Wallace L. Sorenson v. United States

This is a suit for refund of a 100% civil penalty assessed under § 6672 of the Internal Revenue Code for willful failure to collect or truthfully account for and pay over employee withholding and FICA taxes. The Government counterclaimed for that portion of the penalty assessed but unpaid. The district court entered judgment for Sorenson and against the Government.

The record relates the sad tale of a man who began a small cabinetmaking business, incorporated as Regal Industries, Inc., with high hopes and who then watched that business devour his personal funds and ultimately drive him into bankruptcy. As Sorenson says of himself, “I just got on a tiger.” As much as we sympathize with his plight we must add to his hardships by reversing the judgment of the district court.

Regal Industries, Inc. commenced operations in 1966. Regal filed accurate employee withholding returns for the first three quarters of 1966 but the returns for the second and third quarters were unaccompanied by payment. Regal failed and ceased operations by the end of the third quarter of 1966.

In 1971, the Internal Revenue Service assessed a 100% penalty of $4,646.40 against appellee as a…