Dkt. No. 10912-04L , TC Memo. 2005-38, March 2, 2005.
[Appealable, barring stipulation to the contrary, to CA-2. --CCH.]
[Code
Sec. 6320] Collection: Tax liens: Notice of lien filing. --
An
individual's petition to review the IRS's determination with respect to
a tax lien on her property was dismissed. The taxpayer had received a
notice of deficiency, but had not taken the opportunity to challenge her
underlying liability. She was, consequently, barred from addressing the
underlying liability in later hearings.
Edythe
Fishbach, pro se; Marc L. Caine, for respondent.
MEMORANDUM
OPINION
LARO, Judge:
Petitioner petitioned the Court under sections
6320(c) and 6330(d)
to review respondent's determination as to his notice of tax lien upon
petitioner's property.1
Respondent filed the notice of lien to collect 1996 Federal income taxes
with related additions thereto totaling approximately $24,860.85.2
Respondent has filed a motion for summary judgment under Rule 121, which
petitioner opposes. We shall grant respondent's motion for summary
judgment.
Background
Petitioner
failed to file a Federal income tax return for 1996. On May 18, 1999,
respondent mailed petitioner a notice of deficiency, determining a
deficiency for 1996 of $20,871, with additions to tax under sections
6651(a)(1) and (2)
and 6654(a)
of $2,286.90, $1,219.68, and $483.27, respectively. On August 13, 1999,
petitioner petitioned this Court to redetermine these amounts. See Fishbach
v. Commissioner, docket No. 13906-99S. Because petitioner failed to
prosecute her case, this Court dismissed it on February 20, 2001, and
entered a decision for respondent in the amounts stated in the notice of
deficiency.
On February 6,
2003, respondent mailed to petitioner a Notice of Federal Tax Lien
Filing and Your Right to a Hearing Under IRC 6320. Petitioner filed a
request for the referenced hearing and then ceased all communication
with respondent, save for one cryptic Form 656, Offer in Compromise,
which stated as its basis a doubt as to liability but contained no
supporting documentation. Petitioner did not reply to respondent's
efforts to schedule the hearing. On June 17, 2004, respondent mailed to
petitioner a Notice of Determination Concerning Collection Action(s)
Under Section
6320 and/or 6330,
sustaining the proposed lien. This petition followed.
Discussion
Summary
judgment may be granted with respect to any part of the legal issues in
controversy if the records before the Court "show that there is no
genuine issue as to any material fact and that a decision may be
rendered as a matter of law." Rule 121(a) and (b); Craig v.
Commissioner[Dec.
54,933], 119 T.C. 252, 259-260 (2002).
Respondent
bears the burden of proving there is no genuine issue of material fact;
all facts are interpreted in the light most favorable to petitioner. Craig
v. Commissioner, supra at 260. However, petitioner must do
more than merely allege or deny facts; she must set forth "specific
facts showing that there is a genuine issue for trial." Rule
121(d); Celotex Corp. v. Catrett, 477
U.S.
317, 324 (1986). Under this standard, petitioner has failed to raise any
genuine issue of material fact, and summary judgment is appropriate.
Where a
taxpayer liable for a tax liability fails to pay it after respondent
demands payment a lien is by statute imposed upon all property and
rights to property owned by the taxpayer. Sec.
6321. We review nonliability administrative determinations
for abuse of discretion, and we review determinations as to the
underlying tax liability de novo. See Sego v. Commissioner[Dec.
53,938], 114 T.C. 604, 610 (2000); Hoffman v. Commissioner[Dec.
54,882], 119 T.C. 140, 144-145 (2002).
Petitioner
raises no valid legal arguments. She argues, in both her request for a
hearing and in her petition to this Court, that she does not owe any tax
for 1996. This she may not do. Petitioner, having received a notice of
deficiency and having forgone the opportunity to challenge her
underlying liability in her prior case, is barred from doing so in this
case. See sec.
6330(c)(2)(B); Ginalski v. Commissioner[Dec.
55,620(M)], T.C. Memo. 2004-104.
C. Conclusion
We shall grant
respondent's motion for summary judgment.
To reflect the
foregoing,
An
appropriate order and decision will be entered for respondent.
1
Unless otherwise noted, section references are to the applicable
versions of the Internal Revenue Code. Rule references are to the Tax
Court Rules of Practice and Procedure.
2
We say "approximately" as these amounts were computed before
the present proceeding and have since increased on account of interest.
Michael
Stein v. Commissioner.
Dkt. No. 10970-01L , TC Memo. 2004-124, May 24, 2004.
[Appealable, barring stipulation to the contrary, to CA-2. --CCH.]
[Code
Sec. 6320] Collection: Notice of federal tax lien: Appeal. --
An individual
who filed no income tax returns, and who did not respond to IRS
deficiency notices and other communications, was not allowed to contest
the underlying tax liability in a proceeding to determine the validity
of a notice of federal tax lien (NFTL). Attempts at resolving the
liability through a compromise, installment plan, or other solution had
been unsuccessful, largely because the taxpayer failed to file returns
for the relevant years, respond to communications, or properly pursue
appeal and other avenues for relief. The taxpayer had forfeited the
right to contest the underlying tax liabilities through his
procrastination and failure to respond to IRS mailings. Further, the IRS
did not commit an abuse of discretion in sustaining the NFTL.
Michael Stein,
pro se; John Aletta, for respondent.
MEMORANDUM
OPINION
BEGHE, Judge:
Petitioner failed to file timely Federal income tax returns for 1992,
1993, and 1994. Respondent filed "substitutes for return"1
(SFRs) for those years, mailed petitioner statutory notices of
deficiency to which he never responded, and thereafter assessed income
tax liabilities against petitioner for those years.
As of March 8,
1999, petitioner's total unpaid tax liabilities for the above-mentioned
years, including the unpaid assessed income tax liabilities, and
additions to tax and interest, were as follows:
UnpaidAdditions to TaxTotal Unpaid
YearAssessmentsand/or InterestLiabilities
1992$1,344.17$1,068.95$2,413.12
19935,505.151,910.127,415.27
1994197,079.4963,903.26260,982.75
On February
23, 2000, respondent filed a notice of Federal tax lien (NFTL) against
petitioner's real property with respect to $203,928.81, the then-unpaid
balance of petitioner's 1992 through 1994 tax liabilities. On July 26,
2001, respondent issued petitioner a notice of determination concerning
collection action(s) under section
6320 and/or 6330,2
which upheld respondent's NFTL.3
The issues for
decision presented by petitioner's timely filed petition with this Court
are:
1. Whether
petitioner is liable for the deficiencies assessed by respondent. We
hold petitioner is liable for the deficiencies because petitioner has
not satisfied the conditions that would entitle him in this proceeding
to contest respondent's deficiency determinations or assessments; and
2. whether
respondent abused his discretion in sustaining the filing of the Federal
tax lien against petitioner's property to secure petitioner's
outstanding income tax liabilities for tax years 1992 through 1994. We
hold respondent did not abuse his discretion in so doing.
Procedural Background
This case was
tried in
Hartford
,
Connecticut
, on January 6, 2003. Respondent's opening brief was due April 7, 2003,
and petitioner's answering brief was due June 5, 2003. On April 7, 2003,
respondent filed his brief with the Court.
Petitioner
filed five motions for extension of time to file his answering brief.
These motions included three requests for extensions to obtain and
review the trial transcript, a fourth request for extension because he
did not receive notice of the granting of the request for the third
extension until 2 days before the third extended due date, and a fifth
request for extension pending adjudication of certain motions that
petitioner stated "are concurrently being submitted to the Court in
separate envelopes" but have never been received by the Court. The
Court granted the first four of these motions, thereby extending the due
date of petitioner's brief from June 5 to November 20, 2003.
The Court's
order of November 5, 2003, denying petitioner's fifth motion filed
November 3, 2003, was served by certified mail on petitioner at his
specified mailing address, P.O. Box 210, Greenwich, Connecticut (the
post office box address), and was returned unclaimed on November 28,
2003. Petitioner did not notify the Court of any change of his mailing
address. On January 20, 2004, the Court ordered that a copy of the
November 5, 2003, order be served on petitioner at the post office box
address by certified mail and regular mail.
On March 10,
2004, the Court ordered petitioner and respondent to file, on or before
March 22, 2004, a joint status report or separate status reports
indicating whether and when petitioner filed Federal income tax returns
for 1992 through 1994, and, if so, whether, notwithstanding the
outstanding assessments and the lien controversy in the case at hand,
respondent was examining those returns. Respondent's status report,
filed March 19, 2004, indicated that petitioner had not filed the
returns, and that, therefore, respondent was not in the process of
examining them.
On April 6,
2004, petitioner filed a status report requesting an extension to file
his brief and the motions he intended to file with his last extension
request (but which he claimed to have failed by inadvertence to file).
In this status report, petitioner asserted that "severe health
problems" and his preoccupation with separate litigation as "a
pro se defendant" had caused the delays in filing his brief and the
motions. According to petitioner, the separate litigation involved
"a dispute over fines imposed on petitioner by a condominium
association" that had led to foreclosure litigation "involving
the same condominium property that the Respondent has placed a lien on
in the instant case." Petitioner stated he had not yet filed signed
Federal income tax returns for the 1992 through 1994 tax years, but he
was working with respondent's revenue officer to submit information to
complete those returns. The Court denied petitioner's request for
another extension of time to file his brief and notified petitioner that
the Court would decide the case on the record and arguments previously
submitted.
Factual Background
Some of the
facts have been stipulated and are so found. The stipulation of facts
and the attached exhibits are incorporated herein by this reference.
Petitioner
testified that "for purposes of the trial" and when he filed
the petition in this case, he resided at
One Strawberry Hill Court
, Unit 11-C,
Stamford
,
Connecticut
(the Strawberry Hill address). Petitioner testified he is a resident of
Nevada
for State income tax purposes.
Petitioner
testified he is a self-employed engineer who travels up to 3 months at a
time more than once a year. In Form 433-A, Collection Information
Statement for Individuals, filed with the Internal Revenue Service (IRS)
on November 11, 1998, petitioner said he was a "volunteer" and
"not employed."
Petitioner
does not receive wages or salary from which tax is withheld. During the
tax years at issue, petitioner paid estimated taxes, and petitioner held
accounts with financial institutions that withheld taxes from his
interest and dividend income.
As of July 26,
2001, petitioner had failed to file Federal income tax returns for his
tax years 1988 through 2000.4
There is no record information or other evidence that petitioner has
filed returns for his 1992 through 1994 tax years.
Petitioner
"[dropped] everything" in 1988 when both his elderly parents
were ill with cancer. Petitioner's parents died in 1990. Since 1988,
petitioner has had a "combination of health problems (including * *
* surgery)".
Petitioner
could not locate his 1987 return among his papers and other personal
possessions that were packed in boxes as a result of residential moves.
Petitioner eventually found a copy of his 1987 return before trial but
made no effort to have it admitted into evidence. Petitioner asserted
his 1987 return shows a capital loss carryover of $187,000 and an
overpayment of tax exceeding $12,000, and he had unspecified losses in
subsequent years, including 1988 through 1993.
During 1996,
petitioner used his address at 25 West Elm Street, Greenwich,
Connecticut (the Elm Street address), to receive Forms 1099-B, Proceeds
From Broker and Barter Exchange Transactions, and Forms 1099-Div,
Dividends and Distributions, from financial institutions that paid
investment income to him.
On December
12, 1996, after having prepared SFRs for petitioner's tax years at
issue, respondent mailed three notices of deficiency to petitioner
determining income tax deficiencies of $15,812, $10,210, and $153,787
for petitioner's 1992, 1993, and 1994 tax years, respectively, failure
to file additions to tax under section
6651(a)(1) of $211 for 1992 and $24,758 for 1994, and
additions to tax under section
6654 of $689 for 1992 and $7,352 for 1994 for failure to pay
estimated tax.5
Respondent sent the notices of deficiency by certified mail to the
Elm Street
address.
On January 8,
1997, the U.S. Postal Service returned to respondent the notices of
deficiency and the covering envelopes stamped "unclaimed". The
envelopes displayed no indication that petitioner was no longer using
the
Elm Street
address or that this address was invalid.
Petitioner did
not file petitions with the Court disputing the determinations set forth
in the statutory notices.
On May 5,
1997, respondent assessed income tax liabilities against petitioner for
the tax years at issue on the basis of the SFRs and petitioner's failure
to petition the Court to dispute the deficiencies determined in the
statutory notices.
On or about
December 28, 1997, respondent's revenue officer Ronald Mele (Revenue
Officer Mele) confirmed with postal employees that petitioner's previous
mailing address was the
Elm Street
address. On January 28, 1998, Revenue Officer Mele confirmed with postal
employees that petitioner was using his Strawberry Hill address as his
mailing address and updated respondent's computer records accordingly.
During a
telephone conversation sometime in 1998, petitioner instructed Revenue
Officer Mele to use the post office box address as his mailing address
rather than the Strawberry Hill address.
Respondent's Proposed Levy
On March 8,
1999, respondent sent petitioner by certified mail addressed to
petitioner at his post office box address a final notice of intent to
levy and notice of right to a hearing. On May 14, 1999, respondent
received petitioner's untimely Form 12153, Request for a Collection Due
Process Hearing. On June 7, 1999, respondent granted petitioner a
so-called equivalent hearing under section 301.63301T(i), Temporary
Proced. & Admin. Regs., 64 Fed. Reg. 3413 (Jan. 22, 1999), because
petitioner's request was untimely. On September 13, 1999, respondent's
Appeals Office issued petitioner a decision letter upholding the
proposed levy.
In a letter
dated October 22, 1999, Revenue Officer Mele informed petitioner that
respondent would begin levying on his income sources and assets on
November 5, 1999.
On or about
November 8, 1999, petitioner submitted a Form 9423, Collection Appeal
Request, in which he attributed the delays in filing his returns to
respondent's failure to follow through on petitioner's request for
capital loss carryover information from 1987 that he needed to file his
returns for the tax years at issue. Petitioner's Form 9423 states that
Revenue Officer Mele was unable to obtain petitioner's 1987 return.
On or about
December 7, 1999, petitioner submitted to Revenue Officer Mele a request
to enter into an installment agreement to pay his tax liabilities for
1992 through 1994. On January 11, 2000, Revenue Officer Mele sent a
letter to petitioner's post office box address denying petitioner's
request for an installment agreement because petitioner had not filed
income tax returns for 1992 through 1999. The January 11, 2000, letter
specifically instructed petitioner to send an appeal request to Revenue
Officer Mele at his office address on or before February 11, 2000, if
petitioner wished to appeal the denial of his installment agreement
request. Petitioner did not appeal the denial of his installment
agreement request.
Lien Proceeding
On January 31,
2000, Revenue Officer Donald Angotta (Revenue Officer Angotta) replaced
Revenue Officer Mele for purposes of collecting petitioner's 1992
through 1994 tax liabilities.
On February
23, 2000, respondent filed an NFTL with respect to petitioner's 1992
through 1994 tax liabilities against petitioner's real property at the
land record office in
Stamford
,
Connecticut
. The lien attached to the condominium unit petitioner owned at the
Strawberry Hill address.
On February
23, 2000, respondent's lien unit office mailed petitioner Letter 3172,
Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC
6320, to the Strawberry Hill address, with a copy of the NFTL and a Form
12153.
On March 15,
2000, respondent received from petitioner a Form 12153 with an attached
letter to Revenue Officer Angotta and an attached memorandum (the
attached memorandum). On the Form 12153, petitioner listed his telephone
number and instructed the IRS to write to petitioner's post office box
address, which he said he checked twice a month, if the IRS was unable
to reach him by telephone. Petitioner placed the words "See
Attachment", apparently referring to the attached memorandum, under
both notations on the Form 12153 that allowed him to appeal either a
"Filed Notice of Federal Tax Lien" or a "Notice of
Levy".
In the
attached memorandum, petitioner asserted he would complete his
delinquent returns within 60-90 days to prove that he did not owe the
tax liabilities determined by respondent.
In the
attached memorandum, petitioner also stated he was appealing Revenue
Officer Angotta's "levy warning letter" dated February 14,
2000, which, according to petitioner, stated: "Enforced collection
may include placing a levy on your bank accounts, wages, receivables,
commissions, etc."6
In the attached memorandum, petitioner asserted: "Mr Angotta
informed me over the telephone that I have until March 15, 2000 to
appeal this action."
In the
attached memorandum, petitioner also said Revenue Officer Angotta failed
to respond to petitioner's messages left on Revenue Officer Angotta's
answering machine before February 11, 2000, in which petitioner stated
that he was ready to personally meet with Revenue Officer Angotta to
hand in his appeal.
In a letter
dated June 22, 2000, Appeals Officer William A. Hirsch (Appeals Officer
Hirsch) informed petitioner that respondent's NFTL had been assigned to
him for consideration. After repeated failed attempts by Appeals Officer
Hirsch and petitioner to get in touch with each other, Appeals Officer
Hirsch, in a letter dated July 26, 2000, informed petitioner that he
needed to file his delinquent returns by August 31, 2000, as a condition
to discussing collection alternatives such as an installment agreement
or an offer in compromise.
On October 3,
2000, Appeals Officer Hirsch telephoned petitioner and attempted to
conduct a section
6320 hearing, at which time petitioner requested an extension
of time to review his notes. During this conversation, Appeals Officer
Hirsch granted petitioner's request for an extension to file his
delinquent returns until November 30, 2000. Petitioner agreed to conduct
the hearing by telephone rather than in person within 1 week of
submitting his delinquent returns.
On October 4,
2000, Appeals Officer Hirsch sent petitioner a letter scheduling a
telephone hearing for December 8, 2000.
On December 8,
2000, Appeals Officer Hirsch telephoned petitioner and conducted
petitioner's section
6320 hearing, even though petitioner had not yet filed his
delinquent returns. There is no evidence in the record that petitioner
at any time either requested that the hearing be held in person or
objected to the holding of a hearing by telephone.
On July 26,
2001, respondent's Appeals Office issued a notice of determination
concerning collection actions informing petitioner of the determination
not to withdraw the NFTL. As of that date, petitioner had not appealed
the rejection of his installment agreement request.
On August 27,
2001, petitioner timely mailed his petition with the Court in response
to the July 26, 2001, notice of determination; the Court received and
filed the petition on September 4, 2001.7
Discussion
As a
preliminary matter, we note that petitioner's mail and living
arrangements, which have created and continue to create difficulties in
contacting him, and his repeated failures to comply with deadlines, have
impeded and delayed respondent's collection efforts and the efforts of
the Court to resolve these matters.
We note that
petitioner has uttered contradictory testimony and arguments and has
failed to provide respondent and the Court with reliable information and
documents to resolve this matter. Petitioner bears the risk of loss and
the responsibility arising from failure to prepare and file returns and
to preserve and locate his cost records and copies of prior returns for
use in substantiating items required to be reported on his returns for
the years in issue.
Petitioner's
place of residence and employment status are uncertain insofar as the
record in this case is concerned because he has given confusing,
contradictory, and untrustworthy testimony on these issues. Petitioner
testified that he is a resident of
Nevada
for State income tax purposes, although
Nevada
has no income tax. See Nev. Rev. Stat. Ann. secs. 360-377A (Michie 1999
& Supp. 2001). Perhaps he means he is a
Nevada
resident for the purpose of avoiding State income taxes.
Petitioner's
testimony that he is a self-employed engineer who travels away from home
for up to 3 months at a time more than once a year contradicts his claim
that when he uses or has used the post office box address as his mailing
address, he checks his mail twice a month. In Form 433-A, filed on
November 11, 1998, petitioner said he was a "volunteer" and
"not employed."
Petitioner has
used the illness of his parents from cancer in 1988 and thereafter as a
continued excuse for failing to file returns right up to the present,
even though he also testified in another connection that his parents
died in 1990.
On more than
one occasion, petitioner defined what respondent had to do before
petitioner would take action. Petitioner then did nothing because
respondent's officials did not exactly follow petitioner's requirements
as he defined and sought to impose them. Petitioner has failed to file
returns with respect to more than 10 tax years, failed to timely appeal
the denial of his installment agreement request, failed, after repeated
extensions, to file his brief, and failed to file certain motions that
he claimed he was filing before submitting his brief.
Petitioner
repeatedly made legal arguments orally during the trial, even though we
instructed petitioner to present his legal arguments in his brief.
Although we could reject petitioner's contentions and declare him in
default, and dismiss his case for failure to file his brief, see Rules
123, 151; Stringer v. Commissioner[Dec.
42,025], 84 T.C. 693 (1985), affd. without published opinion
789 F.2d 917 (4th Cir. 1986); Horn v. Commissioner[Dec.
54,847(M)], T.C. Memo. 2002-207, we choose instead to address
the merits of respondent's determination to file a lien on petitioner's
property, see Horn v. Commissioner, supra; Comey v.
Commissioner[Dec.
54,518(M)], T.C. Memo. 2001-275.
Petitioner
contests the filing of the NFTL. Petitioner failed to file a timely
request for hearing with respect to respondent's proposed levy. We
therefore have no jurisdiction to consider the levy. See Moorhous v.
Commissioner[Dec.
54,316], 116 T.C. 263, 269 (2001); Kennedy v. Commissioner[Dec.
54,315], 116 T.C. 255, 261-262 (2001).8
We have
jurisdiction to review respondent's determination of the validity of the
Federal tax lien on petitioner's property under section
6320. See secs.
6211(a), 6213(a),
6214(a);
Parker v. Commissioner[Dec.
54,464], 117 T.C. 63, 65 (2001); Van Es v. Commissioner[Dec.
54,080], 115 T.C. 324, 327 (2000).
Where the
validity of the underlying tax liability is properly at issue, the Court
will review the matter de novo. Where the validity of the underlying tax
liability is not properly at issue, the Court will review the
Commissioner's administrative determination for abuse of discretion. Goza
v. Commissioner[Dec.
53,803], 114 T.C. 176, 181-182 (2000). A taxpayer's
underlying tax liability may be at issue if he did not receive any
statutory notice of deficiency for such tax liability or did not
otherwise have an opportunity to dispute such tax liability. See secs.
6320(c), 6330(c)(2)(B).
Petitioner
claims he did not file petitions with this Court contesting the
determinations in the three notices of deficiency because he did not
receive the notices of deficiency.
The notices of
deficiency were properly mailed on December 12, 1996, to petitioner's
last known address, which, at the time, was the
Elm Street
address. There is no record evidence petitioner notified respondent
before December 12, 1996, that the
Elm Street
address was no longer his mailing address. Respondent performed a
thorough investigation to determine petitioner's address by contacting
the U.S. Postal Service and using the numerous Forms 1099 petitioner
received in 1996.
On January 8,
1997, the U.S. Postal Service returned to respondent the notices of
deficiency and the covering envelopes stamped "unclaimed". The
envelopes displayed no indication that petitioner was no longer using
the
Elm Street
address or that this address was invalid. In the absence of clear
evidence to the contrary, the presumptions of official regularity and
delivery justify the conclusion that respondent sent the statutory
notices, and the U.S. Postal Service properly attempted to deliver the
notices. See United States v. Zolla[84-1
USTC ¶9175], 724 F.2d 808 (9th Cir. 1984); United States
v. Ahrens[76-1
USTC ¶9241], 530 F.2d 781 (8th Cir. 1976); Sego v.
Commissioner[Dec.
53,938], 114 T.C. 604, 611 (2000). The facts and
circumstances of this case, including petitioner's failure to claim mail
sent by the Court and the difficulties in contacting him, lead us to
conclude that petitioner's conduct constituted deliberate refusal of
delivery of the statutory notices. He thereby forfeited his opportunity
to contest the underlying deficiencies in a proceeding in this Court
under section
6330(d). See Goza v. Commissioner, supra at
183; Sego v. Commissioner, supra; Carey v. Commissioner[Dec.
54,849(M)], T.C. Memo. 2002-209.
Because the
underlying tax liabilities are not properly at issue, we review
respondent's determination for abuse of discretion. See Goza v.
Commissioner, supra; Sego v. Commissioner, supra
at 610; Hodgson v. Commissioner[Dec.
52,581(M)], T.C. Memo. 1998-70, affd. 18 Fed. Appx. 571 (9th
Cir. 2001). We must decide whether respondent exercised his discretion
arbitrarily, capriciously, or without sound basis in fact or law. See Woodral
v. Commissioner[Dec.
53,206], 112 T.C. 19, 23 (1999); Fargo v. Commissioner[Dec.
55,514(M)], T.C. Memo. 2004-13.
Petitioner
argues he is not liable for the deficiencies assessed by respondent.
Petitioner also argues respondent's Appeals Office abused its discretion
in sustaining the filing of the lien because: (1) Respondent did not
comply with the notice requirements of section
6320(a); (2) respondent failed to comply with petitioner's
request to conduct the section
6320 hearing in person rather than by telephone; and (3)
respondent is precluded from filing the NFTL before petitioner appeals
the rejection of his installment agreement request.
As explained
below, we hold petitioner is liable for the deficiencies. We hold
respondent's Appeals Office did not abuse its discretion by upholding
respondent's filing of the lien.
Issue
1. Petitioner's Liability for the Assessed Deficiencies
Petitioner has
stated that he wishes to contest the underlying liabilities for his tax
years at issue. Petitioner argues that respondent's determination of the
amounts of the assessed income tax liabilities is incorrect because
petitioner would have little or no capital gains tax liability if
respondent's SFRs had used the actual cost bases, instead of zero-cost
bases, to determine his income from the sale of securities, and if the
SFRs had accounted for a capital loss carryover from 1987.
Petitioner is
liable for the assessed deficiencies because the conditions have not
been satisfied that would entitle him to contest the deficiencies in
this proceeding.
Petitioner was
entitled at the hearing with the Appeals officer to challenge the
existence or amount of the underlying tax liabilities for the periods in
issue only if he did not receive a statutory notice of deficiency or did
not otherwise have an opportunity to dispute the liabilities. See sec.
6330(c)(2)(B).
Petitioner
forfeited his opportunity to contest the underlying deficiencies in a
proceeding in this Court under section
6330(d) because of his deliberate refusal of delivery of the
statutory notices. See supra pp. 18-19.
In any event,
petitioner was not ready at trial to prove that the assessments
overstated his tax liabilities. Taxpayers bear the burden of proving
their entitlement to deductions. Rule 142(a); Welch v. Helvering[3
USTC ¶1164], 290 U.S. 111 (1933). The Commissioner is
required only to prepare the substitute for return "from his own
knowledge and from such information as he can obtain through testimony
or otherwise." Sec.
6020(b); see Andary-Stern v. Commissioner[Dec.
54,852(M)], T.C. Memo. 2002-212. Petitioner did not offer
into evidence any records, not even the 1987 return, that would tend to
prove his contentions that he had cost bases greater than zero for
purposes of determining gains and losses on the sale of his securities,
or that he had a capital loss carryover from 1987. See Poindexter v.
Commissioner[Dec.
55,604] , 122 T.C. 280 (2004); Horn v. Commissioner[Dec.
54,847(M)], T.C. Memo. 2002-207; Smith v. Commissioner[Dec.
54,669(M)], T.C. Memo. 2002-59. Respondent is not obligated
to accept any late-filed returns unless petitioner can substantiate his
claimed capital loss carryover or any other losses. See sec.
6001; Rules 142(a), 149(b); Horn v. Commissioner, supra;
Smith v. Commissioner, supra; sec.
1.6001-1(a), (e), Income Tax Regs.
We do not
accept petitioner's excuse that he intends to file returns for 1992
through 1994. Petitioner has procrastinated and has failed to file the
returns more than 1 year after finding his 1987 return in 2002. See,
e.g., Montgomery v. Commissioner[Dec.
55,618], 122 T.C. 1, 19 (2004) (Marvel, J., concurring)
("A taxpayer who procrastinates and seeks to rely solely on his
announced intention to file an amended return as a defense to a proposed
levy or lien * * * proceeds at his peril as his undocumented intention
is not likely to be viewed as a credible challenge to the underlying tax
liability."). So much more so with respect to petitioner, who has
never even filed original returns for the years in issue.
Issue
2. Respondent's Exercise of Discretion in Sustaining the Lien
a. Overview of Lien Proceedings
The Federal
Government obtains a lien against "all property and rights to
property, whether real or personal" of any person liable for
Federal taxes upon demand for payment and failure to pay. See sec.
6321; Iannone v. Commissioner[Dec.
55,618], 122 T.C. 287, 293 (2004). The lien arises
automatically on the date of the assessment and continues until the tax
liability is satisfied or the statute of limitations bars enforcement of
the lien. Sec.
6322; Iannone v. Commissioner, supra. If the
taxpayer fails to pay, the IRS usually files an NFTL with the
appropriate State office in order to validate the lien against any
purchaser, holder of a security interest, mechanic's lienor, or judgment
lien creditor. See sec.
6323(a); Lindsay v. Commissioner[Dec.
54,529(M)], T.C. Memo. 2001-285.
The
Commissioner must provide the taxpayer with written notice of the filing
of an NFTL not more than 5 business days after filing and must advise
the taxpayer of the right to a hearing before the IRS Appeals Office. Sec.
6320(a)(1), (2) and (3).
If the
taxpayer requests a hearing, the IRS Appeals officer conducting the
hearing must verify that the requirements of any applicable law or
administrative procedure have been met. Secs.
6320(c), 6330(c)(1).
The Appeals officer must also determine whether any proposed collection
action balances the need for the efficient collection of taxes with the
legitimate concern of the taxpayer that any collection action be no more
intrusive than necessary. Secs.
6320(c), 6330(c)(3).
The IRS may
withdraw an NFTL if the taxpayer has entered into an installment
agreement to satisfy the liability for which the lien was imposed (and
the installment agreement does not specify that the lien will not be
withdrawn). Sec.
6323(j)(1).
b. Abuse of Discretion
(i) Section 6320(a) Notice Requirements
We reject
petitioner's argument that respondent should not have sustained the
filing of the Federal tax lien because respondent failed to mail Letter
3172 and the accompanying NFTL to petitioner's last known address.
Notice of the
lien filing may be given to the taxpayer in person, left at the
taxpayer's dwelling, or sent by certified or registered mail to the
taxpayer's last known address. Sec.
6320(a)(2).
On February
23, 2000, respondent timely mailed to petitioner's Strawberry Hill
address, Letter 3172, with a copy of the NFTL.
Petitioner
sent a Form 12153 that was received by respondent on March 15, 2000,
within 30 days of respondent's filing of the NFTL and the mailing of the
Letter 3172. Petitioner sent the Form 12153 to appeal the February 14,
2000, "levy warning letter" he claims was issued by Revenue
Officer Angotta.
On December 8,
2000, respondent provided petitioner with a section
6320 hearing to contest the filing of the NFTL. Because the
hearing had been timely requested within the prescribed 30-day period,
petitioner's claims that respondent did not send Letter 3172 to
petitioner's last known address and that petitioner never received it
are beside the point. Even though, in the Form 12153, petitioner
appealed an alleged "levy warning letter", Appeals Officer
Hirsch's letters sent to petitioner before the section
6320 hearing clearly indicated that the section
6320 hearing would deal with the NFTL.
(ii) Section 6320 Hearing in Person
Petitioner
argued Appeals Officer Hirsch did not properly conduct the section
6320 hearing in person.
Section
6320(c) requires that the section
6320 hearing be conducted under the provisions of section
6330(c), (d), and (e). The hearing under section
6330 need not be conducted face to face. See sec.
301.6320-1(d)(2), Q&A-D6 and D7, Proced. & Admin. Regs; see also
Lunsford v. Commissioner[Dec.
54,553], 117 T.C. 183 (2001); Day v. Commissioner[Dec.
55,534(M)], T.C. Memo. 2004-30; Armstrong v. Commissioner[Dec.
54,865(M)], T.C. Memo. 2002-224.
Respondent was
not required to provide petitioner with a face-to-face section
6320 hearing. There is no evidence in the record petitioner
requested such a hearing. Petitioner agreed the telephone hearing
constituted his section
6320 hearing and did not object to the holding of the hearing
by telephone.
On the basis
of the entire record and applicable law, we conclude that the Appeals
officer properly conducted petitioner's section
6320 hearing under section
6320(c).
(iii) Appeal of Rejection of Installment Agreement
Petitioner
argues that Revenue Officer Angotta prevented him from filing an
administrative appeal of the denial of his installment agreement
request, and that respondent's consideration of the appeal would have
precluded respondent from filing the NFTL or levying against his
property.
Respondent
would not have been required to withdraw the NFTL even if petitioner had
entered into an installment agreement to satisfy the liability for which
the lien was imposed. See sec.
6323(j)(1); sec. 301.6323(j)-1(c), Proced. & Admin. Regs.
IRS Publication 594, What You Should Know About the IRS Collection
Process, cited by petitioner, specifically states that the Commissioner
may file a tax lien even if an installment agreement is in effect. IRS
Publication 594 at 6; see, e.g., Beery v. Commissioner[Dec.
55,553], 122 T.C. 184, 189-190 (2004) (section
6015(e)(1)(B) does not preclude the Commissioner from filing
a Federal tax lien against an individual making an election under section
6015).9
We hold respondent was not precluded from filing the NFTL against
petitioner's property.
Conclusion
Respondent's
Appeals Office did not abuse its discretion in upholding respondent's
filing of a Federal tax lien against petitioner's property to collect
outstanding income tax liabilities for petitioner's 1992 through 1994
tax years. As required by section
6330(c)(1), the Appeals officer verified that the
requirements of applicable laws and administrative procedures had been
met. The Appeals officer also determined that the filing of the tax lien
balanced the need for efficient collection of taxes with petitioner's
legitimate concerns that any collection action be no more intrusive than
necessary. Although this case does not involve a jeopardy assessment
under section
6861, respondent's security interest in petitioner's property
will be jeopardized if respondent's security interest is subordinated to
those of other creditors, such as the party or parties involved in the
foreclosure litigation with respect to petitioner's condominium against
which respondent filed the NFTL. See sec.
6323(a); Lindsay v. Commissioner[Dec.
54,529(M)], T.C. Memo. 2001-285; see also Iannone v.
Commissioner[Dec.
55,618], 122 T.C. at 293 (Federal tax liens are not
extinguished by personal discharge in bankruptcy).
Petitioner's
latest status report indicates petitioner is working with a revenue
officer to attempt to reach agreement with respondent on his outstanding
tax liabilities. If that is so, we commend respondent for displaying
extraordinary patience and forbearance in attempting to continue to work
with petitioner. See, e.g., Montgomery v. Commissioner[Dec.
55,618], 122 T.C. at 10 (the substantive and procedural
protections contained in sections
6320 and 6330 reflect congressional intent that the
Commissioner collect the correct amount of tax, and do so by observing
all applicable laws and administrative procedures).
In the
meantime, we have sustained respondent's lien; respondent has complied
with all requirements for its validity. In any event, we do not intend
to subject respondent's ability to collect petitioner's tax liabilities
to further jeopardy.
To reflect the
foregoing,
Decision
will be entered for respondent.
1
The Commissioner has previously represented to this Court that the term
"substitute for return" (SFR) is a term used by the
Commissioner for returns or partial returns prepared by the Commissioner
where the taxpayer did not file a return. See Swanson v. Commissioner [Dec.
55,280], 121 T.C. 111, 112 n.1 (2003). The term
"SFR" has also been used to describe a return prepared by the
Commissioner under sec.
6020(b). There is no record evidence to prove or disprove
respondent's assertion in his brief that the substitutes for return in
this case meet the requirements of sec.
6020(b). For convenience, we refer to the returns prepared by
respondent as SFRs.
2
Unless otherwise indicated, all section references are to the Internal
Revenue Code, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
3
On Mar. 8, 1999, respondent sent petitioner a final notice of intent to
levy and notice of the right to a hearing with respect to his total
unpaid tax liabilities; petitioner did not file a timely request for a sec.
6330 hearing. After an equivalent hearing, respondent upheld
the proposed levy. We do not have jurisdiction to consider the proposed
levy. See infra p. 16. However, because petitioner has conflated the
lien and levy issues and made some of the same arguments with respect to
both of them, we sometimes refer to the proposed levy in considering
petitioner's arguments against the lien.
4
As of Jan. 6, 2003, petitioner had filed returns for his 1995 and 1996
tax years.
5
Respondent did not determine penalties for petitioner's 1993 tax year.
6
The Feb. 14, 2000, letter was not part of the record.
7
Petitioner's mailing of the petition was a timely filing on the last day
of the 30-day period specified by secs.
6320(c) and 6330(d),
as extended by Rule 25. Aug. 25 and 26, 2001, were a Saturday and
Sunday, respectively, and petitioner mailed the petition on Monday, Aug.
27, 2001. See Guerrier v. Commissioner [Dec.
54,605(M)], T.C. Memo. 2002-3.
8
Petitioner referred to respondent's alleged levies that occurred in
January 1998 that were not part of the record. To the extent that
petitioner refers to respondent's collection activities before July 22,
1998, we have no jurisdiction to review them. See Internal Revenue
Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.
3401, 112 Stat. 746 (which created new sec.
6330 and provided for an effective date of 180 days after
July 22, 1998); see also Van Es v. Commissioner [Dec.
54,080], 115 T.C. 324, 327-328 (2000).
9
In his petition and during trial, petitioner conflated the lien and levy
issues. We do not have jurisdiction to consider any of petitioner's
arguments with respect to respondent's proposed levy including
petitioner's argument that his appeal of the rejection of his
installment agreement request would preclude respondent's proposed levy.
See supra p. 16.
Fletcher
H. Hyler v. Commissioner.
Docket No. 11023-01L , T.C. Memo. 2002-321, 84 TCM 717, Filed December
30, 2002. [Appealable, barring stipulation to the contrary, to CA-9.
--CCH.]
[Code
Sec. 6213]
Notice of deficiency: Last-known address. --
The IRS
mailed notices of deficiency to an individual's last known address,
which was the address shown on the taxpayer's most recent return at the
time the notice was issued. The taxpayer failed to show that he provided
the IRS with clear and concise notice of a change of address, or that
the IRS knew of a change of his address and did not exercise due
diligence in ascertaining his correct address. The taxpayer's use of a
new address in dealings with IRS employees who were not involved with
issuing deficiency notices did not require them to compare such address
to the last known address on file. Further, his submission of a Form
4868 seeking an automatic extension of time to file a return did not
indicate that it was intended as a notification of change of address.
[Code
Sec. 6320]
Notice of lien: Due process. --
An
individual was not denied due process with respect to a notice of tax
lien. The IRS met the requirements of its policy statement regarding
filing notice of tax lien; the Tax Court noted that policy statements,
however, do not confer enforceable rights on taxpayers. The IRS was not
required to send to the taxpayer notice of intent to file the notice of
tax lien prior to filing such notice. His contention that he had been
denied due process due to an accumulation of procedural mistakes on the
part of the IRS also was rejected.
[Code
Secs. 6501 and 6651]
Assessment of taxes and penalties: Statute of limitations. --
The IRS's
assessment of taxes and penalties against an individual was not barred
by the three-year statute of limitations after the taxpayer filed his
return. The assessments were made within the applicable limitations
period and were valid. The taxpayer failed to show that failure to file
penalties should have been abated because of prior administrative action
and presented no evidence of error in the determination of taxable
income or the calculations of his tax liability. His reliance on his
assistant to file a timely return when he could have ascertained its due
date did not constitute reasonable cause to abate penalties for late
filing. Finally, the taxpayer's contention that the IRS conducted an
unauthorized second examination of his books and records was rejected.
[Code
Sec. 7811]
Notice of deficiency: National Taxpayer Advocate directive. --
Notices of
deficiency issued to an individual regarding two tax years were not
barred by a directive from the National Taxpayer Advocate's office. The
Taxpayer Advocate actively assisted the taxpayer during the time he had
an administrative claim for damages pending, including moving the locus
for the dispute and requesting that the IRS cease collection actions
until the taxpayer's claim had been considered. However, there was no
credible support for his contention that the Taxpayer Advocate barred
the issuance of any notices of deficiency. --CCH.
Fletcher H.
Hyler, pro se. Thomas R. Mackinson, for the respondent.
MEMORANDUM
FINDINGS OF FACT AND OPINION
COHEN, Judge:
After conducting a hearing, respondent sent to petitioner a Notice of
Determination Concerning Collection Actions(s) Under Section 6320 and/or
6330. The notice of determination informed petitioner that the Appeals
officer declined to invalidate assessments of Federal income taxes for
petitioner's 1995 and 1997 taxable years and declined to withdraw the
Notice of Federal Tax Lien. After concessions, the issues for decision
are: (1) Whether notices of deficiency regarding petitioner's tax
liabilities for 1995 and 1997 were barred by a directive from the
National Taxpayer Advocate's office; (2) whether notices of deficiency
for 1995 and 1997 were sent to petitioner's last known address; (3)
whether petitioner was denied due process with respect to the notice of
lien; and (4) whether assessment of taxes and penalties for 1995 was
barred by the statute of limitations or otherwise violated applicable
regulations. Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended.
FINDINGS
OF FACT
Some of the
facts have been stipulated, and the stipulated facts are incorporated in
our findings by this reference. Petitioner resided in
Portola Valley
,
California
, at the time he filed his petition.
Petitioner
holds at least one advanced academic degree and has lectured at the
Stanford School of Business. During the years in issue, petitioner and
his spouse owned a marketing corporation, Logical Marketing, Inc.
Petitioner served as its chief executive officer.
On or about
March 9, 1998, petitioner agreed to a decision in this Court at docket
No. 25288-96 determining a deficiency in income tax due from him for
1993 in the amount of $57,255 and a penalty under section 6662(a) in the
amount of $11,451. At the time the notice of lien involved in this case
was filed, some part of the deficiency for 1993 had not been paid.
Petitioner's 1995 Federal Tax Return
Petitioner
obtained an extension to August 15, 1996, to file his 1995 Federal
income tax return. On February 17, 1997, respondent sent to petitioner a
delinquency notice requesting that he file his 1995 return. The Internal
Revenue Service (IRS) received an unsigned and undated 1995 return for
petitioner on March 31, 1997; the return gave an address for petitioner
in
Woodside
,
California
.
Shortly
thereafter, the IRS made a mathematical adjustment to the 1995 income
tax return relating to whether petitioner should receive credit for
$3,800 in estimated tax payments or tax payments from a prior year
against his tax liability of $3,857.41. The IRS sent to petitioner a
notice of balance due. On July 25, 1997, the IRS filed a Notice of
Federal Tax Lien for 1995 and for taxes outstanding for other periods.
In July 1998, a payment of $6,748.62 was applied to the 1995 liability.
This amount included tax of $3,857.41, an estimated tax penalty of
$210.58, a late filing penalty of $867.92, a failure to pay tax penalty
of $771.48, and assessed interest totaling $1,041.23. After the payment,
the IRS abated $250.73 of the previously assessed failure to pay tax
penalty and the entire $867.92 late filing penalty. The IRS also abated
$185.51 of the assessed interest. These abatements resulted in a credit
of $1,304.16 in favor of petitioner, which was applied to his
outstanding liabilities for 1993.
Revenue Agent
Brian Rausch (Rausch) began an examination of other aspects of
petitioner's 1995 income tax return on December 31, 1997. Connie Stone
(Stone), petitioner's sister and a resident of
Virginia
, represented petitioner. Stone falsely represented that she was
licensed as a certified public accountant. The examination focused on
Schedule C, Profit or Loss From Business, deductions claimed by
petitioner. During the examination, Stone requested that petitioner's
address be changed to her address in
Henry
,
Virginia
. The IRS entered this change into its records during the week of August
16, 1998. On August 18, 1998, the IRS received petitioner's 1997 Federal
income tax return, which was timely filed pursuant to an extension of
time. This return bore the Woodside address. Its receipt caused the IRS
again to change its records, during the week of October 25, 1998, to
reflect that petitioner's address was once again the Woodside address.
At the end of
November 1998, petitioner moved from the Woodside address to
Portola Valley
,
California
. He submitted a mail forwarding request to the U.S. Postal Service
reflecting his move.
Petitioner
sold the Woodside property for $1.6 million and acquired the
Portola
Valley
property for $4 million. He estimated that the
Portola
Valley
property was worth $6.5 million when he bought it and $10 million at the
time of trial in May 2002. He applied available funds to the debt on his
Portola
Valley
residence rather than to his outstanding tax liabilities (acknowledged
at $67,000) because of the perceived necessity of maintaining his
residence and his lifestyle for business reasons.
On February 3,
1999, Rausch sent a 30-day letter explaining proposed deficiencies for
1995. In response, Stone filed a timely protest requesting that the
proposed deficiency for 1995 be reviewed by the IRS Appeals Division.
Appeals Officer Lawrence Dorr (Dorr) of the San Francisco Appeals Office
undertook the requested review. Beginning in April 1999, he sent at
least four contact letters to Stone and spoke with her on the telephone
on at least one occasion. During the course of their discussions, Stone
did not inform Dorr that petitioner had moved from the Woodside address
shown on his 1997 return.
Stone did,
however, send to Dorr a facsimile cover sheet requesting more time to
submit information. On June 25, 1999, Dorr replied in a letter stating
that, if his office did not see some progress on the matter within 2
weeks, it would be necessary to issue a notice of deficiency. Stone did
not reply to that letter, and, on August 19, 1999, the San Francisco
Appeals Office sent a notice of deficiency for 1995. The notice proposed
a deficiency of $65,975 and an addition to tax of $16,494 for late
filing, plus an accuracy-related penalty of $13,195.07. The notice was
sent by certified mail to petitioner at the Woodside address, and a copy
was sent to Stone in
Henry
,
Virginia
. Stone received the notice of deficiency but did not inform petitioner,
believing that some contacts she had made with the Office of the
Taxpayer Advocate precluded further action by the IRS.
Petitioner did
not file a petition with this Court with respect to the 1995 deficiency
during the time permitted, which expired November 17, 1999. On February
7, 2000, the deficiency for 1995 was assessed. The amounts assessed have
not been paid.
Petitioner's 1997 Federal Income Tax Return
On July 16,
1999, the
Philadelphia
Service
Center
sent a notice of deficiency for 1997 by certified mail to petitioner at
the Woodside address. That notice contained a mathematical computation
based on failure to calculate the alternative minimum tax. Petitioner
did not file a petition with this Court seeking review of the 1997
deficiency. That deficiency was assessed on December 20, 1999, and has
not been paid. Petitioner subsequently submitted an amended 1997 return.
Petitioner's 1998 Federal Income Tax Return
Sometime
before August 18, 1999, petitioner submitted an unsigned Form 4868,
Application for Automatic Extension of Time To File U.S. Individual
Income Tax Return for 1988. The Form 4868 listed petitioner's address as
the
Portola
Valley
address. The Form 4868 did not contain petitioner's Woodside address,
nor did it state that the application was intended as a notification of
a change of address. The IRS did not receive a 1998 Federal income tax
return from petitioner until May 14, 2001. This was the first time that
petitioner had submitted a Federal income tax return that reflected
petitioner's Portola Valley address. Petitioner's taxable year 1998 is
not otherwise before the Court.
Petitioner's Suit for Damages
Petitioner had
some complaints about IRS collection activities. Petitioner and Stone
contacted the Office of the Taxpayer Advocate concerning petitioner's
complaints. They visited that office in
Washington
,
D.C.
, in February 1999 and provided the
Portola
Valley
address to Sharese Stevens of that office. He filed an administrative
claim for damages with the District Director in
Oakland
,
California
, on July 15, 1999. The claim listed petitioner's address as the
Portola
Valley
address. The claim did not contain petitioner's Woodside address, nor
did it state that the claim was intended as a notification of a change
of address.
At the request
of the National Taxpayer Advocate, consideration of petitioner's
administrative claim was transferred from
Oakland
,
California
, to
Seattle
,
Washington
. The Office of the Taxpayer Advocate also requested suspension of
collection activities during the consideration of petitioner's
administrative claim, and the IRS did not undertake collection
activities while petitioner's claim was pending.
In the Seattle
Appeals Office, petitioner's claim was assigned for review to Special
Procedures Advisor Jill Pace (Pace), who received it on August 6, 1999.
On August 11, 1999, Pace sent to petitioner a form letter regarding the
possibility of third-party contacts; her letter was sent to the
Portola
Valley
address that was on petitioner's damages claim. Pace did not check IRS
records to determine an alternate address for petitioner, and she was
unaware that the address used by petitioner on the administrative claim
was a new address. During her review of the administrative claim, Pace
met with petitioner and Stone. Neither petitioner nor Stone informed
Pace of petitioner's change of address the previous November. Petitioner
did, however, provide a Form 2848, Power of Attorney and Declaration of
Representative, appointing Stone as his representative for multiple
income tax periods including 1993, 1995, and 1997.
On December
28, 1999, the holder of a deed of trust on petitioner's residence
commenced a nonjudicial foreclosure proceeding with the filing of a
Notice of Default and Election to Sell Under Deed of Trust. Petitioner
did not inform the IRS of the default or the scheduling of the
foreclosure sale.
On February
18, 2000, the District Director in
Seattle
, Pace's superior, denied petitioner's administrative claim for damages.
Petitioner engaged an attorney, Richard R. Sayers (Sayers), to file a
lawsuit in the United States District Court for the Western District of
Virginia, captioned Logical Marketing, Inc. and Fletcher H. Hyler,
III v.
United States, Civil Action No. 7:00295, in which petitioner sought damages for
IRS collection activities. Petitioner did not authorize Sayers to
represent petitioner before the IRS, and the lawsuit did not seek to
enjoin further efforts to collect petitioner's tax liabilities.
Collection Activities
Petitioner's
collection case was transferred from
Virginia
to
California
and assigned to Revenue Officer David Rosado (Rosado) in
Redwood City
,
California
. Rosado obtained petitioner's
Portola
Valley
address from the IRS computer system, which had been updated during the
12th week of the year 2000. At petitioner's behest, Rosado spoke to
Stone on April 17, 2000, and informed her that he was considering filing
a notice of Federal tax lien. Around this time, Stone received
transcripts for the years 1993, 1995, and 1997 for petitioner's
individual accounts.
On April 19,
2000, Rosado wrote to Stone. His letter noted that he and Stone had
discussed a monthly payment plan for petitioner's 1993 income tax
liability and asked for copies of a number of documents relating to
petitioner's financial status. The letter further indicated that Rosado
had enclosed transcripts of petitioner's income tax accounts for 1993,
1995, and 1997, as well as IRS publications relating to preparation of
financial statements, to the IRS collection process, and to "Your
Rights as a Taxpayer". The letter concluded as follows:
5.
Notice of Federal Tax Lien. Per our conversation, I will delay Filing
Notice of Federal Tax Lien until May 15, 2000. At that time I will
reevaluate the need for filing. We had discussed alternatives to filing
a Notice of Lien such as the posting of a bond. I would expect your
proposal on this matter no later than 5/15/2000.
6.
You had indicated that notice of assessment for 1995 and 1997 was not
received. Is this correct?
7.
For your information I have requested the administrative case file for
1995 and 1997, so that any issues can be addressed. As soon as I receive
these files, I will share it with you. I also agreed to delay filing
Notice of Federal Tax Lien for these periods until we can address the
assessments. If there are no unresolved issues regarding assessments,
then collection of the balance due will be addressed. Will also address
filing of Notice of Federal Tax Lien.
8.
During the interim, please advise Mr. Hyler that he can begin sending
payments of $5000 to my office. Please note that penalties and interest
continue to accrue on any unpaid balance. This is not an acceptance of a
monthly payment proposal. That will be determined at a later time.
Please have
the completed Collection Information Statement and verification in my
office no later than May 15, 2000. If you have any concerns or
questions, you can reach me at the telephone number listed above. I am
required to advise you that failure to provide the above information by
the May 15, 2000 [sic] may result in enforcement action such as,
issuance of Final Notice, Issuance of Notice of Levy, serving summons,
filing Notice of Federal Tax Lien. Once again do not hesitate to call.
Thank you.
Stone never
sent to Rosado the information that he had requested in the April 19,
2000, letter. Stone did, however, send copies of the letter to
petitioner and to Sayers.
Sayers wrote
to Rosado requesting that collection action be halted until petitioner's
lawsuit against the Government for damages was resolved. Rosado received
that letter on May 11, 2000, and sought legal advice from IRS counsel
regarding whether to proceed with collection while the lawsuit was
pending. On June 5, 2000, IRS counsel advised him that collection could
be pursued.
On June 13,
2000, the IRS sent a Notice of Federal Tax Lien to the County Recorder
in San Mateo, California, for filing, indicating that petitioner had
unpaid Federal income tax liabilities for 1993, 1995, and 1997. On June
16, 2000, the IRS sent to petitioner a Notice of Tax Lien Filing and
Your Right to a Hearing Under I.R.C. 6320 (Notice) for those years. The
notice of lien was recorded in
San Mateo
County
on June 21, 2000. On July 20, 2000, petitioner's counsel timely filed a
request under section 6320 for a hearing.
At the
hearing, petitioner's then counsel Edward T. Perry (who represented
petitioner through trial of this action but was permitted to withdraw at
the conclusion of the testimony and before briefs were due) raised the
following issues:
a)
the filing of the Notice of Federal Tax Lien created a hardship for
petitioner;
b)
the filing of the lien was not justified because the IRS failed to
provide clear notice to petitioner of an intention to file a Notice of
Federal Tax Lien in advance of the lien filing;
c)
the underlying assessment for 1995 was invalid because the statute of
limitations on assessment had expired prior to assessment;
d)
the underlying assessments for 1995 and 1997 were invalid because the
notices of deficiency were not mailed to petitioner's last known
address;
e)
the notice and demand for payment issued for each of the tax years 1995
and 1997 were invalid in that such notices were not mailed to
petitioner's last known address and were issued during a stay of
collection imposed by the Taxpayer Advocate;
f)
the lien filing was defective in that it included the amount of a
failure to file penalty for 1995, and the IRS had abated a previously
assessed delinquency penalty; and
g)
the lien filing was defective in that it included 1997, and petitioner
did not recall an examination for that period.
While the
Appeals process was in effect, the IRS issued Certificates of
Subordination to permit petitioner to refinance his residential property
on August 14, 2000, and again on July 31, 2001.
On August 31,
2001, the Appeals office issued an 8-page determination letter with
respect to the matters raised at the hearing. It reported Appeals's
determination that petitioner's liability for 1993 taxes was not
properly at issue, because that year was the subject of a decision by
this Court. It further determined that, because petitioner had been
provided an opportunity to challenge the 1995 tax liability in the
Appeals Division prior to assessment, the 1995 tax liability (including
the late filing penalty) was not properly at issue in the hearing.
Finally, it determined that no relief was available for either 1995 or
1997 because all administrative requirements had been met and notices of
assessment and demand for payment with respect to those years had been
sent to petitioner.
OPINION
Statutory Framework
Section
6321 imposes a lien in favor of the United States on all
property and rights to property of a person when a demand for the
payment of the person's taxes has been made and the person fails to pay
those taxes. Section 6322 provides that such a lien arises when an
assessment is made. To protect the Government's rights to recover its
unpaid taxes, section
6323(a) provides that the IRS may file a notice of Federal
tax lien in order to establish the priority of its claims against the
taxpayer's other creditors.
In the
Internal Revenue Service Restructuring and Reform Act of 1998 (RRA
1998), Pub. L. 105-206, sec. 3401, 112 Stat. 746, Congress enacted
sections 6320 (pertaining to liens) and 6330 (pertaining to levies) to
provide protections for taxpayers in tax collection matters. Section
6320 requires that the Secretary notify a person who has
failed to pay a tax liability of the filing of a notice of lien under section
6323. The notice required by section 6320 must be provided
not more than 5 business days after the day of the filing of the notice
of lien, pursuant to section
6320(a)(2). Section 6320 further provides that the person so
notified may request administrative review of the matter (in the form of
a hearing) within 30 days beginning on the day after the 5-day period.
Under section
6320(c), the hearing generally is to be conducted consistent
with the procedures set forth in section 6330(c), (d), and (e). Section
6330(c) permits the person notified to raise collection
issues such as spousal defenses, the appropriateness of the
Commissioner's intended collection action, and possible alternative
means of collection. Section
6330(c)(2)(B) provides that the person notified may contest
the existence and amount of the underlying tax liability at a hearing if
that person did not receive a notice of deficiency for the taxes in
question or did not otherwise have a prior opportunity to dispute the
tax liability. See Sego v. Commissioner [Dec.
53,938], 114 T.C. 604, 609 (2000); Goza v. Commissioner
[Dec.
53,803], 114 T.C. 176, 179 (2000).
Section
6330(d) provides for
judicial review of the administrative determination by this Court or by
a Federal District Court, as may be appropriate. Where the validity of
the underlying tax liability is not properly at issue, the Court will
review the Commissioner's administrative determination for abuse of
discretion. Where, however, the validity of the underlying tax liability
is properly at issue, this Court will review the matter on a de novo
basis. Sego v. Commissioner, supra at 610; see H. Conf.
Rept. 105-599 at 266 (1998), 1998-3 C.B. 747, 1020.
The Notices of Deficiency Regarding Petitioner's Tax Liabilities
for 1995 and 1997 Were Not Barred by a Directive From the Office of the
Taxpayer Advocate
Within the IRS
is an Office of the Taxpayer Advocate, headed by the National Taxpayer
Advocate. Sec.
7803(c). Among the functions of the Office of the Taxpayer
Advocate is to "assist taxpayers in resolving problems with the
Internal Revenue Service". Sec.
7803(c)(2)(A)(i). A taxpayer seeking such assistance may file
an application with the Office of the Taxpayer Advocate for a
"Taxpayer Assistance Order" (TAO), which may be issued if the
National Taxpayer Advocate determines that the taxpayer is or is about
to incur "a significant hardship as a result of the manner in which
the internal revenue laws are being administered" by the IRS. Sec.
7811(a)(1)(A). The Office of Taxpayer Advocate is not
restricted to issuance of TAOs in carrying out its functions of aiding
taxpayers; section
7811(e) provides that none of the provisions of section
7811 prevents the National Taxpayer Advocate from taking any
action in the absence of a taxpayer application.
In this case,
the Office of the Taxpayer Advocate actively assisted petitioner during
the time that he had an administrative claim for damages pending. These
activities included moving the locus of the dispute from San Francisco
to Seattle and requesting that the IRS cease collection actions until
petitioner's claim had been considered.
Section
7811(b)(2)(A) explicitly
provides that a TAO may require cessation of any action with respect to
the taxpayer "under chapter 64 (relating to collection)". The
issuance of a notice of deficiency, however, is provided for in chapter
63, relating to assessments. Further, with exceptions not applicable
here, a TAO may direct cessation of action under a provision other than
chapter 64 only if that provision is "specifically described by the
National Taxpayer Advocate in such order." Sec. 7811(b)(2)(D).
There is no
credible support for petitioner's claim that a TAO barred the issuance,
in July and August 1999, of the deficiency notices for his 1995 and 1997
income taxes. No copy of any TAO is in the record. Pace testified that
the Office of the Taxpayer Advocate had requested a suspension of
"the collection action". During July and August, there was no
"collection action" related to petitioner's 1995 and 1997
taxable years. Petitioner's representative, Stone, claims to have been
told in February 1999 that "no action would be taken." Her
testimony, however, fails to make clear the context in which she
allegedly received this advice. We do not believe that the request of
the Office of the Taxpayer Advocate extended beyond collection actions
to preclude the issuance of notices of deficiency for 1995 and 1997.
The Notices of Deficiency for 1995 and 1997 Were Sent to
Petitioner's Last Known Address
Absent special
circumstances, the IRS may not assess a deficiency in tax until after a
valid notice of deficiency has been sent to the taxpayer. For that
purpose, mailing a notice of deficiency to the taxpayer at the
taxpayer's "last known address" is sufficient regardless of
actual receipt or nonreceipt. Sec.
6212(b); see Pietanza v. Commissioner [Dec. 45,576],
92 T.C. 729, 735-736 (1989), affd. without published opinion 935 F.2d
1282 (3d Cir. 1991); Shelton v. Commissioner [Dec. 32,842], 63
T.C. 193 (1974).
Absent clear
and concise notice of a change of address, a taxpayer's last known
address is the address shown on the taxpayer's return that was most
recently filed at the time that the notice was issued. King v.
Commissioner [88-2
USTC ¶9521], 857 F.2d 676, 681 (9th Cir. 1988), affg. [Dec.
43,864] 88 T.C. 1042 (1987); Abeles v. Commissioner [Dec.
45,203], 91 T.C. 1019, 1035 (1988); compare sec.
301.6212-2, Proced. & Admin. Regs., effective January 29,
2001. In deciding whether a notice was mailed to a taxpayer at the
taxpayer's last known address, the relevant inquiry "pertains to
*** [the Commissioner's] knowledge rather than to what may in fact be
the taxpayer's most current address." Frieling v. Commissioner
[Dec. 40,284], 81 T.C. 42, 49 (1983).
In order to
supplant the address shown on the most recent return, a taxpayer must
clearly indicate that the former address is no longer to be used. Tadros
v. Commissioner [85-2
USTC ¶9448], 763 F.2d 89, 91-92 (2d Cir. 1985); Alta
Sierra Vista, Inc. v. Commissioner [Dec.
32,649], 62 T.C. 367 (1974), affd. without published opinion
538 F.2d 334 (9th Cir. 1976). A taxpayer's use of an address different
from that on the last-filed return in correspondence with officials of
the IRS does not constitute clear and concise notice of a change of
address. King v. Commissioner, supra at 681. The
acquisition of a different address by IRS personnel generally fails to
constitute adequate notice of a change of address when those personnel
are not involved in issuing the statutory notices. In United States
v. Zolla [84-1
USTC ¶9175], 724 F.2d 808, 811 (9th Cir. 1984), the Court of
Appeals for the Ninth Circuit explained:
If we required
agents mailing notices of deficiency to take into account address
information acquired by agents in different divisions in the course of
unrelated investigations, the IRS could ensure that notices were validly
addressed only by systematically recording in a central file all address
information acquired in any fashion. We decline to require the IRS to do
that. *** it would impose an unreasonable administrative burden on the
IRS. ***
In this case,
the notices of deficiency were mailed to the Woodside address listed on
petitioner's 1998 return --the last return filed by petitioner prior to
the mailing of the notices in July and August 1999. Consequently, the
notices of deficiency were mailed to petitioner at his last known
address, unless petitioner can show otherwise.
Petitioner has
not demonstrated that, before the 1995 and 1997 notices of deficiency
were mailed, he provided the IRS with clear and concise notice of a
change of address. Nor has he shown that, prior to the mailing of the
notice of deficiency, the IRS knew of a change in petitioner's address
and did not exercise due diligence in ascertaining petitioner's correct
address. See Abeles v. Commissioner, supra; Alta Sierra
Vista, Inc. v. Commissioner, supra at 374.
Petitioner
maintains that he provided notification of his Portola Valley address on
several occasions. None of those occasions, however, provided the clear
and concise notice needed to charge the IRS in the summer of 1999 with
knowledge that Portola Valley was the last known address.
Petitioner
principally urges that the IRS received clear and concise notice of an
address change when, in 1998, Rausch was conducting an examination of
petitioner's 1995 return. During this examination, Stone informed Rausch
that petitioner's address had changed to Henry, Virginia. The IRS
entered this change into its records but soon thereafter received
petitioner's 1997 Federal income tax return. This return bore the
Woodside address. Its receipt caused the IRS to change its records,
during the week of October 25, 1998, to reflect that petitioner's
address was once again the Woodside address. That address remained
unchanged on IRS records until late in 2001, when petitioner's 1998
Federal income tax return was filed. In July and in August 1999, when
the 1995 and 1997 notices of deficiency were mailed, IRS records
indicated that petitioner's address was the Woodside address, the one
appearing on his last-filed Federal income tax return. There is no
indication that either notice was returned to the IRS undelivered, so
there was no reason for the IRS to conduct a further search for
petitioner's address. (Petitioner speculated at trial that mail may have
been stolen from his mailbox at the Portola Valley residence. If that
were the case, however, it would not be attributable to any error on the
part of the IRS.)
In any event,
petitioner did not move to Virginia. The Virginia address was the
address of Stone. Subsequent correspondence between Dorr and Stone
indicated that petitioner continued to live in California while Stone
lived in Virginia. Moreover, a copy of the 1995 notice was sent to the
Henry, Virginia, address. Stone neglected to advise petitioner of
receipt of that notice. Petitioner seeks to disavow some communications
sent to Stone. His inconsistent positions concerning her authority and
her misrepresentations of her capacity are not attributable to
respondent. See Lefebvre v. Commissioner [Dec.
41,151(M)], T.C. Memo. 1984-202, affd. [85-1
USTC ¶9351] 758 F.2d 1340 (9th Cir. 1985). Any confusion was
created by petitioner and his representative, and their communications
cannot be characterized as clear and concise.
We are
unpersuaded by petitioner's contentions that, on other occasions, he or
Stone had provided clear and concise notification of his new Portola
Valley address before the 1995 and 1997 deficiency notices were mailed.
Those occasions involved persons who were either with the Office of the
Taxpayer Advocate, the Special Procedures Office, or the Collection
Division. Petitioner's use of a new address in dealings with persons who
were not involved with the issuing of deficiency notices did not require
them to compare the address petitioner used to the last known address
otherwise on file. United States v. Zolla [84-1
USTC ¶9175], 724 F.2d at 811; see also Rev. Proc. 90-18,
1990-1 C.B. 491.
Another
notification of a new address, petitioner argues, came when IRS received
an unsigned Form 4868 seeking an automatic extension of time within
which petitioner might file his 1998 Federal income tax return. The Form
4868, which was mailed sometime prior to August 18, 1999, used the
Portola Valley address. However, the Form 4868 does not indicate that it
is intended as a notification of a change of address. Under these
circumstances, the submission of a Form 4868 does not constitute the
requisite notification that the address it contains is a new address for
the taxpayer. Monge v. Commissioner [Dec.
45,827], 93 T.C. 22, 32 (1989).
We conclude
that petitioner's haphazard use of his new address did not constitute
"clear and concise written notification". He fell short of
placing the examination division on notice that the Woodside address,
the address appearing on his last-filed return, was not his last known
address. We conclude that the notices of deficiency for 1995 and 1997,
which were mailed to the Woodside address, were valid.
Due Process Was Not Offended by Efforts To Collect Petitioner's
Tax Liabilities
The IRS has
published a list of policies regarding the administration of the
internal revenue laws in the Internal Revenue Manual. One section of the
Manual describes the filing of notices of tax lien, as follows:
(1)
Notices of lien generally filed only after taxpayer is contacted in
person, by telephone or by notice: A notice of lien shall not be
filed, except in jeopardy assessment cases, until reasonable efforts
have been made to contact the taxpayer in person, by telephone or by a
notice sent by mail, delivered in person or left at the taxpayer's last
known address, to afford him/her the opportunity to make payment. All
pertinent facts must be carefully considered as the filing of the notice
of lien may adversely affect the taxpayer's ability to pay and thereby
hamper or retard the collection process. [1 Administration, Internal
Revenue Manual (CCH), sec. 1.2.1.5.13, at 3002-3003.]
Policy
statements in the Internal Revenue Manual do not confer enforceable
rights on taxpayers. Vulcan Oil Tech. Partners v. Commissioner [Dec.
52,609], 110 T.C. 153, 161 (1998), affd. without published
opinions sub nom. Tucek v. Commissioner [99-2
USTC ¶50,942], 198 F.3d 259 (10th Cir. 1999), Drake Oil
Tech. Partners v. Commissioner [2000-1
USTC ¶50,378], 211 F.3d 1277 (10th Cir. 2000). In any event,
it is apparent to us that the IRS met the requirements of the policy
statement before filing the notice of lien. Early in 2000, Rosado
contacted petitioner's representative, Stone, and discussed with her
payment of amounts owing. His letter of April 19, 2000, enclosed
transcripts of petitioner's income tax accounts for 1993, 1995, and
1997. It suggested that petitioner begin making payments of $5,000
monthly to reduce the amount of tax owing and resulting interest
charges. The letter requested information from petitioner and explained:
I am required
to advise you that failure to provide the above information by the May
15, 2000 [sic] may result in enforcement action such as, issuance of
Final Notice, Issuance of Notice of Levy, serving summons, filing Notice
of Federal Tax Lien. ***
This letter, a
copy of which Stone forwarded to petitioner, adequately provided
petitioner with the opportunity to make payment of the liabilities
specified and warned him of the consequences of doing nothing.
Petitioner
further argues that respondent was required to send to him notice of
intent to file the notice of tax lien before the notice was actually
filed, but petitioner is incorrect. Section
6320 only requires that notice be sent to the taxpayer within
5 days after the notice of tax lien has been filed.
Petitioner
argues that respondent violated some procedures set forth in the Fair
Debt Collection Practices Act (FDCPA), Pub. L. 95-109, 91 Stat. 874
(1977), 15 U.S.C. sec.
1692 (2000). By its terms, however, that act does not apply
to employees of the Government whose collection activities are part of
their jobs. See 15 U.S.C. sec. 1692a(6) (2000). Congress has amended the
Internal Revenue Code to require respondent to observe some FDCPA
procedures. See sec.
6304 as added by RRA 1998, sec. 3466, 112 Stat. 768; see also
H. Conf. Rept. 105-599, at 291 (1998), 1998-3 C.B. 747, 1045.
Petitioner's reliance upon FDCPA practices that Congress has not
included in the Internal Revenue Code is unavailing.
Nor has
petitioner convinced us that respondent has deprived him of
constitutional due process by a perceived accumulation of procedural
mistakes. As we noted at trial, mistakes have been made by both sides in
this dispute. None of respondent's mistakes, however, have deprived
petitioner of his right to notice and a fair hearing, either at the
administrative level or before this Court.
The Assessment of Taxes and Penalties for 1995 Was Valid
Respondent
concedes that petitioner did not receive a copy of the notice of
deficiency for 1995 and that the underlying liability for 1995 is
therefore properly considered in this proceeding. Whether the
limitations period has expired constitutes a challenge to the underlying
tax liability. Boyd v. Commissioner [Dec.
54,495], 117 T.C. 127, 130 (2001).
Petitioner
contends that the statute of limitations bars assessment of his
liabilities for 1995 and that the additions to tax should be abated
because of prior administrative action. He has not presented any
evidence of error in the determination of taxable income or the
calculations of tax liability. Section
7491(a) does not apply because the examination of
petitioner's liabilities in issue commenced before the effective date of
that section.
The
Commissioner has 3 years from the time a return is filed to issue a
notice of deficiency with respect to income tax. See secs. 6212(a),
6213(a), 6501(a). Section
7502(a)(1) provides that, in certain circumstances, a timely
mailed return will be treated as though it were timely filed. Section
7502(a)(2) provides that the timely mailing/timely filing rule applies
if the postmark date on an envelope falls within the prescribed period
on or before the prescribed date. To establish that a return has been
timely filed, we require reliable testimony or other corroborating
evidence of the circumstances surrounding the return's preparation and
mailing. See, e.g., Estate of Wood v. Commissioner [Dec.
45,604], 92 T.C. 793 (1989), affd. [90-2
USTC ¶50,488] 909 F.2d 1155 (8th Cir. 1990); Mitchell
Offset Plate Serv., Inc. v. Commissioner [Dec. 29,829], 53 T.C. 235,
239-240 (1969); see also Schwechter v. Commissioner [Dec.
53,738(M)], T.C. Memo. 2000-36; Rakosi v. Commissioner
[Dec.
48,878(M)], T.C. Memo. 1993-68, affd. without published
opinion [95-1
USTC ¶50,133] 46 F.3d 1144 (9th Cir. 1995).
Petitioner
argues that Stone timely mailed a 1995 return on his behalf on or before
August 15, 1996. Thus, he concludes, assessment of his 1995 taxes on
February 7, 2000, was beyond the applicable period of limitations. There
is neither reliable testimony nor corroborating evidence, however,
sufficient to prove his claim.
Petitioner
entrusted the preparation and filing of his return to Stone. Stone and
her former office assistant testified about office procedures in 1996.
Stone testified that she stamped petitioner's name on the return. The
assistant testified that the return would have been hand delivered to a
window at the local post office, but no proof of mailing was obtained.
Stone claimed that a check was enclosed with the return and never
cleared the bank, but her testimony about the amount of the check was
inconsistent with the balance shown on the copy of the return later
produced. There was no explanation of the failure to follow up on the
uncleared check. There is no evidence that a 1995 return was received by
the IRS before March 31, 1997, when an unsigned and undated copy was
delivered after an inquiry from the IRS. The record shows that
petitioner was chronically delinquent in his tax obligations, and we
cannot accept these unpersuasive assertions that a particular return was
timely. We conclude that the assessment for 1995 was timely. (We need
not, therefore, address respondent's contention that the return
described by Stone was invalid for lack of petitioner's signature.)
The addition
to tax under section
6651(a) is applicable unless a taxpayer establishes that the
failure to file was due to reasonable cause and not willful neglect.
Petitioner failed to exercise ordinary care and prudence in filing his
1995 return. Stone's office procedures may have contributed to the
failure to make or to prove a timely filing. Nevertheless, reliance on
an agent to file a timely return when the due date of the returns was
ascertainable by the taxpayer does not constitute reasonable cause for
excusing the taxpayer from statutory penalties for late filing. United
States v. Boyle [85-1
USTC ¶13,602], 469 U.S. 241 (1985). Petitioner was aware
that he had not signed a return for 1995. Accordingly, petitioner is
liable for the addition to tax under section
6651(a)(1).
Petitioner
argues that earlier administrative actions of the IRS require a
different result. Petitioner asserts that, because of previous abatement
of $867.92 in late filing penalties, section 6406 operates to estop
respondent from assessing $16,494 in late filing penalties that were
subsequently determined in the notice of deficiency for 1995. Petitioner
is incorrect. Section
6406 precludes review by "any other
administrative or accounting officer, employee or agent of the United
States" (emphasis added) of a decision of the Secretary or his
delegate with respect to a claim by the taxpayer. Secs. 6406,
7701(a)(11)(B). By its terms, section
6406 does not preclude the Secretary or his delegate from
reviewing prior actions. As explained in Hacker v. Commissioner [Dec.
49,126(M)], T.C. Memo. 1993-285, affd. 29 F.3d 632 (9th Cir.
1994):
The
legislative history of section 6406 indicates that such section was
originally added for the purpose of prohibiting review of a decision of
the Secretary of the Treasury (and his delegates, including the
Commissioner) by employees of other agencies, such as the Comptroller
General. See Hearings on H.R. 8245 Before the Senate Comm. on Finance,
67th Cong., 1st Sess. 299-300 (Sept. 1-Oct. 1, 1921); see also Crocker
v. United States [71-1
USTC ¶9465], 323 F. Supp. 718, 724-725 (N.D. Miss. 1971).
Clearly, section
6406 does not estop the Commissioner, or his successor, from
reviewing his own decisions. See E.A. Landreth Co. v. Commissioner
[Dec.
3715], 11 B.T.A. 1, 23 (1928); see also Burnet v. Porter
[2
USTC ¶711] , 283 U.S. 230 (1931); McIlhenny v.
Commissioner, 39 F.2d 356 (3d Cir. 1930), affg. [Dec. 4316] 13 B.T.A. 288 (1928); Estate of Meyer v.
Commissioner [Dec.
31,336], 58 T.C. 69, 71 (1972).
The evidence
before us discloses no reason for the original abatement of $867.92. On
the contrary, the evidence justifies imposition of the late filing
additions.
Petitioner
also contends that respondent conducted an unauthorized second
examination of his books in violation of section
7605(b). Petitioner's error arises from his misreading of the
certificate of assessment and payments. This document indicates that the
matter of petitioner's 1995 tax liabilities was transferred without
assessment from the IRS Examination Division to the IRS Appeals Office
and then, when petitioner's administrative appeal was unavailing, back
to the Examination Division for the assessment of the taxes in issue. It
does not show that there was an unauthorized second examination of
petitioner's books and records with respect to his 1995 taxable year.
Our review of
the procedures used in assessing and collecting petitioner's Federal
income tax liabilities supports the Appeals officer's determination that
the Notice of Federal Tax Lien should not be withdrawn. Petitioner has
not shown that respondent erred in declining to invalidate assessments
of Federal income taxes for 1995 or 1997. The assessments were made
within the applicable period of limitations and were valid.
We have
considered petitioner's other arguments. Many of them relate to matters
not properly before the Court or not supported by evidence or authority.
All lack merit.
[Collection Due Process hearings: Procedures: Form 4549: Petition for
redetermination: Waiver: Notice of deficiency.]Petitioners (Ps) filed
returns for 1992-94. Respondent (R) examined those returns, and Ps
signed a Form 4549, Income Tax Examination Changes, in which they waived
the right to contest their tax liability in the Tax Court and consented
to the immediate assessment and collection of tax for 1992-94. R issued
to Ps a notice of intent to levy with respect to Ps' taxes due for tax
years 1992-94. Ps requested a hearing pursuant to sec. 6330(b), I.R.C.,
solely to dispute the amount of their tax liabilities for 1992-94. R
sent a notice of determination to Ps stating that collection of their
tax liability for 1992-94 would proceed. Ps petitioned this Court to
review R's determination. R subsequently filed a motion for summary
judgment, to which Ps did not respond.Held: Ps may not contest
their underlying tax liability for tax years 1992-94 because, by signing
Form 4549, they consented to the immediate assessment and collection of
tax for those years.
Francisco and
Angela Aguirre, pro se. David C. Holtz, for the respondent.
OPINION
COLVIN, Judge:
This matter is
before the Court on respondent's motion for summary judgment. For
reasons stated below, we will grant respondent's motion.
All section
references are to the Internal Revenue Code as amended, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
Background
Petitioners
are married and lived in Hacienda Heights, California, when they filed
their petition.
Petitioners
filed joint returns for 1992, 1993, and 1994. Respondent examined
petitioners' 1992, 1993, and 1994 returns in 1995. On July 13, 1995,
petitioners signed a Form 4549, Income Tax Examination Changes, in which
they consented to the immediate assessment and collection of tax for
1992, 1993, and 1994. It stated:
Consent to
Assessment and Collection--I do not wish to exercise my appeal rights
with the Internal Revenue Service or to contest in United States Tax
Court the findings in this report. Therefore, I give my consent to the
immediate assessment and collection of any increase in tax and
penalties, and accept any decrease in tax and penalties shown above,
plus any additional interest as provided by law. I understand that this
report is subject to acceptance by the District Director.
In 1999,
respondent sent to petitioners a Notice of Intent to Levy and Notice of
Your Right to a Hearing relating to petitioners' 1992-94 tax years.
Petitioners then filed a Form 12153, Request for a Collection Due
Process Hearing, for those tax years. 1
Petitioners requested the hearing solely to dispute the correctness of
their underlying tax liabilities. On August 22, 2000, respondent sent
petitioners a Notice of Determination Concerning Collection Action(s)
Under Section 6320 and/or 6330 (the determination letter), in which
respondent stated that collection from petitioners of their tax
liability for 1992-94 would proceed. On September 5, 2000, petitioners
filed a petition for lien or levy action under section 6320(c) or
6330(d).
Respondent
filed a motion for summary judgment on April 13, 2001. On April 17,
2001, the Court issued an order directing petitioners to file a response
to respondent's motion. The order included a reminder to the parties
that the case would be called from the calendar at the April 30, 2001,
Los Angeles, California, trial session. Petitioners failed to file a
response to respondent's motion, and they did not attend, or have
someone appear on their behalf at, the calendar call.
Discussion
A.
Contentions of the Parties
Respondent
contends, inter alia, that petitioners waived their right to challenge
collection of their tax liability for 1992-94 because they signed Form
4549 consenting to the immediate assessment and collection of their tax
liability for those years.
In their
petition, petitioners stated as a basis for relief only that:
We disagree
with the determination, because although we were present at the time of
the original audit, many of our deductions were disallowed when they
were correct. We have been requesting an audit reconsideration to
present general ledegers [sic] and documents properly organized in order
to verify our deductions in a cohesive manner.
B.
Summary Judgment
Summary
judgment is intended to expedite litigation and avoid unnecessary and
expensive trials. Fla. Peach Corp. v. Commissioner [Dec. 44,689],
90 T.C. 678, 681 (1988). We may grant summary judgment if the pleadings,
answers to interrogatories, depositions, admissions, affidavits, and any
other acceptable materials show that there is no genuine issue of
material fact and a decision may be rendered as a matter of law. Rule
121(b); Sundstrand Corp. v. Commissioner [Dec. 48,191], 98 T.C.
518, 520 (1992), affd. [94-1 USTC ¶50,092] 17 F.3d 965 (7th Cir. 1994);
Zaentz v. Commissioner [Dec. 44,714], 90 T.C. 753, 754 (1988).
The moving party bears the burden of proving that there is no genuine
issue of material fact. Dahlstrom v. Commissioner [Dec. 42,486],
85 T.C. 812, 821 (1985); Jacklin v. Commissioner [Dec. 39,278],
79 T.C. 340, 344 (1982).
C.
Analysis
No genuine
issues of material fact preclude us from deciding this matter. Rule
121(b). We conclude that respondent is entitled to summary judgment.
First, by signing Form 4549, petitioners consented to the immediate
assessment and collection of their tax liability for 1992-94. See Hudock
v. Commissioner [Dec. 33,519], 65 T.C. 351, 363 (1975) (Form 4549 is
evidence of the taxpayer's consent to the immediate assessment and
collection of the proposed deficiency). Petitioners cannot now challenge
the tax liability to which they have consented.
Petitioners
signed the Form 4549 in 1995, before enactment in 1998 2
of sections 6320 and 6330, which provide procedures for an Appeals
Office hearing and judicial review of collection actions. However, our
deficiency jurisdiction existed in 1995. By signing the Form 4549,
petitioners explicitly waived the right to contest in the Tax Court
their tax liability for the years included in the Form 4549. Petitioners
thus expressly waived the opportunity to obtain prepayment judicial
review of their tax liability for those years. Petitioners requested the
section 6330 hearing and filed their petition in this case solely to
dispute the correctness of their underlying tax liabilities. The fact
that section 6330 now provides an opportunity to contest tax liability
for taxpayers who did not receive a notice of deficiency, sec.
6330(c)(2)(B), provides no consolation to petitioners who themselves
made the choice not to receive such notice, see Sego v. Commissioner
[Dec. 53,938], 114 T.C. 604, 611 (2000) (taxpayers who deliberately
refused to accept delivery of the notices of deficiency repudiated the
opportunity to contest the notices of deficiency in the Tax Court).
Second, by
failing to file a response to respondent's motion and to attend the
calendar call, or have someone appear on their behalf, petitioners
waived their right to contest the motion. Rule 121(d); Lunsford v.
Commissioner, 117 T.C.--(2001).
Accordingly,
we will grant respondent's motion for summary judgment.
An
appropriate order and decision will be entered.
1
The record does not indicate whether respondent conducted a hearing in
petitioners' case.
2
Secs. 6320 and 6330 were enacted as part of the Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3401, 112
Stat. 685, 746
Liens and levies: Notice of federal tax lien: Collection due process
hearing.--A pipefitter was not entitled to relief under Code Sec. 6320
because the notice of the filing of a lien that was mailed to him
predated the applicability of the statute.
Liens and levies: Notice of intent to levy: Collection due process
hearing: Judicial review: Abuse of discretion, no evidence of.--The
IRS's determination to proceed with collection pursuant to a lien filed
against the wages of a pipefitter was not an abuse of discretion. While
the taxpayer was entitled to challenge the assessment for all of the tax
years at issue since he did not receive a deficiency notice for any of
those years, he did not offer any credible evidence to support his
contention that he did not owe the tax as assessed. Moreover, he failed
to explain why his offer to pay $50 a month and forgo tax refunds in the
future were appropriate alternatives to levy.
Harry James
Inman, pro se. Edwina L. Charlemagne, for the respondent.
MEMORANDUM
FINDINGS OF FACT AND OPINION
COLVIN, Judge:
Respondent
sent to petitioner a Notice of Determination Concerning Collection
Action(s) Under Section
6320 and/or 6330 in which respondent determined that a levy
on petitioner's wages was appropriate to satisfy petitioner's
outstanding liabilities for Federal income taxes, additions to tax,
interest, and fees. On August 31, 1999, those amounts were as follows:
Unpaid Additions to Tax and Interest
--------------------------------------------
Unpaid
YearIncome Tax Sec. 6651(a) (1) Sec. 6651(a) (2)Interest
Respondent also assessed $18 for a lien fee for 1992.
We must decide
the following issues:
1. Whether
petitioner is entitled to relief under section
6320 . We hold that he is not.
2. Whether
petitioner is liable for the amounts determined by respondent (including
additions to tax and interest) for the years 1985, 1986, 1987, 1992,
1994, and 1995. We hold that he is.
3. Whether
respondent may proceed with levy action. We hold that respondent may.
Section
references are to the Internal Revenue Code. Rule references are to the
Tax Court Rules of Practice and Procedure.
Petitioner
lived in Greensboro, North Carolina, when he filed the petition in this
case. Petitioner is a civilian employee of the Defense Department at
Camp Lejeune. He works full time as a pipe fitter for about $20 per
hour.
Petitioner
filed his income tax returns for 1985 on April 19, 1996, for 1986 on
March 27, 1996, for 1987 on April 19, 1996, for 1992 on April 23, 1995,
and for 1994 on March 14, 1996. He timely filed his 1995 tax return.
Respondent
issued a notice of Federal tax lien on September 3, 1996, for 1985,
1986, 1987, 1992, 1994, and 1995, relating to income tax liabilities
that petitioner reported on his return, less withholding credits and
other payments, and including additions to tax for failure to timely
file returns and pay tax, lien fees, and interest.
Respondent
issued a Final Notice, Notice of Intent to Levy and Notice of Your Right
to a Hearing, which petitioner received on February 17, 1999. See secs.
6330 and 6331
. Petitioner filed a request for a hearing. In it, he stated
that "every time I talk to someone I get a different set of
figures", and that no one had explained how he could owe the
amounts sought by respondent. At that hearing, petitioner did not
otherwise contest the underlying tax liability or accept any of the
payment options proposed by respondent. Respondent determined that
petitioner's wages should be levied in a notice of determination
concerning collection actions under section
6330 sent on July 8, 1999. In response, petitioner filed the
petition in this case.
OPINION
A.
The Notice of Lien
Petitioner
contends that he is entitled to relief under section
6320 from the notice of lien. We disagree. Section
6320 was first effective January 19, 1999. See Internal
Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.
3401(d) , 112 Stat. 685, 750. Thus, section
6320 does not apply to the notice of Federal tax lien issued
on September 3, 1996.
B.
Underlying Tax Liability
Respondent did
not send a notice of deficiency to petitioner for 1985, 1986, 1987,
1994, or 1995, but respondent did send a notice of deficiency for 1992.
Respondent does not contend that petitioner may not raise issues
relating to 1992 in this case, in part because it is not clear whether
petitioner received that notice of deficiency. Thus, petitioner may
challenge the underlying liability for all of those years. See sec.
6330(c)(2)(B) (taxpayer may challenge amount of underlying
tax liability if taxpayer did not receive notice of deficiency for
period); Landry v. Commissioner [Dec.
54,224 ], 116 T.C. 60, 62 (2001). However, petitioner has
done so only in the most minimal way, alleging that he does not
understand how he can owe so much, but without offering any credible
evidence or challenging that he is liable for the amounts he reported
late.
C.
The Levy Action
We have
jurisdiction to review respondent's determination to proceed with the
levy action on an abuse of discretion basis. See sec.
6330(d) ; Goza v. Commissioner [Dec.
53,803 ], 114 T.C. 176, 181-182 (2000); H. Conf. Rept.
105-599, at 266 (1998), 1998-3 C.B. 755, 1020. Petitioner contends that
he cannot pay the taxes that are due, but he is willing to forgo income
tax refunds to which he may be entitled for the current and future
years. He testified that he had offered to pay respondent $50 per month,
but he did not show why that amount would be appropriate. He offered no
credible evidence showing that respondent's determination was an abuse
of discretion. Thus, we conclude that petitioner is not entitled to
relief.
Decision
will be entered for respondent.
1
Petitioner refused before and at trial to stipulate facts not fairly in
dispute as required by Rule 91, including whether copies of income tax
returns with his name and signature for 1985, 1986, 1987, 1992, 1994,
and 1995 were his. Thus, the Court ordered that respondent's proposed
factual stipulations were deemed established.
Presented by Alvin Brown and Associates,
tax attorney, formerly with the Office of the Chief Counsel of the
IRS.
Call us for all IRS tax issues, problems and emergencies
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