Ian Michael Stead Belinda A. Stead v. United States

We must decide whether the taxpayer or the government bears the risk of loss when funds on deposit at a bank for practical purposes disappear after being levied upon by the Internal Revenue Service (“IRS”) and removed from a taxpayer’s bank account. We have jurisdiction pursuant to 28 U.S.C. §§ 1291 and 1346(a)(1), and we hold that, in light of the burden of proof on the taxpayer in a tax refund case, the risk of loss necessarily falls upon the taxpayer.

I

In tax year 1994, Plaintiff-Appellant Ian Michael Stead and his former wife, Lynan K. Stead, filed a federal income tax return but underpaid their tax liability by $7,574.31. The IRS issued a notice of balance due on November 13, 1995, and, when the Steads did not respond, issued a notice of intent to levy the Steads’ assets on January 22, 1996. Despite these measures, the tax liability remained unsatisfied.

On August 29, 1996, the IRS issued a notice of levy to First Interstate Bank in the amount of $9,023.26 for funds on deposit in an account belonging to From Gifted Hands, Inc., a corporate entity controlled by Ian Michael Stead. On September 4, 1996, First Interstate Bank debited the From Gifted Hands, Inc. account in the…