T.C. M em o . 2 0 1 8 -1 8 9

UNITED STATES TAX COURT

RANDY RICHARDSON AND M ELISSA RICHARDSON, Pet it i on ers v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 6 8 6 6-1 6L. Fi l edNo vem b er 1 3 , 2 01 8
.

Ran dy Ri ch ard s o n an dM el i s s a Ri ch ard s o n , p ro s es e. Brad l ey C. Pl o v anan dNan cy

M . Gi l m o re, fo r res p o nd en t .

M EM ORANDUM OPINION LAUBER, J u d g e: Inth is co l l ect i o n du e p ro ces s (CDP) cas e, p et it i o n ers
s eekrev i ew p u rs u an t t o s ect i on s 6 3 2 0 (c) 1 an d 6 3 3 0 (d ) o f th e d et erm i n at i o n b y th e

1 Un l es s o th erwi s e n o t ed , al l s t atu t o ry referen ces are t o th e In tern al Rev en u e Co d e i n effect atal l rel ev an t t i m es , an dRu l e referen ces are t o th e Tax Co u rtRu l es o f Pract i ce an dPro cedu re. W e ro u ndal l m o n et ary am o u n t s t o th e n eares td o l l ar.-2
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[* 2 ] In t ern al Rev enu e Serv i ce (IRS o r res po n d en t ) t o s u s t ai n th e fi l i n g o f t wo
n o t i ces o f Fed eral t ax li en (NFTL). Th e IRS i n i t i at edth e co ll ect i o n act i on s wi t h
res p ectt o p et i t i o n ers ’ Fed eral i n co m e t ax l i ab i l it i es fo r 2 0 0 9 th ro u g h 2 01 2
. Res po n d en th as m o v edfo r p art i al s u m m ary ju d g m en tu n d er Ru l e 1 21 , co n t en d i n g th atth ere are n o d i s p u t ed i s s u es o f m at eri al factan d thath i s d et erm i n at i o n t o
s u s t ai n th e p ro p os edco ll ect i o n act i on s was p ro p er as a m at ter o f l aw. 2 W e wi l l g ran tthe m o t i o n i n p art an dd en y i ti n p art . Back gro u n d Th e fo l l o w i n g fact s are b as edo n th e p art i es ’ p l ead i n g s an dres p o n d en t ’ s
m o ti o n , i n cl u d i n g th e at t ach edd ecl arat i o n an d ex h i b i ts . Pet i t i o n ers h ada m ai l i n g ad dres s i n M ary l an dwh en th ey fi l edth ei r p et i ti o n , b u tth ey s t at edthatth ei r l eg al
res i den ce was i n Del aware. A. As s es s m en t s fo r 2 0 0 9-2 01 2 Pet i t i o ners d i dn o tfi l e a t i m el y Fed eral i n co m e t ax retu rn fo r 2 0 0 9 . On J an u ary 2 3 , 2 0 1 2, they

fi leda d el i n qu en tretu rnrep ort i n g n o t ax du e. Th e IRS i s su edth em

a t i m el y n o t i ce o f d efi ci en cy fo r 2 0 09 , b u tthey

d i dn ot p et i t i o n th i s

2 Pet i t i on ers al s o s ou g h t rev i ew wi th res p ectt o th ei r 2 01 3 an d 2 01 4 t ax y ears . Bu t the IRS d i dn o ti s s u e t h em a n o t i ce o f d et erm i n at i o n fo r t h o s e y ears , an d we g ran t edres p o n d en t ’ s m o t i o n t o d i s m i s s fo r l acko f ju ri s d i ct i o n as t o th em . See s ecs . 6 3 2 0 (c), 6 3 3 0(d )(1 ); Ru l e 3 3 0 (b ). Res p o n den t ’ s m o ti o n fo r p art ial s u m m ary ju d g m en tthu s ad dres s es al l rem ai n i n g cl ai m s i n t h i s cas e.-3
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[* 3 ] Co u rtfo r rev i ew o f t hatn ot i ce. On Decem b er 1 , 2 0 1 4 , th e IRS as s es s edth e d efi ci en cy , an ad d i ti o n t o t ax u n d er s ect i o n 6 6 5 1 (f) (wh i ch ap p ears as a

“ m i s cel l an eo u s p en al ty ” o n p et i t i o n ers ’ tran s cri p t o f acco u n t ), an accu racy -rel at ed p en al ty u n d er s ect i o n 6 6 6 2 (a), an dap pl i cab l e i n t eres t . Pet i t i o ners d i dn o tfi l e a t i m el y Fed eral i n co m e t ax retu rn fo r 2 0 1 0 . On J an u ary 2 3 , 2 0 1 2, they

fi leda d el i n qu en tretu rnrep ort i n g $ 4 3 ,7 3 8 o f t ax du e. On M ay 7 , 2 0 1 2 , th e IRS as s es s edth e s el f-rep o rt edt ax , ad d i t io n s t o t ax u n d er s ect i o n 6 6 5 1 (a), an dap pl icab l e i n t eres t . OnJ u n e 1 7 , 2 0 1 3 , an d J un e 2 , 2 01 4 , th e IRS as
s es s edtwo m o re ad d i t io n s t o t ax , th e l at t er o f wh i ch was acco m p an i edb y an as s es s m en to f i n teres t . OnJ u ly 7 , 2 0 1 4 , the IRS d et erm in edth atp et i t i o ners ’ fai l u re t o fi l e a t i m el y

retu rn fo r 2 0 1 0 h adb een frau dul en t . Itacco rd i n g l y as s es s eda s up p l em en t al ad d i t io n t o t ax u n d er s ect io n 6 6 51 (f) (wh i ch ap p ears as a “ m i s cel l an eo u s p en al ty ” o n p et i t io n ers ’ tran s cri p to f acco u n t ). Th e IRS i s s u edp et i t i o n ers a t i m el y n o t i ce o f d efi ci en cy

fo r 2 01 0 , b u tth ey d i dn o t p et i t i on th i s Co u rtfo r rev i ew o f t h atn ot i ce. On Decem b er 1 , 2 0 1 4 , th e IRS as s es s edth e d efi ci en cy , an ad d i t i o n t o t ax u n d er s ect io n 6 65 1 (f) (wh i ch ap p ears as a “ m i scel lan eo u s p en al ty ” o n p et i ti o n ers ’ tran s cri p to f acco u n t ), an dan
accu racy -rel at edp en al ty

u n d er s ect i o n 6 6 62 (a).-4
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[* 4 ] Pet i t i o ners d i dn o tfi l e a t i m el y Fed eral i n co m e t ax retu rn fo r 2 0 1 1 . On J an u ary 3 1 , 2 0 1 3, they

fi leda d el i n qu en tretu rnrep ort i n g t ax du e o f $ 3 9 ,6 1 5 . On Sep tem b er 3 0 , 2 0 1 3, the IRS as s es s edth e s el f-rep o rt edt ax , ad di t i o n s t o t ax u n d er
s ect i on s 6 6 5 1 (a) an d 6 6 54 , an dap p l i cab l e i n t eres t . OnM arch 1 0 , 2 0 1 4 , th e IRS
as s es s edm o re i n t eres tan dan ad d i t i o n t o t ax u nd er s ect i o n 6 6 5 1 (a)(2 ). OnJ u l y 7 , 2 0 1 4 , th e IRS d et erm i n edth atp et i t i o ners ’ fai lu re t o fi l e a t i m el y return fo r 2 0 1 1 h ad b een frau du l en t. Itacco rd i n g l y ab at edth e Sep t em

b er 3 0 , 2 01 3 , as s es sm en to f
a s ect io n 6 65 1 (a)(1 ) ad d i t i o n t o t ax an das s es s eda s ect i o n 6 6 5 1 (f) ad d i t i o n t o t ax (wh ich ap p ears as a “ m is cel l an eo u s p en al ty ” o n p et i t i o n ers ’ tran scri p t o f acco u n t ),
m o re i n t eres t , an dan ad d it i o n t o t ax u n d er s ect i o n 6 6 5 1 (a)(2 ). Th e IRS i s s u edp et i t i o n ers a t i m el y n o t i ce o f d efi ci en cy

fo r 2 01 1 , b u tth ey d i dn o t p et i t i on th i s Co u rtfo r rev i ew o f t h atn ot i ce. On Decem b er 1 5 , 2 0 1 4 , th e IRS as s es s edth e d efi ci en cy , an ad d i t i o n t o t ax u n d er s ect io n 6 65 1 (f) (wh i ch ap p ears as a “ m i scel lan eo u s p en al ty ” o n p et i ti o n ers ’ tran s cri p to f acco u n t ), an dan
accu racy -rel at edp en al ty

u n d er s ect i o n 6 6 62 (a). Pet i t i o ners d i dn o tfi l e a t i m el y Fed eral i n co m e t ax retu rn fo r 2 0 1 2 . On Feb ru ary 2 4 , 2 0 1 4 , th ey

fi l eda d el i n qu en t retu rn rep o rt i n g $ 1 0,6 5 4 o f t ax du e. On M arch 2 4 , 2 0 1 4 , th e IRS as s es s edth e s el f-rep o rt edt ax , ad d i t i o n s t o t ax u n d er
s ect i on 6 6 5 1 (a), an d ap p l icab l e i n t eres t .-5
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[* 5 ] By th e en d o f 2 0 1 4 t h e IRS h adreco rd edth e fo l lo wi n g as s es s m en t s rel at i n g t o 2 0 0 9, 2 0 1 0 , 2 0 1 1 , an d 2 0 1 2 :

Description Tax y e ar Amount Assessed Sec. 6662(a) penalty 2009 $14,619 12/01/14 Miscellaneous penalty 54,822 12/01/14 Deficiency 73,096 12/01/14 Interest 21,635 12/01/14 Sec. 6651(a)(1) addition to tax 2010 7,704 05/07/12 Self-reported tax 43,738 05/07/12 Interest 1,720 05/07/12 Sec. 6651(a)(2) addition to tax 2,782 05/07/12 Sec. 6651(a)(2) addition to tax 5,350 06/17/13 Interest 3,679 06/02/14 Sec. 6651(a)(2) addition to tax 2,568 06/02/14 Miscellaneous penalty 32,099 07/07/14 Sec. 6662(a) penalty 22,358 12/01/14 Miscellaneous penalty 83,844 12/01/14 Deficiency 111,358 12/01/14 Sec. 6654 addition to tax 2011 784 09/30/13 Sec. 6651(a)(1) addition to tax Abated 09/30/13 Self-reported tax 39,615 09/30/13 Interest 1,980 09/30/13 Sec. 6651(a)(2) addition to tax 3,565 09/30/13 Interest 707 03/10/14 Sec. 6651(a)(2) addition to tax 1,387 03/10/14 Miscellaneous penalty 29,711 07/07/14 Interest 1,742 07/07/14 Sec. 6651(a)(2) addition to tax 1,585 07/07/14 Sec. 6662(a) penalty 4,922 12/15/14 Miscellaneous penalty 18,458 12/15/14 Deficiency 24,611 12/15/14 Self-reported tax 2012 10,654 03/24/14 Sec. 6651(a)(1) addition to tax 2,397 03/24/14 Sec. 6651(a)(2) addition to tax 639 03/24/14 Interest 336 03/24/14-6
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[* 6 ] B. Co l l ect io n Du e Pro ces s Pro ceed i ng s In an effo rt t o co l l ectth es e u np ai dl i ab i l i ti es , th e IRS i n J an u ary 2 0 15 fi l ed two NFTLs an dn o t i fi edp et i t i on ers , wh o t i m el y req ues t ed a CDP h eari n g . Th ei r
cas e was as s i g nedt o a s et t l em en to ffi cer (SO) fro m th e IRS Ap p eal s Offi ce i n Kan sas Ci ty , M i s s o uri
. On M arch 1 6 , 2 0 1 5, the SO s en tp et i t i o n ers a l et t er ack n owl ed gi ng th ei r req u es tfo r a CDP h eari n g an ds ch edu l i n g a t el ep h o ne co n feren ce i n Ap ri l . Th e SO i n fo rm edp et i t i o n ers th ath e co u l dco n s id er co l l ect i o n al t ern at i v es o n ly

i f t h ey co m p l et eds p eci fi edIRS fo rm s an ds upp l i eds up p o rt i n g fi nan ci al i n fo rm at i on . OnM arch 2 4 , 2 0 1 5 , p et it i o n ers fi l eda p et i t i o n u nd er ch ap ter 7 o f th e Ban k
rup t cy Co d e wi th th e U.S. Ban krup t cy Co u rtfo r t h e Di s tri cto f M ary l an d
. Du ri n g th e Ap ri l 2 01 5 t el ep h o n e co n feren ce t h ey i n fo rm ed the SO o f t h ei r p en d i n g b an krup t cy p et i t i on . Th e SO t h ereup o n s u s pen d edp et i t i o n ers ’ CDP h eari ng an dtran s ferred th ei r cas e t o an IRS i ns o l v en cy s p eci al i s tfo r m on i t ori n g . OnAu gu s t3 1 , 2 0 1 5 , th e b an krup t cy

co u rten t eredan o rd er d i s ch arg i n g p et i t i o ners fro m b an k
rup t cy . Th e SO h el d a s eco n dt el ep h o n e co nferen ce wi th p et i ti o n ers o n Decem b er 1 6 , 2 0 1 5 . Th ey

co n t en d edth ats o m e o f t h e l i ab il i t i es i n qu es t i o n h adb een d i s ch arg edi n b an krup tcy an ds h o ul db e ab at ed . Bu tth ey d i dn o ts p eci fy

wh i ch-7
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[* 7 ] l i ab i l i t i es s h o u l db e ab at edo r ex p l ai n wh y the b an krup tcy

d i s ch arg e co v ered th o s e l i ab i l i t i es . Th ey ack n o wl ed g edth atth ey h adn o ty ets ub m i tt ed an o ffer-i n co m p ro m i s e (OIC) o r an y

fi n an ci al i n fo rm at i o n b u ts t at edth ei r i n t en ti o n t o d o s o . Th e SO t h en rev i ewed th e b an krupt cy o rd er an d , i n co n

jun ct i o n wi th th e IRS In s o lv en cy

Un i t i n Bal t i m o re, M ary l an d(Bal t i m ore In s ol v en cy Un i t), d et erm i n ed th atcert ai n o f p et i t i o n ers ’ 2 0 1 0 t ax l i ab i l i t i es h adb een d i s ch arg edi n b an k
rup t cy . Th e IRS ab at edthe fo l l o wi n g as s es s m en t s rel at i n g t o 2 0 1 0 : Description Amount Assessed Sec. 6651(a)(1) addition to tax $7,704 05/07/12 Sec. 6651(a)(2) addition to tax 2,782 05/07/12 Sec. 6651(a)(2) addition to tax 5,350 06/17/13 Sec. 6651(a)(2) addition to tax 2,568 06/02/14 Miscellaneous penalty 32,099 07/07/14 Th e SO d et erm i ned(an dth e Bal t i m o re In s o l v en cy Un i tco n fi rm ed ) t hatth e as s es s m en t s fo r 2 0 0 9 , 2 0 1 1 , an d2 0 1 2 were i n el i g i b le fo r d i s ch arg e an dh adn o t b een d i s ch arg ed
. Th e SO wai t ed4 7 d ay s aft er t h e t el ep h o n e co n feren ce fo r p et it i on ers t o p ro p o s e a co l l ect io n al t ern at i v e an dt o s ub m i t fi n an ci al i n fo rm at i o n . Hav i n g recei v ed
n o res p o n s e, t h e SO cl os ed th ei r cas e an do n Feb ru ary 1 6, 2 0 1 6 , i s s ueda n o t i ce o f d et erm i n at i o n s us t ai n i n g th e NFTL fi li n g s. Pet i t i o n ers t i m el y p et i t i o n edth i s Co u rt-8
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[* 8 ] an d , o n Au g us t 31 , 2 0 1 7 , res p o n d en t m o v ed fo r p art i al s u m m ary ju d gm en t . 3 Al th o u g h we d i rect edp et i t io n ers t o res p on d t o t h atm o t i o n , th ey d i dn o td o s o . Di s cu ss i o n A. Su m

m ary J u dg m en tSt an d ard Th e p u rp os e o f s u m

m ary ju d g m en t i s t o ex p ed it e l i t i g at i o n an d av o i dco st l y , t i m e-co n s u m i n g , an du n n eces s ary tri al s . Fl a. Peach Co rp . v . Co m m i s si on er, 9 0 T.C. 6 7 8 , 6 8 1 (1 9 8 8 ). Th e Co urtm ay g ran t s umm ary

ju d g m en twh en th ere i s n o g en ui n e d i s p u t e as t o an y m at eri al fact an da d eci s i o n m ay b e ren dered as a m at t er
o f l aw. Ru l e 1 2 1 (b ); Su n d st ran dCo rp . v . Co m m i ss i o n er, 9 8 T.C. 5 1 8 , 5 2 0 (1 9 9 2 ), aff’ d , 1 7 F.3 d9 65 (7 th Ci r. 1 99 4 ). In d eci d i n g wh et h er t o g ran ts u m m ary ju d g m en t , we co n s tru e fact ual m at eri al s an di n feren ces drawn fro m th em i n th e l i gh t m o s tfav orab l e t o th e n o n m o v i n g p art y . Su n d st ran d Co rp . , 9 8 T.C. at5 2 0
. Ho wev er, th e n o n m o v in g p arty m ay n o tres tup o n m ere al l eg at i o n s o r d en i al s o f h i s p l ead i n g s b u ti n s t eadm u sts etfo rt h s p eci fi c fact s s h o wi n g th atth ere i s a g en ui n e d i s p u t e fo r t ri al
. Ru l e 1 2 1 (d ); s ee Su n ds tran dCo rp ., 9 8 T.C. at5 2 0
.

3 Res p o n d en ts ty l edh i s m o t i o n as a m ot i o n fo r p art i al s u m m ary ju d g m en t b ecau s e h e h ads ep arat el y m o v edt o d i s m i s s th e cas e wi th res p ectt o p et i t io n ers ’ 2 0 1 3 an d2 0 1 4 t ax l i ab i l i t i es . See s up ra n o t e 2
.-9
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[* 9 ] Becau s e p et i t i o n ers d i d n o tres p o n d t o the m ot i o n fo r s u m m ary ju dg m en t , we co u l den t er d eci s i o n ag ai n s tth em fo r t hatreas o n . See Ru l e 1 2 1 (d ). W e wi l l
n ev erth el es s co n s i d er t h e m o t i on o n i t s m eri t s . B. St an dardo f Rev i ew Wh ere t h e v al id i ty

o f t h e t ax p ay er’ s u n d erl y i n g t ax l i ab i l i ty i s p ro p erl y

at i s su e, we rev i ew t he IRS’ d et erm i n at io n d e n o v o . Go za v . Co m m is s i o n er, 1 1 4 T.C. 1 7 6 , 1 8 1 -1 82 (2 0 0 0). Wh ere (as h ere) t h e u n d erl y i n g l iab i l i ty i s n oti n d i s p u t e, we rev i ew t he IRS’ act i o n s fo r ab u s e o f d i s cret io n. 4 Ab us e o f d i s cret i o n ex i s ts wh en a d et erm i nat i o n i s arb i t rary , cap ri ci o us , o r wi th o u ts o un db as i s i n facto r l aw. See M u rp hy

v . Co m m i s s i o n er, 1 2 5 T.C. 3 01 , 3 20 (2 0 0 5 ), aff’ d , 4 69 F.3 d2 7 (1 s tCi r. 2 0 0 6 ). Anab u s e o f d i s cret i o n i ncl u d es an erro n eo u s i n t erp ret at i o n an d ap p li cat io n o f b an krup t cy l aw. See Swan s o n v . Co m m i s si o n er, 1 2 1 T.C. 1 1 1 , 1 19 (2 0 0 3); s ee al so Bu s sel l v . Co m m i s s i o n er, 1 3 0 T.C. 2 2 2 , 2 36 (2 00 8 ) (“ A t ax p ay er’ s as s ert i o n th ath i s o r h er t ax l i ab il i t i es were d i s ch arg ed i n b an krup t cy am o u n t s t o a ch al l en g e t o t h e ap p ro p ri at en es s o f t he co l l ect i o n act i o n[.] ”).

4 Pet i t i on ers d i dn otd i s p u t e t h ei r u n d erl y i n g l i ab i l i t i es atth e CDP h eari n g an d are t h u s p recl u d edfro m ch al l en g i n g th em

h ere. See Th o m

p s o n v . Co m

m i s s i on er, 1 4 0 T.C. 1 7 3 , 1 7 8 (2 01 3 ) (“ A t ax pay er i s p recl u d edfro m d i s p u t i n g th e u n d erl y i n g l iab il i ty

i f i twas n o tp ro p erl y

rai s edi n t h e CDP h eari n g .”); s ec. 3 0 1 .6 3 2 0 -1 (f)(2 ), Q&A-F3 , Pro ced . & Ad m in . Reg s .-1 0
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[* 1 0 ] C. An al y s i s In as cert ai n i n g wh et h er t h e SO ab u s edh i s d i s cret i o n , we rev i ew t h e reco rd t o d et erm i n e wh et h er h e: (1 ) p ro p erl y v eri fi edth atthe req ui rem en t s o f ap p l i cab le l aw o r adm i n i s trat i v e p ro cedure h av e b een m et , (2 ) co n s id eredan y rel ev an ti s s u es p et i t i o n ers rai s ed , an d(3 ) d et erm i n edwh et h er “ an y p ro p o sedco l l ect i o n act i o n b al an ces th e n eedfo r t h e effi ci en tco l l ect i o n o f t ax es wi th the l eg i t i m at e co n cern
o f * * * [p et i t io ners ] th atan y co l l ect i o n act i o n b e n o m o re i n tru s i v e t h an
n eces s ary .” See s ec. 6 3 3 0(c)(3 ). Pet i t i o ners ad v an cedthree co nt en t i o n s i n th ei r p et i t i o n . Fi rs t , they arg u ed th atth ey i n t en d edt o s ub m i t an OIC an d thatth e SO h adcl o s edth ei r cas e p rem atu rel y . Al th o u g h p et it io n ers m ay h av e i n t en d edt o s ub m i tan OIC, t h ey d i dn o t fo l l o wth ro u g h o n th is i n t en ti o n. AnSO d o es n o tab u s e h i s d i scret i o n i n d ecl i n i ng t o co n si d er co l l ect i on al tern at i v es wh en th e t ax p ay er n eg l ect s t o p ro p os e an y . Sec. 3 0 1 .6 3 2 0 -1 (f)(2 ), Q&A-F3 , Pro ced . & Ad m in . Reg s . Th e SO affo rd edp et i t i o n ers
am pl e t i m e t o p rep are an ds ub m i tan OIC; aft er 4 7 d ay s h adel ap s edwi th n o co m m u ni cat i o n fro m

p et i t i o ners , h e d i dn o t ab us e h i s d i s cret i o n i n cl o si n g th e cas e. See, e.g
. , M cLai n e v . Co m m i s s i o n er, 1 3 8 T.C. 2 2 8 , 2 4 3 (2 0 1 2 ); Co p p er v . Co m m i s s i o n er, T.C. M em o . 2 0 1 7 -2 3 1 , at* 8
.-1 1
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[* 1 1 ] Seco n d , p et i t i o n ers co n t en d edth atth e t ax l i en s s h o u l d b e av o i d ed b ecau s e th e NFTLs were fi l eddu ri n g th e “ p referen ce p eri o d ” p reced i ng th ei r b an krup t cy . Cert ai n tran s act i o ns o ccu rri n g i n th e 9 0 -d ay p eri o di m

m ed i at el y b efo re a b an k
rup t cy fi l i n g m ay

b e av o i d ed up o n ap p l i cat i o n o f t h e t ru st ee o r d eb t o r. See 1 1 U.S.C. s ecs . 5 2 2(h ), 5 4 7 (b ) (2 0 1 2 ). Ho wev er, a Fed eral t ax l i en i s n o tav o i d ab l e b y a d eb t o r as a p referen t i al tran s fer wh ere (as h ere) an NFTL was p ro perl y fi l ed b efo re co m

m en cem en to f t h e b an krup t cy cas e. See 1 1 U.S.C. s ecs . 5 4 5 (2 ) (cro s sreferen ci n g s ec. 6 3 2 3 ), 5 4 7 (c)(6 ) (2 0 1 2 ); Sp icer v . IRS (In re M o t i o n M kt g . So l s ., In c.), 4 0 3 B.R. 4 0 3 , 4 0 9 (Ban kr. N.D. Tex . 2 0 09 ) (h o l d i ng th at a Fed eral t ax l i en
was av o i dab le as a p referen t i al tran s fer u n d er 1 1 U.S.C. s ec. 5 4 7 o n l y t o th e ex t en t i t w as o th erwi s e av oi d ab le u n d er 1 1 U.S.C. s ec. 5 4 5(2 )). Fi n al l y , p et i t i o n ers co n t en d edth ats o m e o f t h e t ax l i ab i l it i es i n qu es t i o n h ad b een di s ch arg edi n b an krup t cy . A ch ap t er 7 d i s ch arg e rel iev es a d eb t o r fro m al l p ers o n al l i ab i l it i es (i ncu rredb efo re t h e fi l i n g o f t h e b an krup t cy p et i t i o n ) ex cep t th o s e l i s t edi n s ect i o n 5 2 3 o f t h e Ban krup t cy Co de. See 1 1 U.S.C. s ec. 7 2 7 (b ) (2 0 1 2); Bu s sel l, 1 30 T.C. at2 3 4 . Sect i o n 5 2 3 ex cep ts fro m d i s ch arg e an y

t ax : (i ) fo r wh i ch th e du e d at e (i n cl u d i n g ex t en s i o n s ) fo r t h e rel ev an tt ax return was wi th i n th ree y ears b efo re t h e fi l i n g o f t he b an krup t cy p et i t i o n (t h ree-y ear ru l e),-1 2
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[* 1 2 ] (i i ) fo r wh i ch th e rel ev an tt ax retu rn was n o tt i m el y fi l edan dwas fi l ed wi th i n two y ears o f t h e b an krup t cy p et i t io n (t w o -y ear ru l e), (i i i ) t h at was as s es sed wi th i n 2 4 0 d ay s o f t h e b an krup t cy p et i t i o n (2 4 0 -d ay

ru l e), o r (i v ) fo r wh i ch th e d eb to r m ad e a frau dul en tretu rn o r wi l l fu l ly at t em p t edi n an y m an n er t o ev ad e o r d efeat th e t ax . See 1 1 U.S.C. s ec. 5 2 3 (a)(1 ) (2 0 1 2 ) (cro s s -referen ci n g 1 1 U.S.C.
s ec. 5 0 7(a)(8 ) (2 0 1 2 )). Th es e ex cep t i o ns are s el f-effect i n g ; th e IRS n eedn o tt ak e
an y act i on t o p res erv e a t ax d eb ti n b an krup tcy . See Co l v i n v . Co m m is si o n er, T.C. M em o. 2 0 1 0 -2 3 5 , 1 0 0 T.C.M . (CCH) 3 61 , 3 63 (2 0 10 ), aff’ d , 4 6 0 F. Ap p ’ x 3 4 9 (5 th Ci r. 2 0 1 2 ) (“ A n o nd i s ch arg eab l e t ax d eb t i s n o taffect edb y th e fai l u re t o fi le a p ro o f o f cl ai m .”); Bri n t s v . Co m m i s s i o n er, T.C. M em o . 1 9 8 9 -4 5 7 , 5 7 T.C.M
. (CCH) 1 4 0 5 , 1 4 0 8 (1 9 8 9 ). In a CDP cas e s u ch as th i s , we h av e ju ri s d ict i o n t o d et erm i n e wh eth er t h e t ax l i ab i l i t i es th at th e IRS s eek s t o co l l ecth av e b een d i s ch arg ed i n b an krup t cy . See Bu s s el l , 1 3 0 T.C. at2 4 3 (up h o l d i n g a co l l ect i o n act i o n aft er d et erm i ni n g th at th e u n derl y i n g t ax d eb twas ex cep t edfro m d is ch arg e b y

1 1 U.S.C. s ec. 5 2 3 ); W as h i n g t o n v . Co m

m i s s i o n er, 1 2 0 T.C. 1 14 , 1 2 0 -1 21 (2 0 0 3 ); cf. Nei l s o n v . Co m m i s s i o n er, 9 4 T.C. 1 , 9 (1 99 0 ) (ru l i n g thatwe l ackjuri sd i ct i o n t o m ak e t h i s d et erm i n at i o n i n a d efi ci en cy cas e).-1 3
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[* 1 3 ] M o s t o f t h e l i ab i l it i es l i s t edo n the NFTLs were ex cep t edfro m d i s ch arg e b y th e t h ree-y ear ru l e, th e 2 4 0-d ay ru l e, o r b o th . Al l l i ab i l i t i es fo r 2 0 1 1 an d2 0 1 2
were ex cep t edfro m

d i s ch arg e b y

th e t h ree-y ear ru l e b ecau s e th e ex ten d eddu e d at es fo r t h o s e ret u rn s (Oct o b er 1 5 , 2 0 1 2 , an dOct ob er 1 5 , 2 01 3 ) were wi thi n th ree y ears o f M arch 2 4 , 2 0 1 5, the d at e o n wh i ch p et i t i o n ers fi l edfo r b an krup t cy . See 1 1 U.S.C. s ecs . 5 0 7 (a)(8 )(A)(i ) an d5 2 3 (a)(1 )(A) (2 0 12 ). 5 Al l l i ab i l i t i es fo r 2 0 0 9
an d cert ai n l i ab i li t i es fo r 2 0 1 0 were ex cep t edfro m d i s ch arg e b y th e 2 4 0 -d ay ru l e b ecau s e th o s e l i ab i li t i es were as s es s edo n o r aft er J u l y 2 7 , 2 0 1 4 (2 4 0 d ay s b efo re th e b an krup tcy

co m m en ced ). Th e o n l y l i ab i l i t i es p ot en t i al l y

el i gi b l e fo r d i s ch arg e were p et i t i o n ers ’ 2 0 1 0 l i ab i l i t i es thatwere as s es s edb efo re J u ly 2 7 , 2 0 1 4 . Th e SO s t at edi n th e n o t i ce o f d et erm i n at i o n : “ Ou r reco rd s i n d i cat e t h ats o m e o f t h e as s es sm en t s m ad e b y th e Serv i ce i n 2 0 1 2 m ay

b e co n s i d eredd i s ch arg eab l e.” Fo r p et i ti o n ers ’ 2 0 1 0 t ax y ear, th e as s es s m en t s thatth e IRS m ad e du ri ng 2 0 1 2 were t h e $ 43 ,7 3 8 t ax as s es s m en t (p l u s rel at edas s es s m en ts o f i n t eres tan dad d i t i on s t o t ax ) m ad e o n M ay 7 , 2 0 1 2
. In h i s m o t i o n fo r s u m

m ary ju d g m en tres p o n d en trep res en t edth at , i n res p o ns e t o th e SO’ s i n qu i ri es , th e Bal t i m o re In s o l v en cy Un i th ad “ co n fi rm edth atn o n e o f t h e

5 Becau s e p et i t i o n ers fi l edth ei r 2 0 1 2 retu rn l at e, t h ei r l i ab i li t i es fo r t h aty ear are al so ex cep t ed fro m

d i s ch arg e b y

th e t wo -y ear ru l e. See 1 1 U.S.C. s ec. 5 2 3 (a)(1 )(B)(i i ) (2 0 1 2 ).-1 4
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[* 1 4 ] as s es s m en t s ati ss ue were d i s ch arg edb y p et i t i o n ers ’ b an krupt cy ex cep tfo r th e $ 4 3,7 3 8 as ses s m en tfo r t he 2 0 10 t ax y ear (an drel at edad d i ti o n s t o t ax ) m ad e
o n M ay 7 , 2 01 2.” (Th e SO s t at edth e s am e i n h i s s w o rn d ecl arat io n .) Res p o n d en t rep res en t edth at“ [t ] h e M ay 7 , 2 0 1 2 , an dJ u l y 7 , 2 0 14 , as s es s m en t s h av e b een ab at eddue t o p et i ti o n ers ’ l at er b an krup t cy d i s ch arg e.” OnFeb ru ary 2 2 , 2 0 1 8, we d i rect edres p o n den tt o s up p lem en th i s m o t i o n fo r
s u m m ary ju d g m en tt o cl ari fy

the s t atu s o f p et i t i o n ers ’ 2 0 1 0 t ax l i ab i l it i es . W e
n o t edth atth e Fo rm

4 3 4 0, Cert i fi cat e o f As ses s m en t s , Paym en t s , an dOther Sp eci fi edM at t ers , fo r p et i t i o ners ’ 2 0 1 0 t ax y ear s h o wedth atth e SO h adab at ed
o n l y the l at e-fi l i n g an d fai l u re-t o -p ay ad d i ti o ns t o t ax as ses s edo n M ay 7 , 2 0 1 2
. Th e u nd erl y i n g t ax as s es s m en to f $ 4 3 ,7 3 8 an d two rel at edi n teres tas s es s m en t s o f $ 1 ,7 2 0 an d$ 3 ,6 79 (m ad e o n M ay 7 , 2 0 1 2 , an dJ u n e 2 , 2 0 1 4, res p ect iv el y ) d i dn o t ap p ear t o h av e b een ab at ed . W e as k edres p o n d en t t o s up p l em en th is m ot i o n t o ad dres s th i s p o i n t . In h i s M arch 2 3 , 2 0 1 8 , res p o n s e t o o u r o rd er res p o n d en t ack n o wl ed gedth at th e IRS h adab at edn ei th er t h e $ 4 3 ,7 3 8 as s es sm en tm ad e o n M ay 7 , 2 0 1 2 , n o r t h e i n t eres tas s es s edo n th at s um . He s t at edth ath e “ bel i ev ed th e as ses s m en t s h ad b een ab at eddu e t o p et it i o n ers ’ * * * d i s ch arg e u n d er Ch ap t er 7 .” Res po n d en t-1 5
-

[* 1 5 ] req u es t edad d i t i o n al t i m e t o wo rk wi th the Bal t i m o re In s o l v en cy Un i tt o
res o l ve t h i s s itu at i o n . OnJ u ly 2 3 , 2 0 18 , res p o nd en tfi l ed a s t atu s rep o rt s tat i n g th atth e $ 43 ,7 3 8
as s es s m en tm ad e o n M ay 7 , 2 0 1 2 , t o g et her wi th al l rel at edad d i t io n s t o t ax , h ad
n o w b een ab at ed . Anupd at ed co p y o f t h e Fo rm

4 3 40 fo r p et i t i o n ers ’ 2 0 1 0 t ax y ear co n fi rm edth attho s e ab at em en t s h adb een m ad e. Res p o n d en t rep res en t ed th atp et i t i o n ers ’ o v eral l b al an ce du e fo r 2 0 1 0 (n eto f ab at em en t s ) was $ 2 2 2 ,4 5 4 as
o f J u l y 1 6 , 2 0 1 8
. OnAu gu s t6 , 2 0 1 8 , we i s s u edan o rd er n o t i n g th at , wh i l e t h e IRS h ad ab at edth e $ 4 3 ,7 3 8 as s es s m en t m ad e o n M ay 7 , 2 01 2 , t o g et h er wi th al l rel at ed ad d it i o n s t o t ax , th e two rel at edi n teres tas s es sm en t s o f $ 1 , 7 2 0 an d$ 3 ,6 7 9 d i dn o t ap p ear t o h av e b een ab at ed . W e d i rect ed res p on d en tt o fi l e an o th er s t atu s rep o rt ad dres s i n g th atp o i n t . In a s t atu s rep o rtfi l ed Oct o b er 1 0 , 2 01 8 , res p o n den tch an gedh is p o s i t i o n . He n o w co n t en d s thatth e $ 4 3 ,7 3 8 as s es sm en tm ad e o n M ay 7 , 2 0 1 2 , wh i ch th e IRS h adp rev i ou s l y

ab at ed , “ was ex cep t ed fro m p et i t i o n ers ’ b an krupt cy

d i s ch arg e p u rs u an t t o 1 1 U.S.C. § 5 2 3(a)(1 )(C).” Res p o nd en t s tat edth atth e IRS was t ak i n g-1 6
-

[* 1 6 ] s t ep s t o rev ers e th e ab at em en to f t hat$ 4 3 ,7 3 8 as s es s m en t an do f al l rel at ed ad d it i o n s t o t ax . 6 Becau s e res p o n den t ’ s m o s trecen tp o s i t i o n ap pears i nco n s i s t en t(i n wh o l e o r i n p art ) wi th th e d et erm in at i o n s p rev i o u s l y m ad e b y th e SO an db y

the Bal t i m o re In s o l v en cy

Un i t , as wel l as wi th res p on d en t ’ s p rev i ou s p o s it i o n i n th i s Co u rt , we
co n cl u d e th atfu rth er p ro ceed i ng s are req u i redt o res o l v e qu es t i o n s co n cern i n g th e d i s ch arg e an dab at em en to f p et i t i o ners ’ 2 0 1 0 t ax l i ab i l i t i es . W e wi l l g ran tres p o n d en t’ s m o t i o n fo r p art i al s u m m ary ju d g m en twi th res p ectt o p et i ti o n ers ’ 2 0 0 9 , 2 0 1 1 , an d2 0 1 2 l i ab i l i ti es , an d wi th res pect t o p et i t i o n ers ’ 2 0 1 0 l iab i l i t i es th at
were as s es s edo n o r aft er J u l y 2 7 , 2 0 1 4 . W e wi l l d en y

res p o nd en t’ s m ot i o n wi t h
res p ectthe 2 0 1 0 l iab i l i t ies as s es s edb efo re J u l y 2 7 , 2 0 1 4, as s et fo rth b el o w:

6 Res p o n d en tal s o rei t erat edh i s p o s i t i o n (wi th wh i ch we ag ree) t hatth e Decem b er 1 , 2 0 1 4, as s es s m en t o f t ax fo r 2 0 1 0 o f $ 1 1 1,3 5 8 , t o g ether wi th th e rel at ed s ect i on 6 6 6 2 p en al ty an dad d i t i o n t o t ax m ad e t h e s am e d ay , were n o t d i s ch arg edi n b an krup tcy .-1 7
- Descr i pt i on Am ount Assessed Sec. 6651( a) ( 1) addi t ion t o t ax $7,704 05/ 07/ 12 Sel f
- r epor t ed t ax 43,738 05/ 07/ 12 I nt er est 1,720 05/ 07/ 12 Sec. 6651( a) ( 2) addi t ion t o t ax 2,782 05/ 07/ 12 Sec. 6651( a) ( 2) addi t ion t o t ax 5,350 06/ 17/ 13 I nt er est 3,967 06/ 02/ 14 Sec. 6651( a) ( 2) addi t ion t o t ax 2,568 06/ 02/ 14 M i scel laneous penal t y 32,099 07/ 07/ 14
To refl ectthe fo reg o i n g , Ano rd er wi l l b e i s s u edg ran t i n g i n p artan dd en y i n g i n p artres p o n d en t ’ s
m o t i o n fo r p art i al s u m

m ary ju d g m en t . [* 1 7 ]