T.C. M em o . 2 0 1 7 -3 5

UNITED STATES TAX COURT
CHARLES D. SHAFFRAN, SR., Pet i t io n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 1 2 6 11 -1 2 L. Feb ru ary 1 6 , 2 0 1 7
.
Ch arl es D. Sh affran , Sr., p ro s e. M i ri am C. Di l l ard , fo r res p on d en t .

M EM ORANDUM FINDINGS OF FACT AND OPINION VASQUEZ, Ju d ge: Th i s cas e ari s es fro m a p et i t io n fo r rev i ew fi l ed i n
res p o n s e t o a No t ice o f Det erm i n at i o n Co ncern i n g Co l lect i o n Act i on (s ) Un d er Sect i o n 6 3 2 0 an d/ o r 6 3 3 0 (n o t i ce o f d et erm i n at i o n ) i n wh i ch res p o n d en t d et erm i n edt o s u s tai n a l i en n o t i ce fi l i n g an duph o l da n o ti ce o f i n t en tt o l ev y wi t h- 2
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[* 2 ] res p ectt o p et i t i o n er’ s b el o w-l i s t edl i ab i l i t i es . 1 Res p o n d en t d et erm i n edth at p et i t i o n er was l i ab l e fo r t ru s tfu n d reco v ery p en al t i es (TFRPs ) fo r t h e fo l l o wi n g p eri o d s : Tax ab l e p eri o d TFRP as s es s edam o u n t

9 / 3 0/ 20 0 6 $ 1 8 ,6 9 4.3 4 3 / 3 1/ 20 0 7 1 6 ,7 9 5 .1 7 6 / 3 0/ 20 0 7 1 9 ,9 1 7 .7 5 9 / 3 0/ 20 0 7 1 2 ,4 8 7 .9 5 1 2/ 31 / 2 0 0 7 1 0 ,0 6 1 .4 9 Th e i s s u e fo r d eci s io n i s wh et h er p et i t i o ner i s l i ab l e fo r t h e TFRPs as s es s ed ag ai n s th i m . W e h o l dth ath e i s n o t . FINDINGS OF FACT So m e o f t h e fact s h av e b een s ti p u lat ed an dare s o fo u n d. Th e s t ip u l at i o n o f fact s an dth e at t ach ed ex h i b i ts are i n co rp o rat ed h erei n b y th i s referen ce. Pet i t i o n er
res i dedi n Fl o ri d a atth e t i m e t h e p et i t i o n was t i m el y fi l ed
. Back g ro u n d Pet i t i o ner s pen tm

u ch o f h i s adu l tl i fe i n M i ch ig an wo rk i n g fo r Fo rdM o t or Co . Pet i ti o n er an dh is wi fe, M ari a Sh affran , m o v edt o Fl o ri d a i n ei t h er 2 00 5 o r

1 Un l es s o t h erwi s e i n d i cat ed , al l s ect i o n referen ces are t o th e In t ern al Rev enu e Co de i n effect atal l rel ev an tt i m es .- 3
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[* 3 ] 2 0 0 6 aft er h e h ad s uffered a h eart at t ackan ds h e h ads u ffered th ree s t ro k es . Pet i t io n er was 7 7 y ears o l d atth e t i m e o f t ri al
. In M arch 2 00 6 Pau l Ro bert s o rg an izedth e Res t au ran tGro up o f Des t i n , LLC (Res t au ran t Gro up ), wh i ch o p en edSu n s etCh arl i e’ s , a b each s i d e res t au ran t i n M i ram ar Beach , Fl o ri d a. M r. Ro b ert s was Res t au ran tGro up ’ s o wn er an d
m an ag i n g m em

b er duri ng t h e t ax p eri o d s i n ques t i o n . 2 Al o n g wi t h p et i t i o n er’ s s o n Carl o s D. Sh affran , M r. Ro bert s o v ers aw Su n setCh arl i e’ s d ay -t o -d ay o p erat i o n s , i n cl u d i n g p ayro l l -rel at edm at t ers . Res t au ran tGro up m ai n t ai n edth ree b an k acco u n ts atWh i t n ey Nat i o nal Ban k: an o p erat i n g acco u n t , a “p ayro l l ” acco u n t , an da “ t ax ” acco u n t . M r. Ro b ert s an d Carl o s were au t h o ri zeds i g n at o ri es o n al l three acco u n t s an dreg u l arl y
s i gn edch eck s drawn o n t h em . Du ri n g Su n s et Ch arl i e’ s ex i s t en ce p et i t i o n er v i si t edth e res t au ran ttw o o r th ree t im es p er weekfo r s ev eral h o u rs . Wh i l e t h ere p et i t i o n er “ sataro u n d ” atth e b ar an ds o m et im es act edas a “ g o fer” fo r M r. Ro b ert s an d Carl o s. M u ch o f

2 Res t au ran t Gro up ’ s i n i t i al art i cl es o f o rg an i zat i o n d at edM arch 9 , 2 0 0 6 , s h o wedM r. Ro b ert s as th e s o l e m an ag i n g m em b er. An am en d m en tt o th e art i cl es o f o rg an izat io n d at edAp ri l 5 , 2 0 0 6 , ad d edAn g el a J . M il l er as a m an ag i n g m em b er. An am en d m en tt o th e art i cl es o f o rg an i zat i o n d at edSep tem ber 2 8 , 2 0 0 6 , ad d edM ich ael Ro b ert s as a m an ag i n g m em b er. An g el a M i l l er res i g n edo n Au g u st 2 8 , 2 0 0 6 . M ich ael Ro b ert s res i g n edi n J an u ary 2 0 08
.- 4
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[* 4 ] p et i t i o n er’ s t i m e atth e res t au ran twas s o ci al
. 3 Ho wev er, u n d er M r. Ro b ert s ’
an d Carl os ’ d i rect i o n , p et it i o n er o ccas i o n al l y trai n edb art en d ers , recei v ed d el i v eri es , an dp ro v i deds up pl iers wi t h ch eck s s i g n edb y M r. Ro b ert s o r Carl o s . So m et im es p et i t i on er wro t e o u tch eck s fo r Carl o s t o s i gn b ecau s e p et i t i o ner h ad
m o re l eg i b l e h an dwri t i n g. So m e o f t h es e ch eck s were wri t t en t o p et i ti o n er o r M rs . Sh affran i n p art i al rep aym en to f a $ 6 ,5 0 0 l o an th ats h e h adex t en d edt o Res t au ran t Gro up . In Au g u s t 2 0 0 6 M r. Ro b ert s was o u to f t o wn . Bet ween Au g us t3 an d1 4 , 2 0 0 6 , p et i t i o n er s ig n edfo u r ch eck s drawn o n Res tau ran tGro up ’ s o p erat i n g
acco u n t . Pet it io n er s i g n edtwo o f t h es e ch eck s t o p ay s up p l i ers fo r d el i v eri es th at arri v edwh en n ei t h er M r. Ro bert s n o r Carl o s was av ai l ab l e. 4 Pet i t i o n er s i g n edth e
o th er t w o ch eck s , wh i ch were p ay ab l e t o p et i t i o ner an dM rs . Sh affran i n p art i al rep aym en to f h er l o an , atth e b eh es t o f M r. Ro b ert s . 5 Whi t n ey Nat i o nal Ban k

3 M rs . Sh affran ’ s t h ree s t ro k es l efth er p h y s i cal l y d i s ab l ed . Pet i t i o n er o ft en b ro u gh t h er t o Su n s etCh arl i e’ s s o th ats h e co u l dg eto u to f t he h o u s e an d en jo y th e b each s i d e v i ews . Pet it i on er wo u l dal s o s pen d t i m e atthe res t au ran twh i l e M rs . Sh affran recei v edp h y s i cal th erap y ata n earb y

s wi m m i n g p o o l
. 4 Bo t h ch eck s were fo r t h e am o u n t s o n t h e s up pl i ers ’ b il l s. Pet i t i o n er d i d n o tkn ow wh atRes tau ran tGro up ’ s b an kb al an ces were wh enh e s i g n edth e ch eck s .

5 M r. Ro b ert s i n s t ru ct edp et i t io n er t o wri t e t he ch eck s o u tan d s ig n M r. (co n ti n u ed ...)- 5
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[* 5 ] h o n o redal l fo u r ch eck s ev en th o u g h p et i t i o n er was n o tan au t h o ri zed
s i gn at o ry . Pet i t i o n er d i dn o ts i g n an y o th er ch eck s o n b eh al f o f Res t au ran tGro up
o r o th erwi s e d et erm i n e h o w i t s p en ti t s av ai l ab l e fu n d s . 6 Res t au ran tGro up s t ru g g l edfi n an ci al ly an d d i dn o trem i tem

p l oym en tt ax es t o the In t ern al Rev en u e Serv ice (IRS) fo r t h e t h i rdqu art er o f 2 0 0 6 , al l fo ur qu art ers o f 2 0 0 7 , o r t h e fo u rt h qu art er o f 2 0 0 8 . Res t au ran tGro up al s o fel l b eh i n d
o n p aym en t s t o it s s upp l i ers an di t s l an d l o rd . In2 0 08 Res t au ran tGro up was
ev i ct edfro m

the l o cat i o n wh ere i th ado p erat edSu n s etCh arl i e’ s . Itceas edd o i n g b u s i n es s th aty ear. IRS In v es t i g at io n an dAs s es s m en to f Tax In Feb ru ary

2 0 1 1 Rev enu e Offi cer Cyn t hi a Kan e (RO Kan e) was t as k ed wi th i n v es t i g at i n g Res tau ran tGro up ’ s fai l ure t o p ay em pl o ym en tt ax es . On Feb ru ary 2 8 , 2 0 1 1 , RO Kan e v i s i t edth e p rem i ses wh ere Su n s etCh arl i e’ s h ad
o p erat ed . RO Kan e s p o k e wi t h th e b u i l d i n g m an ag er, wh o i n fo rm ed h er th atth e

5 (...co n t in u ed ) Ro b ert s’ n am e. Becau se h e was co n cern edab o u t “ fo rg i n g ” M r. Ro b ert s ’ n am e, p et i t i o n er s i g n edh is o wn n am e o n th e ch eck s i n s t ead
.

6 Res t au ran t Gro up i s s u edap p ro x im at el y 4 6 9 ch eck s du ri n g th e t hi rd qu art er o f 2 0 0 6 . Acco rd i n g l y , th e p ercen tag e o f ch eck s th atp et i t i o n er s i g n edwas l es s th an1 % o f al l ch eck s th atRes t au ran t Gro up i s su eddu ri n g th e t hi rdqu art er o f 2 0 0 6
.- 6
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[* 6 ] res t au ran th adb een ev i ct edi n J u l y o r Au g u s t2 0 0 8. In a fo l l o wup t el ep h o n e cal l th e b u il d in g m an ag er t ol d RO Kan e t h atM r. Ro b ert s an dCarl o s h adh el d th em s el v es o u tas Su n s etCh arl i e’ s o wners . Th e b ui l di n g m an ag er d es cri b ed p et i t i o n er as an “ o l d er m an ” an di n co rrect l y i d en ti fi ed h i m

as th e res t au ran t ’ s b o o kk eep er. RO Kan e was co n cern edth at t h e p eri o do f l i m it at i o n s fo r t h e as s es s m en t o f th e 2 0 07 TFRPs was du e t o ex p i re o n Ap ri l 1 5, 2 0 11 . Thu s , o n M arch 1 7 , 2 0 1 1 , o n l y 1 8 d ay s aft er s h e b eg an h er i n v es t i g at i o n , RO Kan e reco m m en d edas s es s i n g TFRPs ag ai n s tp et i ti o n er, M r. Ro b ert s , Carl os , an dth e t wo o t h er m an ag i n g
m em b ers , An g el a M i l l er an dM i ch ael Ro b ert s . Inacco rd an ce t h erewi t h , RO Kan e
s en tp et i t i o n er a Let t er 1 1 53 , Tru s tFu n dReco v ery Pen al t y Let t er, d at edM arch 1 7 , 2 0 1 1 , at h i s l as t kn o wnad dres s (a p o s t o ffi ce b o x h e s h aredwi t h Carl o s) v i a cert ifi edm ai l . Th e Let t er 1 1 53 s t at edth atth e IRS was p ro p o si n g TFRPs ag ai n s t p et i t i o n er. Ital s o s t at edthatp et i t i o n er h ad6 0 d ay s t o fi l e a fo rm al p ro t es t wi t h th e IRS co n t es t i ng the p ro p os edas s es s m en t o f t h e TFRPs . Pet i ti o n er d i dn o trecei v e
o r o th erwi s e l earn ab o u tthe Let t er 1 1 53 b ecau s e Carl os i n t ercep t edi tan dd i dn ot tu rn i to ver t o p et i t i o n er. 7

7 Th e ret u rn recei p t at t ach ed t o th e Let t er 1 1 53 i n the ad m i n is trat i v e reco rd b ears Carl o s ’ s i g n atu re, n o t p et i t i o n er’ s .- 7
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[* 7 ] Befo re i s su i ng t h e Let t er 1 1 5 3 , RO Kan e d i d n o ts ecu re Res t au ran t Gro up ’ s b an k reco rd s o r m ak e an y at t em p tt o i n t erv i ew t h e i n di v i du al s ag ai n s twh o m s h e
was p ro p o s i ng TFRPs . RO Kan e al s o fai l ed t o d et erm in e wh et h er p et i t i o n er wi l l fu l l y fai l edt o rem i tem

p l o ym en tt ax es t o t h e IRS. 8 No n et hel es s RO Kan e
wen t fo rwardwi t h h er reco m m en d at i on t o as s es s TFRPs ag ai n s tp et i t io n er o n th e b as i s o f t h e l i m i tedi nfo rm at i o n s h e h adco l l ect eddu ri ng h er b ri ef i n v es t i g at i o n . In M ay 20 1 1 RO Kan e s ecu redRes t au ran tGro up ’ s b an kreco rd s fro m Wh i tn ey Nat i o n al Ban k . Aft er rev i ewi n g th e b an kreco rd s an dd is co v eri n g th at An g el a M i l l er an d M i ch ael Ro b ert s h adn o ts i g n edan y ch eck s , RO Kan e wi t h drew h er reco m

m en d at io n t o as s es s TFRPs ag ai n stth em . RO Kan e d i dn o tp ro v i d e
s i m i l ar rel i ef t o p et it i o n er b ecau s e s h e co n fu sedp et i t i o n er’ s s i g n atu re wi t h Carl o s ’
an d was th erefo re u n d er t h e m i s t ak en i m p res s i o n th atp et i t i o n er reg ul arl y s i g n ed Res tau ran t Gro up ’ s ch eck s . OnJ u ne 2 , 2 0 11 , th e TFRPs were as s es sedag ai n s tp et i ti o n er. OnAu g u s t1 , 2 0 1 1 , th e IRS m ai l edp et i t i o ner a Let t er 1 05 8 , Fi n al No t i ce o f In t en tt o Lev y an d No t ice o f Yo u r Ri g h tt o a Heari n g , wi t h res p ectt o th e TFRPs (l ev y n o t i ce). On

8 Ona Fo rm

4 1 8 3 , Reco m

m en d at i on re: Tru s t Fu n dReco v ery Pen al t y As s es s m en t , p rep aredco n cu rren t l y wi t h th e Let t er 1 1 5 3 , RO Kan e wro t e: “ DUE TO THE SHORT STATUTE AND RECENT RECEIPT OF THE CASE FILE, CANNOT FULLY DOCUM ENT W ILLFULNESS [o f p et i t i o n er] AT THIS J UNCTURE.”- 8
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[* 8 ] Au g u s t 1 1 , 2 0 1 1 , th e IRS i s s u edp et i t i o n er a No ti ce o f Fed eral Tax Li en Fi l i n g an dYo u r Ri g h tt o a Heari n g Un d er IRC 6 3 2 0 (l i en n o t i ce). OnAu gu s t3 0 , 2 0 1 1, p et i t i o n er t i m el y fi l eda co ll ect i on du e p ro ces s (CDP) ap p eal o f the l ev y

n o t i ce an d t h e l i en n o t i ce i n wh i ch h e ch al l en g edthe u n d erl y i n g l i ab i l i t i es . Th e Ap p eal s s et tl em en to ffi cer p ro p o sedp l aci n g p et i t i o n er i n cu rren t l y
n o tco ll ect i b l e s tatu s an d ab at i ng the TFRPs fo r t h e t ax p eri o d s en d i n g Decem b er 3 1 , 2 0 0 7 an d2 0 08
. 9 Pet i t i o n er d i dn o t ag ree t o th is p ro p o s al , an dth e s et t l em en t
o ffi cer i s s u eda n o ti ce o f d et erm i n at i o n s us t ai n i n g th e p ro p o sedco l l ect i o n act i o ns . Pet i t i o ner t i m el y

fi l eda p et i t i o n wi t h t h i s Co u rt . A tri al was h el di n J ack s o n vi l l e, Fl ori d a. Atth e cl o s e o f t ri al th e Co u rto rd eredth e p art i es t o fi l e
s i m u l t an eo u s b ri efs . Res p o n d en tt i m el y fi l edh i s p o s tt ri al b ri ef o n Feb ru ary 4 , 2 0 1 6 . Pet i t i o n er d i dn o tfi l e a p o s t t ri al b ri ef. 1 0

9 Aft er t h e p et i t i o n was fi l ed , res p o n den tab at edth e TFRP ag ai n s t p et i t i on er fo r t h e t ax p eri o den d i n g Decem b er 3 1 , 2 0 0 8 . W e 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 o n g ro u nd s o f m o o tn es s fo r t h i s t ax p eri o d.

1 0 Wh en a p art y

d o es n otfi l e a b ri ef o n i s su es th at h av e b een t ri ed , we m ay co n si d er t h o s e i ss u es wai v edo r co n ced ed
. See, e.g ., Ni ck l au s v . Co m m i s si o n er, 1 1 7 T.C. 1 1 7 , 1 2 0 n .4 (2 0 0 1 ); St ri n g er v . Co m m i s si o n er, 8 4 T.C. 6 93 , 7 04 -7 0 8 (1 9 8 5), aff’ dwi t h o utp ub li s h edo p i n i o n , 7 8 9 F.2 d9 17 (4 t h Ci r. 1 98 6 ). W e wi l l ex erci s e o u r d is cret i o n n o tt o d o s o h ere. See, e.g ., Rey v . Co m m is s i o n er, T.C. M em o. 2 0 1 6 -5 8
.- 9
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[* 9 ] OPINION I. J u ri s d i ct i o n an dSt an d ardo f Rev i ew W e fi rs tad dres s o u r ju ri sd i ct i o n o v er t h i s cas e an dth e ap p l i cab l e s t an d ard
o f rev i ew. Sect io n 6 3 2 1 i m

p os es a l i en i n fav or o f t he Un i t edSt at es o n al l p ro pert y an d ri gh t s t o p ro p ert y

o f a t ax p ay er l i ab l e fo r t ax wh en a d em an dfo r p aym en to f t h e t ax h as b een m ad e an dth e t ax pay er fai l s t o p ay th e t ax . Sect i o n 6 3 2 0 (a) p ro v i d es th atth e Secret ary

s h al l fu rn i s h th e t ax p ay er wi t h a n o t i ce o f Fed eral t ax l i enfi l i n g (NFTL) wi t h i n fi v e b u si n es s d ay s aft er t h e n ot ice o f l i en i s fi l ed
. Sect io n 6 3 3 1 (a) au t h o ri zes th e Secret ary t o l ev y up on p ro pert y an dp ro p ert y ri gh t s o f a t ax p ay er l iab l e fo r t ax i f t h e t ax p ay er fai l s t o p ay th e t ax wi t h i n 1 0 d ay s aft er n o t ice an dd em an dfo r p aym en t i s m ad e. Sect i o n 6 3 30 (a) p ro v i d es th atn o l ev y m ay b e m ad e o n an y

p ro p ert y o r ri g h tt o p ro p erty

o f an y p ers o n u n l es s th e Secret ary h as n ot ifi eds u ch p ers o n i n wri t i n g o f t h e ri g h tt o a h eari n g b efo re t h e l ev y i s m ad e. If a t ax p ay er req u es t s a h eari n g i n res p o n s e t o an NFTL o r a n o t i ce o f l ev y p u rs u an t t o s ect io n 6 32 0 o r 6 3 3 0 , a h eari n g s h al l b e h el db efo re an i m p art ial
o ffi cer o r em

p lo y ee o f Ap p eal s . Secs . 6 3 2 0 (b )(1 ), (3 ), 6 3 3 0(b )(1 ), (3 ). Atth e h eari n g th e t ax p ay er m ay rai s e an y rel ev an t i s s u e, i n cl u d i ng s p o u s al d efen s es ,- 1 0 -

[* 1 0 ] ch al l en g es t o the ap pro p ri at en es s o f t h e co l l ect i o n act i o n s, an do ffers o f
co l l ect i o n al t ern at i v es . Secs
. 6 3 2 0 (c), 6 33 0 (c)(2 )(A). In ad d i ti o n , th e t ax p ay er
m ay ch al l en g e t h e ex i s t en ce o r am o u n to f t h e u n d erl y i n g t ax l i ab i l i t y , b u to n l y i f th e t ax p ay er d idn o t recei v e a n o t i ce o f d efi ci en cy o r o t h erwi s e h av e an
o p p o rtu ni t y

t o d is p ut e t he l i ab il i t y . Secs . 6 32 0 (c), 6 3 3 0 (c)(2 )(B). Sect io n s 6 3 2 0 (c) an d6 3 30 (d )(1 ) g ran tth i s Co u rtjuri s di ct i o n t o rev iew t h e Co m m i s s i o n er’ s d et erm in at i o n th atth e p ro p o sedco l l ect io n act i o n was p ro p er. In
rev i ewi n g th e Co m

m i s s i o n er’ s d eci s i on t o s u s t ai n co l l ect i o n act i o n s , wh ere t h e
v al i d i ty o f t h e u n d erl y in g t ax l i ab i l i t y i s p ro p erl y

ati s s u e, t h e Co u rtrev i ews th e Co m m i s s i o n er’ s d et erm in at i o n o f t h e u n d erl y i ng t ax l i ab il it y d e n ov o . Seg o v . Co m m i s s i o n er, 1 1 4 T.C. 6 0 4 , 6 1 0 (2 0 0 0); Go za v . Co m m i s s i o n er, 1 1 4 T.C. 1 7 6 , 1 8 1 -1 8 2 (2 0 0 0 ). Th e Co u rtrev i ews an y o t h er ad m i n i st rat i v e d et erm i n at i on reg ard i n g p ro p o s edco l l ect i o n act i o n s fo r ab u s e o f d i scret io n . Seg o v . Co m m i s s i o n er, 1 1 4 T.C. at6 1 0; Go za v . Co m m i s s io n er, 1 1 4 T.C. at1 8 2
. Th e l i ab i l i t i es i n th i s cas e i n v o lv e TFRPs . Th e Co m m i s s io n er i s req u i redt o p ro v id e t h e t ax p ay er wi t h n o t i ce o f TFRPs b efo re as s es s m en t . Sec. 6 6 7 2 (b )(1 ). A Let t er 1 1 5 3 p ro v id es a t ax p ay er wi t h n o t i ce an dth e m ean s o f p ro t es t i n g a p ro p os edTFRP as s es s m en t ad m i n i s t rat i vel y wi t h th e Co m

m i s s i o ner. M as o n v . Co m m i s s i o n er, 1 3 2 T.C. 3 0 1 , 3 1 7 (2 0 0 9). Wh en a Let t er 1 15 3 i s m ai l ed , th e- 1 1 -

[* 1 1 ] Co m

m i s si o n er m

u s t fo l l o w th e s am e m ai l i n g p ro cedu res t h atare p ro v i d ed fo r n o t i ces o f d efi ci en cy

i n s ect i o n 6 2 1 2 (b ). Sec. 6 6 7 2 (b )(1 ). Th i s Co urth as h el d th atth e s am e ev id en ce t h at es t ab l i s h es th at t h e Co m m i s si on er m ai leda n o t i ce o f d efi ci en cy

t o a t ax p ay er’ s l as tkn o wnad dres s s ho u l db e s u ffi ci en tt o es t ab li s h th at th e Co m m i s s i o n er p ro p erl y

s en ta Let t er 1 1 5 3 . M as o n v . Co m m i s s i o n er, 1 3 2 T.C. at3 1 8 (ci t i n g Hi ck ey

v . Co m m i s s io n er, T.C. M em o . 2 0 0 9-2 ). Res p o n d en t ’ s i s s u an ce o f t h e Let ter 1 1 5 3 b y cert i fi edm ai l , wh i ch was s en t t o p et i ti o n er ath i s l as tkn own ad dres s , s at i s fi es th e n ot i ce req u i rem en t o f s ect i o n 6 6 7 2 (b )(1 ). See i d. Th u s , th e TFRP as s es s m en t s m ad e ag ai n stp et i t i on er are
v al i d . Ho wev er, a Let t er 1 15 3 th atwas n o trecei v ed , b u twas n otrefu sed , b y a t ax p ay er d o es n o t co n st i tu t e ano p p o rtun i t y t o d i s p u t e t h e t ax p ay er’ s l i ab i l i t y . See i d .; Fi t zp at ri ckv . Co m

m i s s i o n er, T.C. M em o . 2 0 1 6-1 9 9 , at* 1 8
. Acco rd i n g l y , p et i t i o n er co u l dch al l en g e t h e u n derl y i ng l i ab i l i t i es duri n g h is CDP h eari n g b ecau s e h e d i dn o trecei v e o r reject a Let t er 1 1 5 3. See Lep o re v . Co m m i s s i o n er, T.C. M em o . 2 01 3 -1 3 5 (recei pto f Let t er 1 1 5 3 b y t ax p ay er’ s adu l ts o n d i d n o t p ro v id e t ax p ay er wi t h an o p p o rtu n i t y t o ch al l en ge h i s l i ab i l i t y

fo r a TFRP). Pet i t io n er d i di n fact ch al len g e t h e u n d erl y i n g l i ab i l i t i es du ri n g h i s CDP h eari n g , an d th e s et tl em en t o ffi cer d et erm i n edth ath e was l i ab l e fo r t hem . Becau s e- 1 2 -

[* 1 2 ] p et i t i o n er p ro p erl y

rai sedth e i s s u e o f t h e l i ab il i t i es duri n g h is CDP h eari n g , we rev i ew res p o n d en t ’ s d et erm i n at i o n o f t h e u n derl y i n g t ax l i ab i l i t i es d e n o v o . II. Tru s tFu n d Reco v ery Pen al t i es W e n ex tad dres s wh et her p et it i on er i s l i ab l e fo r t h e TFRPs as s es s edag ai n s t h i m . Em p l o y ers h av e a du t y

t o wi t h h o l di n co m e an dem p l oym en tt ax es fro m

th ei r
em pl o y ees ’ wag es . Secs . 3 10 2 (a), 3 4 0 2 (a). Th es e wi t hh el dfu n d s are o ft en referred t o as “ t ru s t fu n dt ax es ” b ecau s e s ect i o n 7 5 0 1 (a) ch aract eri zes s u ch wi th h o l d i n g s as “ a s p eci al fu n d[h el d ] i n t ru s tfo r t h e Un it edSt at es . ” M as o n v . Co m m i s s i o n er, 1 3 2 T.C. at3 2 1. Em p l o y ees g en eral ly

are al l o wedcred i ts ag ai n s t th ei r t ax l i ab i l i t ies fo r t h e am o un t s o f t ax es wi th h el dfro m th ei r wag es , reg ard l es s
o f wh eth er th e em

p l oy er act u al l y

rem it s th e fu n d s t o t h e Go v ern m en t . Sec. 3 1 (a);
s ec. 1 .3 1 -1 (a), In co m e Tax Reg s . Th erefo re, wh en n etwag es are p ai dt o an
em pl o y ee an d t h e em

p l o y er d o es n o tp ay

o v er t h e wi t h h el dfu n ds , th e IRS h as n o
reco u rs e ag ai n s tth e em

p l oy ees . M azo v . Un it edSt at es , 5 9 1 F.2 d1 15 1 , 1 1 5 3 (5 t h Ci r. 1 9 79 ). 1 1

1 1 InBo n ner v . Ci t y

o f Pri ch ard , 6 6 1 F.2 d1 2 0 6 , 1 2 0 9 (1 1t h Ci r. 1 9 8 1 ), th e Co u rto f Ap p eal s fo r t h e El ev en t h Ci rcu i t ad o p t edas b i n d i n g p reced en tthe d eci s i o n s o f t h e fo rm er Co u rto f Ap peal s fo r t h e Fi ft h Ci rcu i th an d edd o wnb efo re Oct o b er 1 , 1 9 8 1 . An ap p eal o f th i s cas e wo u l dl i e i n t h e El ev en t h Ci rcu i t. See (co n ti n u ed ...)- 1 3 -

[* 1 3 ] Sect i o n 6 6 7 2 p ro v i d es a co l l ect i o n t oo l al l o wi ng th e Co m m i s s i o ner t o i m p o s e p en al t i es o n cert ai n p ers o n s wh o fai l t o wi th h o l dan d p ay o v er t ru s tfu n d t ax es . See News o m e v . Un i tedSt at es , 4 3 1 F.2 d7 4 2, 7 4 5 (5 t h Ci r. 1 9 7 0 ). Th e p en al ty u n d er s ect i o n 6 6 7 2 i s eq u al t o th e t o t al am o u n t o f t h e t ax th at was wi th h el db u t n o t p ai do v er an di s i m p o s edo n an y

“p ers o n ” req u iredt o co l lect , tru th fu l l y acco u n tfo r, o r p ay o v er an y t ax wi t h hel dwh o wi l l fu l l y fai l s t o d o s o . In th i s co n t ex t , the t erm

“p ers o n ” i s o ft en t ak en t o m ean a “ res p o ns i b l e p ers o n ”
an d i n cl u d es an o ffi cer o r em p l o y ee o f a co rp orat i o n wh o , as s u ch , i s u n d er a du t y t o co l l ect , acco u n t fo r, o r p ay o v er t h e wi t h hel dt ax . See s ec. 6 67 1 (b ); M azo , 5 9 1 F.2 dat 1 15 3 ; M as o n v . Co m m i s s i on er, 1 32 T.C. at3 2 1 . Th erefo re, l i ab i l it y fo r a TFRP i s i m

p o s edo nl y

o n (1 ) a res p o n s i b l e p ers o n wh o (2 ) wi l l fu l l y fai l s t o
co l l ect , acco u n tfo r, o r p ay o v er t h e wi t h h el dt ax . M azo , 5 91 F.2 d at1 1 5 3
. Befo re we ad dres s th es e el em en t s , 1 2 we wi l l co m m en to n the t es t i m on y

o f p et i t i o n er. “ As a t ri er o f fact , i ti s o u r dut y t o l i st en t o t h e t es t i m o n y , o b s erv e t h e

1 1 (...co n t i nu ed ) Go l sen v . Co m

m i s s i on er, 5 4 T.C. 7 4 2 (1 9 7 0 ), aff’ d , 4 4 5 F.2 d9 8 5 (1 0 t h Ci r. 1 9 7 1 ).
1 2 W e n eed n o td eci d e wh o h as th e b u rd eno f p ro o f as t o wh et h er p et i t i o n er i s a res po n si b l e p ers o n wh o wi l l fu l ly fai l ed t o co l l ect , acco un tfo r, o r p ay o v er t he wi th h el dt ax es b ecau s e we d eci d e t h e fact u al i s s u es h ere o n th e p rep o n d eran ce o f th e ev i d en ce.- 1 4 -

[* 1 4 ] d em ean o r o f th e wi t n es s es , wei g h th e ev i d en ce, an dd et erm i ne wh atwe b el i ev e.” Kro p p v . Co m

m is s io n er, T.C. M em o . 2 0 0 0 -1 4 8 , s l ip o p . at8 . InDi az v . Co m m i s s i o n er, 5 8 T.C. 5 60 , 5 6 4 (1 9 7 2 ), we o b s erv edth atth e p ro ces s o f d i s t i l l i n g tru th fro m

th e t es t i m o n y

o f wi tn es ses , wh o s e d em ean o r we o b s erv e an dwh o s e cred i b i l i ty

we ev al u at e, i s th e d ai l y

g ri st o f ju d i ci al l i fe. Al th o ug h th ere were a few i m m at eri al i n co n s is t en ci es i n h i s t es t i m on y , we g en eral l y fo un d p et i t i o n er t o b e h o n es t , fo rt hri gh t , an dcred i b l e. No w we wi l l ad dres s wh et her p et i t i o n er i s a res p o n si b l e p ers o n wi th i n th e
m ean i n g o f s ect i o n 6 6 7 2 . Res po n d en t arg ues th atp et i t i o n er i s a res po n s i b l e p ers o n b ecau s e h e act edas a “ de fact o o ffi cer” b y s i g n i n g fo u r ch eck s an dwri t i n g
o u ts ev eral o th ers fo r Carl o s ’ s i g n ature. Pet it i on er arg ues th ath e i s n ota
res p o n s i b l e p ers o n b ecau s e h e was n o tan o wn er o r m an ag er o f Res t au ran tGro up
an d l ack edau t h o ri t y t o s i g n ch eck s o r d et erm i n e t he p ri o ri ty o f p aym en tt o i t s cred i t o rs . Fo r t h e reas on s b el ow, we ag ree wi t h p et i t i o ner an dh ol dth ath e i s n ota
res p o n s i b l e p ers o n wi t h i n th e m ean i n g o f s ect i o n 6 6 7 2
. A res p o n si b le p ers o n i s an y p ers o n req u i redt o co l l ect , acco u n t fo r, o r p ay
o v er wi th h el dt ax es . M azo , 5 9 1 F.2 dat1 1 5 3
. Wh et h er s o m eo ne i s a res p on s i b l e p ers o n i s a “ m at t er o f s t atu s, du t y an dau t h o ri t y , n o tkn owl ed ge.” Id . at1 1 5 6 . Th e
es s en t i al qu es t i o n i s wh et h er th e p ers o n h ads u ffi ci en tco n t ro l o v er co rp o rat e- 1 5 -

[* 1 5 ] affai rs t o av o i dn o np aym en to f t h e em p l o ym en t t ax es . Sco t t v . Un i t ed St at es , 8 2 5 F.3 d1 2 7 5 , 1 2 7 9 (1 1 t h Ci r. 2 0 1 6 ) (ci t i n g Geo rg e v . Un i t edSt at es , 8 1 9 F.2 d1 0 0 8 , 1 0 1 1 (1 1 th Ci r. 1 9 8 7 )). Th e Co u rto f Ap p eal s fo r t h e El ev en t h Ci rcu i t h as n ot edth ati n d i ci a o f res p o n s i b i l i t y i ncl u d e “ th e h o l di n g o f co rp orat e o ffi ce,
co n tro l o v er fi n an ci al affai rs , the au t h o ri t y t o d i s b u rs e co rp o rat e fu n d s , s t o ck
o wn ers hi p , an d t h e ab i l i t y t o h i re an d fi re em

p l o y ees .” Th i b o d eau v . Un i t ed St at es , 8 2 8 F.2 d1 4 9 9 , 1 5 0 3 (1 1 t h Ci r. 1 9 8 7 ). In co n s i d eri n g th e i nd i v i du al ’ s
s t atu s, du t y , an dau th o ri ty , th e t es ti s o n e o f s ub st an ce, an dth e fo cu s o f th e i n qu i ry d o es no ti n v o l v e a m ech an ical ap p l i cat i o n o f an y p art i cu lar l i s to f fact o rs . See In re DeM arco , 2 5 8 B.R. 4 80 , 4 8 5 (Ban kr. M .D. Fl a. 1 9 9 9 ) (ci ti n g Hei m arkv . Un i t ed St at es , 1 8 Cl . Ct . 1 5 , 2 3 (1 9 8 9 )). Th e i n qu i ry m us tfo cu s o n actu al au t h o ri t y t o
co n tro l , n o to n t ri v i al du t i es . Id .; s ee al s o Sco t t , 8 2 5 F.3 dat 1 2 8 1 (h o l di n g th ata
reas on ab l e t ri er o f fact co u ld fi n dth ata t ax pay er i s n o ta res p o n s i bl e p ers o n ev en th o u g h th e t ax p ay er was (1 ) n am edth e co rp o rat e s ecret ary ; (2 ) wo rk eds ev eral h o u rs p er week ; an d(3 ) h addut i es i n cl u d i n g s i g n i n g p ayro l l ch eck s p rep aredb y a th i rd p art y , s i g n i n g n o np ayro l l ch eck s fo r ro ut i n e ex p en d i tu res , an d s i g n i n g Fo rm s 9 4 1 , Em pl o y er’ s Qu art erl y

Fed eral Tax Retu rn ). Th e p rep o n d eran ce o f t h e ev id en ce es t ab l i s h es thatp et i t i on er l ack ed
s u ffi ci en tco n t ro l o ver Res t au ran tGro up ’ s affai rs t o av o i dth e n o np aym en t o f i t s- 1 6 -

[* 1 6 ] em p lo ym en t t ax es du ri n g th e t ax p eri o d s i n ques t i o n . Pet i ti o n er was n o tan
o ffi cer, d i rect o r, em

p l o y ee 1 3 o r o wn er o f Res t au ran tGro up atan y t im e. He was
n ev er an au t h o ri zeds i g n at o ry o n Res t au ran tGro up ’ s b an k acco u n ts . It i s al s o cl ear fro m

p et i t i o ner’ s cred i b l e t es t i m o ny an dth e ad m i ni s t rat i v e reco rdth ath e: (1 ) d i dn o th av e t h e au t h o ri t y t o h i re an dfi re Res tau ran t Gro up ’ s em pl oy ees ; (2 ) h adn o dut y

t o , an dd i dn o t , rev i ew o r reco n ci l e Res t au ran tGro up ’ s b an k
s t at em en t s ; an d (3 ) h adn o co n t ro l o v er d is b u rs em en t s an dd eci s i o n s p ert ai n i n g t o Res tau ran t Gro up ’ s b an kacco u n t s , i n cl u d i n g the p ayro l l acco u n t . Fu rt h erm o re, th ere i s n o ev i d en ce th atp et i t i o n er h adan y i n v o l v em en t i n th e p rep arat i on o r fi li n g o f Res t au ran t Gro up ’ s em p l o ym en tt ax retu rn s o r th e p aym en to f i t s
em pl o y m en tt ax es . W e are n o tp ers u ad edb y

res p o n d en t ’ s arg u m en tthatp et i t i on er i s a
res p o n s i b l e p ers o n b ecau s e h e s i g n edan d/ o r wro t e o u ta s m al l n u m b er o f Res tau ran t Gro up ’ s ch eck s . Th e fo u r ch eck s b eari n g p et i t io n er’ s s i g n atu re were al l s i g n edi n th e s p an o f t wo week s i n Au g u s t 2 0 0 6 wh en M r. Ro bert s was o u to f t o wn(an d b efo re fo u r o f t h e fi ve t ax p eri o d s i n qu es t i o n). Of t h es e fo u r ch eck s (l es s t h an 1 % o f t h e ch eck s Res t au ran tGro up i ss u ed duri n g t he t hi rdqu art er o f

1 3 Wh i l e p et i t i o n er p erfo rm edt as k s fo r M r. Ro b ert s an dCarl o s as d i rect ed b y th em fro m t i m e t o t i m e, h e d i dn o two rkreg ul ar h o u rs o r recei v e a s al ary .- 1 7 -

[* 1 7 ] 2 0 0 6 ), two were wri t t en an ds i gn edo n l y aft er M r. Ro b ert s h adt o l d p et i t i o n er t o d o s o . Th e o t h er t wo were s i g n edi n u n u s u al ci rcu m s t an ces wh ere p et i t i o n er was th e o n ly

p ers o n av ai l ab l e t o t ak e d el i v ery o f v en do r o rd ers . Su ch l i m i ted ch ecks i g ni ng act i v i t y d o es n o ts upp o rta fi n d i n g t h atp et i t i o ner h ad
s u ffi ci en tco n t ro l o ver Res t au ran tGro up ’ s affai rs t o av ert t he n o np aym en t o f i t s
em pl o y m en tt ax es . 1 4 W i t h res p ect t o th e ch eck s wri t t en b y p et i ti o n er b u ts i g n edb y Carl o s, th i s p ract i ce o n l y

co n fi rm s th atp et it i o n er d idn o t h av e au t h o ri t y t o d i s b urs e Res t au ran t Gro up ’ s fu n d s . To b e s ure, t h e ex erci s e o f ch eck s ig n i n g au t h o ri ty i s a s i g ni fi can t fact or i n d et erm i n in g wh et h er s o m eo n e h as au t h o ri ty t o ch oo s e wh i ch cred i t o rs t o p ay . See W i l l i am s v . Un i tedSt at es , 9 3 1 F.2 d8 0 5, 8 1 0 (1 1 t h Ci r. 1 9 9 1 ). In
co n tras t , th e p rep arat i o n o f ch eck s fo r an o t h er’ s s i g n atu re d o es n o tco n n o t e s u ch
au th o ri ty . W e h av e n o tfo u n d , an dres p o n d en t d o es n otci t e, an y au t h o ri t y t o th e
co n trary .

1 4 W e n o t e t h at RO Kan e, wh o was wo rk i n g u n d er en o rm o u s t i m e p res s u re b ecau s e o f t h e l oo m i n g ex p i rat i o n o f t h e p eri o do f l i m i t at i o n s, erro n eo us l y co n cl u d ed t h at p et i ti o n er h adreg u l arl y s i g nedRes tau ran tGro up ’ s ch eck s du ri n g th e t ax p eri o d s i n qu es t i o n. W e b el i ev e RO Kan e wo u l dh av e wi t hd rawn h er reco m m en d at i o n t o as ses s TFRPs ag ai n s tp et i t io n er h ads h e n o t co n fu s edCarl o s ’ s i gn atu re wi th p et i t i o n er’ s.- 1 8 -

[* 1 8 ] Acco rd i n g ly , we fi ndth atp et i t i o n er i s n o ta res p on s i b l e p ers o n fo r p u rp o s es
o f s ect i o n 6 6 72
. 1 5 In reach i n g o u r h o ld in g , we h av e co ns i d ered al l arg u m en t s m ad e, an dt o t h e
ex t en tn o tm en t i o n ed , we co n s i d er t h em i rrel ev an t , m o o t , o r wi t h o u t m eri t . To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t ered fo r p et i ti o n er.

1 5 Hav i n g d et erm i n edth atp et i ti o ner i s n o ta res po n si b l e p ers o n wi t h i n th e m ean i n g o f s ec. 6 67 2 , th e Co u rtn eedn o td et erm i n e wh et h er h e wi l lfu l l y fai l edt o co l l ect , acco u n tfo r, o r p ay o v er t h e t ru s tfu n dt ax es fo r t h e t ax p eri o d s i n qu es t i o n .