T.C. Mem o. 2 01 3- 28 1

UNITED STAT ES TAX COURT

CHRIS TOPHER A. BIBBY, Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 14 68 7- 12 L. Fi le d Dec em be r 12 , 20 13
.
Dan ny M. Carr, fo r pe ti ti on er. Tim ot hy S. Murp hy, Rob ertD. Heitm ey er, an d J oh n D. Dav is , for
res po nd en t.

MEMORANDUM OPINION NEGA, Jud ge : Th is act io n was co m m en cedinres po ns e to a Not ic e o f Dete rm in at io n C on cern in g C ol le ct io n Act io n( s) Und er Se ct io n 6 32 0 and/o r 63 30 (n ot ic e o f de te rm in at io n) with re sp ectto pe ti ti on er’s 2 00 7 and20 08 Fed eral in co m e ta x l iabi li ti es . The remaini ng is su e fo r de ci si on is whet he r th e se tt le m en t- 2 -

[* 2] of fic er ab us edhe r di sc ret io n i n d en y in g p et it io ne r rel ie f fro m a jeop ardy

lev y . All sec ti onrefe ren ces are t o the Int ern al Rev enue Co de ineffe ctat a ll rel ev an t ti m es , andall Ru le refe ren ces are t o the Tax C ou rt Rul es of P ract ic e an d Pro cedur e. Bac kg ro un d The st ip ul at edfact s ar e in co rp or at edhe rei n b y refe ren ce. Pet it io ne r res id ed inMi ch ig anat the ti m e th e p et it io n was fil ed
. Pet it io ne r fi le d t ax returns fortax y ears 20 07 an d 2 00 8. Re sp on de nt de te rm in edth at , lar ge ly as a res ul t o f $2 03 ,00 0 o f ov ers ta te d wi th ho ld in g c red it s, pe ti ti on er re cei ve d o ve r $2 13 ,00 0 o f refu nd s t o wh ic h h e was no t en ti tl ed
. Pet it io ne r adm it s s pe nd in g the refu nd s fo r th e fo ll owi ng it em s: (1) $3 2,1 33 .88 for
a u se d c ar; (2) $2 5,2 70 foroff eri ng s an d t ithe s t o h is chur ch ; (3 ) $2 1,0 77 for wed di ng an d h on eym oo n e xp en se s; (4) $6 1,8 15 on ho m e rep ai rs ; (5 ) $9 ,48 2.5 0 fo r ta x re turnpre pa rat io n andfil in g; (6) $1 ,95 5.6 6 o n fu rn itur e p ur ch as es ; an d (7 ) $3 6,3 65 forvario us it em s s uc h a s fo od , clo th in g, an d b il l p aym en t. Pet it io ne r adm it s tran sf

erri ng hi s i nt eres t i n h is pe rs on al res id en ce t o apro pe rty ho ld in g co m pa ny whol ly owne d b y

pe ti ti on er an d h is wife . Peti ti on er al so m ad e a $ 25 ,00 0 lo anto Diam on d & Ass oc ia te s, i n re pa ym en t o f whi chDiam on d & Ass oc ia te s qu it cl ai m edth ree p ro pe rti es to pe ti ti on er, wh ic h p et it io ne r subs eque nt ly- 3 -

[* 3] tra ns ferr edto EMG, LLC, a sep arat e b us in es s en ti ty who ll y own edby pe ti ti on er an d h is wife . On Apr il 14 , 20 11 , res po nd en t’s Fri vo lo us Fil ers Uni t
m ad e m ath e rro r as se ss m en ts forpe ti ti on er’s cl ai m edov erwi th ho ld in g c red it s an d is su edFo rm s 3 55 2, No ti ce o f TaxDue o n F ed eral Tax R eturn, fo r 20 07 an d 2 00 8. On J ul y 25 , 20 11 , res po nd en t i ss ue d t o p et it io ne r a No ti ce CP 50 4, No ti ce o f In te nt to Levy, pert ai ni ng to pe ti ti on er’s l iabi li ty for t ax y ear 2 00 7. The cas e was th enass ig ne d t o an In te rn al Rev enue Serv ic e (IR S) rev enue of fic er wh o s ou gh t ap pr ov al fro m IRS Co un se l’s Offi ce t o i ss ue a jeop ardy lev y . Hav in g re cei ve d app ro va l fr om IRS Co un se l’s Offi ce, the IRS re ve nu e o ffi cer is su eda jeop ardy

lev y ag ai ns t p et it io ne r’s ba nkacco un ts an d wag es on Decem be r 2, 2 01 1, i n re fere nc e to pe ti ti on er’s 2 00 7 and20 08 li ab il it ie s. OnDecem be r 6, 20 11 , res po nd en t i ss ue d aLett er 2 43 9 (C G), Not ic e o f Je op ardy Levy andRig htto App eal , to pe ti ti on er. On Dec em be r 15 , 20 11 , res po nd en t i ss ue d aNot ic e o f Fed eral Tax Lev y

an d Yo urRig htto App eal Heari ng to pe ti ti on er. On J anua ry 4, 20 12 , pet it io ne r ti m el y

subm it te d aFo rm

12 15 3, Re qu es t fo r a Co ll ect io n Du e Pro ces s o r Equ iv al en t Hea rin g (s ect io n 6 33 0)
. An IR S se tt le m en t o ffi cer was ass ig ne d t o the cas e. The IR S se tt le m en t of fic er an d p et it io ne r’s co un se l co nduc te d aco ll ect io n due pro ces s h eari ng on Feb ru ary 23 , 20 12 . The s et tl em en t o ffi cer r el ie d o n the rev enue off ic er’s n ot es- 4 -

[* 4] an d the Int eg rat edDataRetrie va l Syste m (IDRS) trans cri pt s t o v eri fy th atall th e requi rem en ts of app li cab le law o r adm in is tra ti ve pro cedur e were m et . Pet it io ne r subm it te d t o the IRS s et tl em en t o ffi cer: Form s 4 33 -A, Co ll ect io n In fo rm at io n S ta te m en t fo r W ag e-Earn ers an d S el f-Em pl oyed In di vi du al s; two Fo rm s 4 33 -B, Co ll ect io n In fo rm at io n S tate m en t fo r Bu si ne ss es , and do cu m en ta ti on supp orti ng pe ti ti on er’s en tri es on all th os e fo rm s. At t he co ll ect io n du e p ro ces s h eari ng , pet it io ne r’s co un se l s ou gh t anin st al lm en t ag reem en t i n ex ch an ge forrel eas e o f th e le vy onpe ti ti on er’s wag es . The IR S se tt le m en t o ffi cer fo un d tha t p et it io ne r’s Fo rm s 4 33 -A fai le d t o d is cl os e $ 24 ,26 5 o f wag e in co m e an d $ 35 ,76 1 o f in co m e fro m th e Fre ud enbe rg -No k C o., re po rte d o n fo rm s 1 09 9- R, Dis tri bu ti on s fr om

Pen si on s, Am en it ie s, Re ti rem en ts or P ro fit -Sh ari ng Pla ns , IRA’s, In su ran ce Co nt ract s, et c. On M arch 22 , 20 12 , th e se tt le m en t o ffi cer reque st edfro m

pe ti ti on er’s rep res en ta ti ve cla rif ic at io n abo utth e n atur e an d du rat io n o f th e Fre ud enbe rg -No k p aym en ts . Peti ti on er’s rep res en ta ti ve pro m is ed to co nt actpe ti ti on er an d fa x awrit te n v eri fic at io n t o IR S App eal s, b utno res po ns e was forth co m in g. Durin g tha t s am e p ho ne co nv ers at io n p et it io ne r’s rep res en ta ti ve was in fo rm edth at , am on g o th er i ss ue s, p et it io ne r ne ed edto ad dr es s the equi ty in te res ts inth e th ree r eal pro pe rti es tra ns ferr edby D ia m on d & Ass oc ia te s i n rep aym en t o f pe ti ti on er’s $ 25 ,00 0 l oa n. Onth e b as is of t he su m of p et it io ne r’s- 5 -

[* 5] di sc lo se d andun di sc lo se d i nc om e as well as p et it io ne r’s di sc lo se d m on th ly
ex pe ns es , th e IRS set tl em en t o ffi cer c on ta ct edpe ti ti on er’s co un se l an d c on ve y ed he r de ci si on th atth e wag e le vy didno t co ns ti tu te a fi na nc ia l h ard sh ip on pe ti ti on er. St il l i n p ur su itof a n i ns ta ll m en t ag reem en t, p et it io ne r’s co un se l p ro vi de d, up on reque stof t he IRS s et tl em en t o ffi cer, ad di ti on al in fo rm at io n l is ti ng th e di sp os it io n o f th e p ro ceed s o f th e 2 00 7 and20 08 refu nd s. On e su chit em was the equi ty int eres t i n the th ree p ro pe rti es Diam on d & Ass oc iate s tran sf erre d t o pe ti ti on er, wh ic h p et it io ne r th entra ns ferr edto EMG, LLC. T he IRS s et tl em en t of fic er t oo k the po si ti on th atth e th ree p ro pe rti es inqu es ti on were p et it io ne r’s
as se ts alo ne an d s ug ge st edth atth ey be tra ns ferr edba ckto th e d ire ctan d s ol e own ers hi p o f pe ti ti on er. EMG, LLC, tran sf erre d the th ree p ro pe rti es by qui tc la im de edto pe ti ti on er an d h is sp ou se bu t n otso le ly to p et it io ne r. The IR S se tt le m en t of fic er m ad e cl ear tha t an in st al lm en t ag reem en t (a ndli fti ng of t he jeop ardy lev y ) de pe nd edon : (1 ) th e tr an sf er o f th e th ree p ro pe rti es to pe ti ti on er’s s ol e o wne rs hi p an d (2 ) th e subs eque ntequi ty liqui da ti on of t he th ree p ro pe rti es . Peti ti on er co ul d
no t o r wou ldno t ag ree t o the se co nd it io ns pre ced en t. The ne go ti at io ns ha vi ng bro ke n d own , pet it io ne r reque st eda de te rm in at io n le tt er. The IRS Ap pe al s o ffi cer m ai le d the no ti ce o f de te rm in at io n t o p et it io ne r on- 6 -

[* 6] May 8, 20 12 . Cit in g, i nt er al ia , pet it io ne r’s fai lu re t o p ro vi de cert ai n reque st edin fo rm at io n re ga rd in g h is expe nd itur es an d h is fin an ces , andhi s tran sf er of ti tl e to th e p ro pe rti es ina m an ne r de si gn edto sh el te r hi s equi ty, th e n ot ic e o f de te rm in at io n s us ta in edth e jeop ardy lev y . Und er the st ip ul at io n, the re i s n o d is pu te be twee n the parti es as t o the
un de rlyin g t ax li ab il it ie s. Th e p art ie s h av e ag reedto subm itth e cas e wit ho uttri al pu rs ua ntto Ru le 12 2. Dis cu ss io n Pet it io ne r arg ue s tha t the set tl em en t o ffi cer f ai le d t o i nd ep en de nt ly de te rm in e th e ap pr op ria te ne ss or the leg al ity of t he jeop ardy

lev y . Res po nd en t ar gu es th atth e se tt le m en t o ffi cer i nd ep en de nt ly bal an cedth e effi ci en t co ll ect io n o f th e ta x wi th th e le gi ti m at e co nc ern s o f pe ti ti on er an d de te rm in edth atth e jeop ardy lev y was n otov erl y

in tru si ve an d tha t n o b et te r m etho d o f co ll ect in g the tax was a va il ab le
. If the Secr et ary be li ev es th atth e as se ss m en t o r co ll ect io n o f a t ax de fic ie nc y wil l b e jeop ard iz edby del ay , he s ha ll imm ed ia te ly ass es s the de fic ie nc y an d i ss ue no ti ce an d d em an d fo r pa ym en t t o the pe rs on li ab le forth e p aym en t o f th e ta x. 1 Purs ua ntto sec . 1.6 85 1- 1, In co m e Tax Reg s., an d s ec. 3 01 .68 61 -1 , Pro ced
. 1 & Admin . Reg s., the Secr et ary au th or iz es cert ai n IR S em pl oyees t o d et erm in e

(co nt in ue d...)- 7 -

[* 7] Sec. 6 86 1. Th e ex is te nc e o f on e o r m or e o f th e fo ll owi ng co nd it io ns supp orts a d et erm in at io n tha t co ll ect io n o f th e ta x i s i n jeo pa rdy : (1 ) th e ta xp ay er i s o r ap pe ars to be de si gn in g qui ck ly to d ep artfro m th e Uni te d S tate s o r to co nc eal hi m se lf o r he rs el f; ( 2) th e ta xp ay er i s o r ap pe ars to be de si gn in g qui ck ly to p la ce hi s, h er o r it s p ro pe rty beyondth e rea chof t he Gov ern m en t b y rem ov in g i t fr om th e Uni te d S ta te s, b y

co nc eal in g i t, b y

di ss ip at in g i t, o r by tran sf erri ng itto othe r pe rs on s; (3) th e ta xp ay er’s fi na nc ia l s ol ve nc y is or app ears to be im

pe ril ed . Sec. 1.6 85 1- 1( a), In co m e Tax Reg s.; sec . 30 1.6 86 1- 1( a), Pro ced . &Adm in . Reg s. Not ic e an d d em an d m ay

be is su edforth e imm ed ia te paym en t o f a t ax th e co ll ect io n o f whi chis de te rm in edto be injeop ardy . Sec. 6 33 1( a). Upo n afai lu re orrefu sa l t o p ay

su chtax , th e Sec ret ary m ay imm ed ia te ly lev y

up on th e p ro pe rty orrig ht s t o p ro pe rty of the pe rs on subjec t t o the tax li ab il ity witho utreg ardto th e 10 -d ay pe rio d o th erwi se requi redun de r se ct io n 6 33 1( a). Pu rs uantto sec ti on 63 30 (d ), th is Co urt h as juri sd ic ti on to rev ie w th e d et erm in at io n o f th e IRS App eal s Offi ce wi th res pe ctto a jeop ardy lev y . Dornv. Co m

m is si on er, 1 19 T.C. 35 6, 3 59 (2 00 2)
.

(...co nt inue d)

1 whe th er the co ll ect io n o f a t ax is injeop ardy .- 8 -

[* 8] Sect io n 6 33 0 g en eral ly pro vi de s tha t the Co m m is si on er cann otpro ceedwith le vy ona ta xp ay er’s p ro pe rty un ti l the tax pa y er h as be engi ve n n ot ic e an d the op po rtu ni ty for a s ect io n 6 33 0 h eari ng an d, i f di ss at is fie d, ju di ci al rev ie w of the adm in is tra ti ve de te rm in at io n. Inth is cas e, th e g en eral requi rem en t o f se ct io n 6 33 0 affo rd in g apri orop po rtu ni ty for a h eari ng do es no t ap pl y be cau se res po nd en t
m ad e a fi nd in g u nd er s ect io n 6 33 1( a) tha t a jeo pa rdy lev y was app ro pr ia te . Rathe r, pu rs ua ntto sec ti on 63 30 (f), p et it io ne r is to be affo rd edanop po rtu ni ty for a h eari ng withi n a“ reas on ab le pe rio d o f ti m e aft er the lev y .” See B us se ll v. Co m m is si on er, 1 30 T.C. 22 2, 2 36 -2 37 (20 08 ). Becaus e th e und erl y in g l iabi li ti es are n otinis su e h ere, we re vi ew th e App eal s d et erm in at io n fo r ab us e o f di sc ret io n. See S eg o v . Comm is si on er, 1 14 T.C. 60 4, 6 10 (20 00 ); s ee al so Liv in g C are Alt ern at iv es of Ut ic a, In c. v. Un it edSta te s, 4 11 F.3d62 1, 6 31 (6t h C ir. 2 00 5) (d efi ni ng ab us e o f di sc ret io n a s “ cl ear t ax pa y er ab us e an d u nf ai rn es s b y

th e IRS ”). The adm in is tra ti ve reco rdin di cat es th at , onMarc h 2 2, 2 01 2, the set tl em en t of fic er re qu es te d fr om

pe ti ti on er’s rep res en ta ti ve cla rif ic at io n abo utth e n atur e an d du rat io n o f th e Fre ud enbe rg -No k p aym en ts . Peti ti on er’s rep res en ta ti ve pro m is ed to co nt actpe ti ti on er an d fa x awrit te n v eri fic at io n t o IR S App eal s. Durin g tha t sa m e p ho ne co nv ers at io n p et it io ne r’s rep res en ta ti ve was i nf orm edth at , am on g ot he r is su es , pet it io ne r ne ed edto ad dr es s the equi ty int eres ts inth e th ree r eal- 9 -

[* 9] pr op ert ie s. Nei th er p et it io ne r no r pe ti ti on er’s rep res en ta ti ve ev er co nv ey ed
an y ad di ti on al in fo rm at io n abo utth e Fre ud enbe rg -No k a m ou nt s. Pet it io ne r di d
no t tran sf er the th ree p ro pe rti es to hi s s ol e o wne rs hi p b utin st eadreque st eda de te rm in at io n l et te r. Pet it io ne r in co rrec tl y

cla im edan d re cei ve d l arg e ta x re fund s an d the n pr oc eed edto free ly spe ndfro m th os e refu nd s. Pet it io ne r al so tra ns ferr edcert ai n real pro pe rty recei ve d i n s at is fact io n o f a l oa n t o Di am on d & Ass oc ia te s t o EM G, LLC, andth enjoi nt ly to h im se lf a ndhi s wi fe. W e fi ndth atth es e fac ts jus ti fy th e de te rm in at io n t o s us ta inth e jeop ardy lev y be cau se pe ti ti on er was qu ic kl y di ss ip at in g the fun ds or o th erwi se att em pt in g t o p utth em

be y on d the reac h o f
res po nd en t b y

tra ns ferr in g fu nd s t o thi rdparti es . It s ho ul d a ls o b e n ot edth at pe ti ti on er h as no t d is pu te d h is tax li ab il it ie s. Pet it io ne r di d n otful ly coo pe rat e with the set tl em en t o ffi cer’s re as on ab le in fo rm at io n re qu es ts ab ou t s ou rces of
un rep orte d i nc om e an d the tra ns fer o f cert ai n re al pro pe rty oth er tha n t o pe ti ti on er’s d ire ctown ers hi p. Inth e li gh t o f pe ti ti on er’s fai lu re t o p ro vi de th e reque st edfin an ci al in fo rm at io n re ga rd in g the Freu de nb erg -No k a m ou nt s, res po nd en t’s d en ia l o f anin st al lm en t ag reem en t was no t an ab us e o f di sc ret io n. See M cLai ne v. Co m

m is si on er, 1 38 T.C. 22 8, 2 43 (20 12 ) (fi nd in g tha t the App eal s o ffi cer’s d en ia l o f anin st al lm en t ag reem en t was no t an ab us e o f- 10 -

[* 10 ] di sc ret io n wh ere the tax pa y er fa il edto pro vi de reque st edfin an ci al in fo rm at io n) ; s ee al so Orum v. Co m m is si on er, 1 23 T.C. 1, 1 3 (2 00 4) (“ In st al lm en t ag reem en ts are b as edup on th e ta xp ay er’s cu rren t fi na nc ia l co nd it io n. * * * [T] he App eal s o ffi cer c ou ldha ve reas on ab ly rejectedanin st al lm en t ag reem en t p ro po sa l by pet it io ne rs on th e b as is of * * * pe ti ti on ers ’ fai lu re t o t im el y pro vi de th e reque st edin fo rm at io n.” (in te rn al cit at io ns om it te d) ), aff’d, 4 12 F.3d81 9 (7 th Cir
. 20 05 ). In c on tra st , th is Co urt fi nd s tha t re sp on de ntaffo rd edpe ti ti on er al l l eg al rig ht s re qu ire d u nd er the Co de an d the reg ul at io ns . The s ettl em en t o ffi cer in de pe nd en tl y

rev ie wedth e rev enue off ic er’s n ot es an d the IDRS tran sc rip ts to ve rif y th atall th e requi rem en ts of app li cab le law o r adm in is tra ti ve pro cedur e were m et . Her act io ns sat is fie d the ve rif ic at io n re qu ire m en ts of s ect io n 6 33 0( c)(1 ) an d (3 )(A). W e al so fin d the set tl em en t o ffi cer t o h av e co m pl ie d wi th th e requi rem en ts st at edinsec ti on 63 30 (c)( 3) (B) and(C). Up on rev ie w of the fact s an d the adm in is tra ti ve reco rd , th e Co urt fi nd s tha t p et it io ne r ha s fa il edto sat is fy hi s bu rd enof p ro vi ng th atth e IRS ab us edit s d is cret io n i n thi s m at te r. Rathe r, th e Co urt fi nd s tha t the fact s an d c irc um st an ces of the cas e, in cl ud in g p et it io ne r’s fai lu re t o fu ll y

co op erat e, jus ti fie d the jeop ardy lev y .- 11 -

[* 11 ] To re fle ctth e fo reg oi ng , Deci si on wil l b e en te red fo r res po nd en t.