OPINION & ORDER In this tax refund case, Plaintiffs Romeo Salta Jr. (“Salta”) and Phyllis Polega (“Plaintiffs”), a married couple, seek a refund for tax year 2015. The taxes at issue arose from the cancellation of debt on a mortgage loan. Plaintiffs argue that the mortgage holder did not sign the key 2015 Relocation Agreement. Aside from Salta’s, the only signature on that document belongs to the mortgage holder’s agent. As the Agreement is a real estate transaction, Plaintiffs argue this violates New York’s statute of frauds, and therefore, the Agreement establishing that the discharge of indebtedness occurred in 2015 is unenforceable. Thus, the Plaintiffs reason, the discharge of the debt (and its associated income tax) should not be attributed to 2015. This argument fails for three reasons. First, Plaintiffs failed to raise this argument in their initial administrative claim, and that is fatal to this suit. Magnone v. United States, 902 F.2d 192, 193 (2d Cir. 1990). Second, the agreement was in writing, the mortgage holder’s agent had apparent authority to act, and both sides ratified that contract through their conduct. So the Agreement is enforceable. See generally Reinhold v. Dowling, 35 AD3d 698 (2d Dept 2006); Jill Real Estate, Inc. v. Smyles, 150 AD2d 640 (2d Dept 1989). Third, the statute of limitations to bring an action to recover the debt expired in 2015. See First American Title Ins. Co. v. Holohan, 189 A.D.3d 1180 (2d Dept 2020). Hence, the debt could not be recovered after 2015. Thus, after “a practical assessment of the facts and circumstances relating to likelihood of repayment,” by 2015, it was “clear” the debt would not be recovered. See Felt v. C.I.R., 433 Fed.Appx. 293, 295-96 (5th Cir. 2011)(citing Cozzi); L&C Springs Associates v. C.I.R., 188 F.3d 866, 870 (7th Cir. 1999). Therefore, the tax was properly paid in 2015. For these reasons, Defendant’s Motion for Summary Judgment is GRANTED, and Plaintiffs’ Cross Motion for Summary Judgment is DENIED. I. BACKGROUND 1. Factual Background1 A. Salta’s Purchase of the Point Lookout Property In 2007, Plaintiff Salta purchased the “Point Lookout property” at issue. The contract sales price was $1,214,865, with $1,000,000 of the purchase price funded by a loan. Dkt. No. 34-1. Salta signed a note promising to repay the loan amount. Dkt. No. 34-2. B. Default and Foreclosure Proceedings In May 2009, the mortgage holder filed a foreclosure suit against Salta in New York Supreme Court, Nassau County. Dkt. No. 34-5. The principal balance due was $1,028,992.97, and the last payment that Salta had made on the loan was on July 1, 2008. Id. at 11. The foreclosure complaint stated that the mortgage-holder “has duly elected and does hereby elect to call due the entire amount presently secured by the mortgage.” Id. at 8. Thus, the payments were “accelerated” in 2009. In November 2013, BSI Financial Services, Inc. (“BSI”), advised Salta that it was now the mortgage servicer for the loan. Dkt. No. 34-8 at 259. In May 2014, the mortgage was reassigned to an entity called Newbury REO 2013, LLC (“Newbury REO”). Dkt. No. 34-10 at 002. C. Salta’s Proposal to Settle Suits Focuses on Tax Implications In January 2014, Salta wrote to the mortgage servicer, BSI, and asked “whether there is a possibility of working out a settlement of the pending litigation involving the property,” and proposed a “settlement whereby the deed is transferred to BSI in exchange for cash and the withdrawal of all proceedings.” Dkt. No. 34-9 at 264. Salta’s letter noted his “primary concern” was “the tax implications of a debt forgiveness.” Id. A few days later, after intervening correspondence, Salta proposed the following: [I]n exchange for $50,000 and termination of all court/foreclosure activities, I will transfer the deed to the note holder; in addition, the note balance would either be forgiven or assigned to another person/entity as I direct (whichever way this goes depends on the tax implications of debt forgiveness — I will have to research that) Id. at 262. D. 2015 Relocation Agreement Salta and BSI agreed to a “Relocation Agreement” executed on January 7 and 9, 2015. Dkt. No. 34-11. That Agreement, in substantial part, reflected the proposal in Salta’s email. There, (i) Salta agreed to “relinquish any rights he may have to remain in the Property;” (ii) BSI agreed to make “a total cash payment of $25,000″ to Salta; and (iii) BSI agreed to “forever waive” the mortgagee’s “right to any deficiency judgment to which it may be entitled pursuant to actions taken to foreclose on the Property.” Id. at 788, 781. The agreement specifically noted that BSI was “required by law to report the forgiven debt to the IRS,” which “may increase [Salta's] taxes.” Id. at 789. Key to Plaintiffs’ arguments here, while BSI signed the Relocation Agreement, the mortgage holder Newbury REO never signed it. Id. On January 15, 2015, Salta transferred the deed for the property to Newbury REO. Dkt. No. 34-12. Salta also signed an affidavit stating that the consideration for his transfer of the deed was $25,000, along with “the full cancellation of all debts, real estate taxes, obligations, costs and deed transfer costs and charges secured by” the mortgage on the property. Dkt. No. 34-13. E. Plaintiffs’ Joint Tax Return for Tax Year 2015 BSI issued Salta an IRS Form 1099-A (Acquisition or Abandonment of Secured Property) for tax year 2015, reporting the cancellation of the $1,028,992.97 outstanding principal balance on the mortgage on the Point Lookout property. Dkt. No. 34-16. BSI separately issued Salta an IRS Form 1099-MISC (Miscellaneous Income) for tax year 2015, reflecting the $25,000 it paid him as part of the transaction. Dkt. No. 34-17. Plaintiffs included as a capital gain on their joint 2015 tax return the cancellation of the debt Salta owed on the mortgage on the Point Lookout property. Dkt. No. 34-18. On their Form 4797, Plaintiffs included a cancellation of debt figure of $1,028,993. Id. F. 2017 1099-C and Refund Request In January 2018, BSI, as servicer, issued Salta an IRS Form 1099-C (Cancellation of Debt) for the 2017 tax year. Dkt. No. 34-19. A representative for BSI explained that it issued this form after Newbury REO had sold the Point Lookout property to a new owner in June 2017, and “there was a difference between the amount received” from the sale “and the amount owed” on the mortgage. Dkt. Nos. 34-20 and 34-21. In July 2018, after receiving the Form 1099-C, Plaintiffs filed an IRS Form 1040X (Amended U.S. Individual Tax Return) for tax year 2015, which sought a refund of the taxes they had paid for the cancellation of the mortgage debt. Dkt. Nos. 34-22 and 34-24. Plaintiffs claimed that they had “erroneously” recorded the cancellation of debt in 2015 based on the Form 1099-A they had received, and noted the issuance of the 1099-C in 2017. Id. In full, Plaintiffs’ explanation reads: Taxpayer erroneously recorded sale of property in 2015 based upon Form 1099A issued by the creditor. In 2017 Form 1099C was issued by the creditor on the same property and liability. Plaintiffs’ amended 2015 return essentially sought to remove the previously reported capital gain arising from the transfer of the Point Lookout property in lieu of foreclosure. Dkt. No. 34-3, Salta Depo. 88:23-89:6, 89:24-90:4. Despite having noted the receipt of a 2017 Form 1099-C as part of the explanation for his and his spouse’s proposed amendment of their 2015 return, Salta did not include any cancellation-of-debt income from the Point Lookout property in his 2017 return. Dkt. No. 34-23. Instead, he included a statement in Part IV (Explanations) of his 2017 return, which read as follows: Taxpayer received a 1099-C for taxable year 2017 from BSI Financial Services…This 1099-C resulted from real property that taxpayer formerly owned at 25 Lido Boulevard, Point Lookout, NY 11569. The taxpayer exchanged the subject real property in 2015, but was not, at that time, forgiven of the debt secured by the property. Because the debt secured by the property was incurred pursuant to a contract, the statute of limitations for BSI Financial’s collection on that debt does not lapse until 2021, or six years after the taxpayer may have breached the loan agreement. See New York State Civil Practice Law and Rules Section 213(2). Income, if any, associated with the cancellation of debt is incurred once the limitations period on the collection of the debt lapses. See Securities Co. v. United States, 85 F. Supp. 532 (SDNY 1948), see also United States v. Kirby Lumber, 284 U.S. 1 (1931). Because BSI Financial’s limitations period for any breach of contract action that it may hope to bring against taxpayer does not end until 2021, taxpayer does not have any income, if any [sic], until 2021, taxpayer does not her[e]in declare income, if any, from this transaction at this stage. Dkt. No. 34-23. Crucial to Defendant’s arguments, nothing in any of Plaintiffs’ submissions to the IRS or to this Court (until this Motion) mentioned any argument that the 2015 Relocation Agreement was unenforceable under New York’s statute of frauds. G. This Action In 2021,2 Plaintiffs brought this action, seeking a refund of the $113,087 they had paid for tax year 2015 stemming from the cancellation of the mortgage debt on the Point Lookout property. Dkt. No. 1. Their complaint suggests that the taxes at issue would have been properly payable in tax year 2017. Id. at
