I want this problem in my own life. Sort of.
Jeffrey Page files his annual federal individual income tax return -- and most (all?) of us do -- and expects to get a bit of a refund; $3,463, to be exact. He indeed receives a refund check from the IRS.
For $491,104.01.
It's a valid check. It's from the U.S. Treasury Department. It's 100% made out to him. Apparently, unbeknownst to anyone, the IRS accidentally credited tax payments from someone else to Mr. Page's account. Hence the half million dollar windfall.
Mr. Page thinks for a while: "What to do, what to do?" He (allegedly) calls the IRS to figure it all out but (allegedly) can't get through to anyone for an answer.
He's still pondering what to do with his unexpected windfall around a year later -- a relevant time period because (at the time) refund checks expire if they're not cashed within a year.
So Mr. Page ultimately decides: "Screw it. It's made out to me. It's a valid check. It's mine." So he cashes the thing. Presumably hoping that the IRS never gets its act together.
Which -- unfortunately for him -- the IRS eventually does. Albeit a couple of years later.
The IRS sends Mr. Page several letters demanding the half million bucks back, but Mr. Page isn't feeling especially generous. Eventually, though, Mr. Page sends back $210,000, but keeps the rest.
At which point the IRS sues him to get the rest of the money back.
But there's a three year statute of limitations, and the district court feels pretty strongly that the IRS has blown the deadline. So even though Mr. Page has definitely been served and hasn't timely filed a response to the lawsuit, when the IRS seeks to enter his default, the district court sua sponte raises the statute of limitations issue, and after a couple of procedural moves -- none by Mr. Page, I might add, who's still sitting on the sidelines "representing himself" (but not bothering to even file an answer) -- dismisses the complaint with prejudice.
The IRS appeals. And, today, it wins, with the Ninth Circuit holding that the relevant three year statute of limitations runs not from the receipt of the refund check by the taxpayer -- which is what some loose language from prior Ninth Circuit cases had said, which is why the district court did what it did -- but instead from when the check was cashed and cleared.
Which means that now Mr. Page has to actually go back and defend the lawsuit, which he likely can't do (successfully, anyway). So he'll have to give back the remaining $277,000+. If he still has it. Plus interest, presumably.
Personally, I'd be pretty psyched to receive an unexpected refund check for a half million bucks. Would I cash it? Maybe. Not sure. I'd definitely at least make a copy and frame it, though.
At a minimum, it's a problem I'd probably enjoy having. Especially around tax time.
As for Mr. Page himself, I can't really fathom why he sent back $210,000 instead of the whole thing -- or nothing. If you're going to keep (or spend) it, keep (or spend) it all. Or don't. It seems like the middle ground -- sending back some, but not all, of it -- is the worst of all possible worlds. If you're hoping the IRS never catches on (within the statute of limitations, anyway), why not go for broke and keep the whole shebang? Or if you're sending it back, send it all back. (And make sure you don't spend it in the interim so there's only two hundred grand left. Surely Mr. Page knew that there was a real risk the IRS might eventually catch on, right?)
The other thing that I thought was strange was that Mr. Page is represented on appeal by four lawyers from Gibson Dunn. Can he really afford that? And is tax refund stuff of this type -- and (perhaps most critically) of this size -- really the kind of work that Gibson Dunn does these days?
All I can figure is either that Mr. Page had some prior relationship with Gibson Dunn or that since Mr. Page represented himself below -- not very competently, honestly, but successfully (ironically enough) -- the Ninth Circuit itself might have reached out and appointed him pro bono counsel. Though nowhere in the opinion does it say so (as it sometimes does).
Plus, to add to the irony, the non-attorney Mr. Page who doesn't even bother to file an answer and elects to represent himself wins in the district court, but once he gets a team of lawyers from Gibson Dunn to represent him, he loses.
Ouch.
