The Dallas Morning News elaborated:
Regarding the speed of the sale, the government said in legal filings that the IRS used a special law that allows for a streamlined procedure if the agency determines the goods seized could “perish or waste” or become greatly reduced in value.
As a result, the IRS didn’t have to post advance public notice of the Mii’s sale or wait at least 10 days before selling the goods, as is normally required.
The provision also says a speedy auction can be used if storing the property would cost the IRS “great expense.”
The bridal shop owners also claim in the complaint that the IRS took inventory worth more than $615,000 and slashed the value to approximately $6,000 “so they could claim it would cost more to store than it was worth.”
It’s unclear from court records which of those scenarios was foreseen by the IRS in the Mii’s Bridal shop case. But the Thangsongcharoens say in their suit that the agents deliberately marked down the inventory to about $6,000 so they could claim it would cost more to store than it was worth.
That comes to less than $4 per dress, the lawsuit said. The agents initially believed the value was significantly higher, according to the lawsuit. IRS regulations say the agency calculates a minimum bid price prior to the sale of seized items.
The US Government has twice filed motions to dismiss the case for lack of jurisdiction, arguing only the entity, Tony and Mii’s Inc., had standing to file a complaint, and that the Thangsongcharoen’s status as owners of the business failed to constitute “interest” in personal damages, writes Law 360:
“Because a corporation is [an] entity separate and distinct from its shareholders, ownership of its shares does not mean that a shareholder has an interest in the corporation’s property for purposes of Section 7426,” the motion said, while requesting that if not dismissed, plaintiffs should be “required to replead and articulate how they purportedly have an interest in the corporation’s seized property.”
The government has also filed a motion to strike the jury demand along with several attempt to whittle down requested damages claiming lack of individual standing.
Full complaint here:
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