TAX COURT OPINION

Case: Affinity Mechanical, Inc.
Docket Number: 31002-12L
Judge: Buch
Opinion Type: bench
Filed: 04/15/2014
Pages: 8

UNITED STATES TAX COURT WASHINGTON, DC 20217 AFFINITY MECHANICAL INC., ) Petitioner, en v. ) Docket No. 31002-12L. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit with this order to both petitioner and respondent a copy of the pages of the transcript of the trial in this case that contain the oral findings of fact and opinion that was rendered at the trial session at Miami, Florida. In accordance with the oral findings of fact and opinion, a decision will be entered for respondent. (Signed) Ronald L. Buch Judge Dated: Washington, D.C. April 15, 2014 SERVED APR 1 8 2014 Capital Reporting Company 3 1 Bench Opinion by Judge Ronald L. Buch 2 March 13, 2014 3 Affinity Mechanical, Inc. v. Commissioner 4 5 Docket No. 31002-12L THE COURT: The following represents the 6 Court's oral findings of fact and opinion. The oral 7 8 9 10 11 12 13 14 15 16 findings of fact and opinion may not be relied upon as precedent in any other case. This opinion is in conformity with Internal Revenue Code section 7459(b) and Rule 152(a) of the Tax Court Rules of Practice and Procedure. Any section references refer to the Internal Revenue Code or the Treasury regulations in effect during the year at issue, and Rule references are to the Tax Court Rules of Practice and Procedure. Background On March 26, 2012, respondent mailed 17 Affinity Mechanical, Inc. a Notice of Levy and Notice 18 19 20 21 22 23 24 25 of Your Right to a Hearing seeking to levy to collect employment taxes for multiple periods, including the period ending September 30, 2010, which is the period before us.now. In response to the levy notice, Mr. Bender, the President of Affinity, submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing (or "CDP Request"). On the CDP Request, Mr. Bender requested an installment 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 agreement and checked the box indicating that the balance could not be paid because "reasonable expense exceeds income". On July 9, 2012, respondent mailed 4 Affinity a letter acknowledging receipt of the CDP 5 6 7 8 9 10 11 12 13 14 Request, scheduling a hearing, and requesting information to be submitted by July 30, 2012. The information required included a 433-B, Collection Information Statement for Businesses and several delinquent tax returns. Respondent's settlement officer held the hearing with Mr. Bender on August 28, 2012. The settlement officer explained that in order to evaluate any collection alternative, Affinity needed to submit the Form 433-B and the delinquent returns. 15 Mr. Bender requested additional time and the 16 17 18 19 20 21 settlement officer granted him until September 27, 2012 to provide the information. Between September 27, 2012 and October 5, 2012, Mr. Bender submitted all of the required returns except the Form 1120, U.S. Corporation Income Tax Return for 2011. The settlement officer spoke 22 with Mr. Bender on October 17, 2011 to check on the 23 24 25 status of the 2011 Form 1120 and the Form 433-B. Mr. Bender explained that the IRS had levied Affinity's bank account which caused it to incur fees and the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 account was closed. As a result, he was having trouble completing the 2011 Form 1120. The settlement officer also told Mr. Bender that he could find the Form 433-B on the IRS website, if needed. After receiving no additional information from Affinity, respondent issued a Notice of 7 Determination Concerning Collection Action(s) Under 8 Section 6320 and/or 6330 on November 20, 2012. 9 Affinity petitioned the Tax Court in response to the 10 Notice of Determination. At the time the petition 11 12 13 14 was filed, Affinity's principle place of business was in Florida. Prior to trial, respondent filed a Motion for Summary Judgment. In response, Affinity filed a 15 Motion to Strike. Attached to the Motion to Strike 16 17 18 19 20 21 22 was a letter dated July 3, 2009 to a member of the IRS Appeals Office stating that a copy of a 433-B was attached. Respondent's motion was denied at calendar call during the Court's March 10, 2014 trial session in Miami, Florida because Mr. Bender alleged that he ha provided financial information to the IRS beyond what was included in the administrative record. 23 During the ensuing trial, Mr. Bender appeared on 24 25 behalf of Affinity and provided various documents. The documents were largely not relevant to the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 specific period at issue in this case and included, among other things, letters and notices regarding other tax periods. Mr. Bender testified at trial and stated that Affinity had little money in its bank account and that its only assets those that are necessary for it to carry on its business. At the time of trial, Mr. Bender did not provide the Court 8 with the 2011 Form 1120, the Form 433-B, or any 9 documents to reflect his or the business's current 10 11 12 13 14 15 16 17 18 financial situation nor did Mr. Bender establish that he had provided these things to the IRS. He stated that he already provided the Form 433-B containing collection information to another settlement officer for a different period, but he had provided that information before the tax period at issue and years before the collection actions at issue commenced. Law and Analysis The Secretary must notify a taxpayer in 19 writing of his or her right to request a hearing upon 20 21 22 23 24 25 the filing of a notice of lien. Sec 6320(a). The hearings are often called collection due process, or CDP, hearings. When evaluating respondent's determination stemming from a CDP hearing, we must apply the appropriate standard of review. If the validity of the underlying liability is properly at 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 issue, we will review the determination de novo. Sego v. Commissioner, 114 T.C. at 610; Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). In contrast, where the validity of the underlying liability is not properly at issue, we will review the determination for abuse of discretion. Id. An abuse of discretion will be found where the determination was arbitrary, capricious, or without sound basis in fact or law. Giamelli v. Commissioner, 129 T.C. 107, 111 (2007). It is not an abuse of discretion for a settlement officer to deny a collection alternative where the taxpayer does not provide the requested financial information. Lance v. Commissioner, T.C. Memo. 2009-129; Schwersensky v. Commissioner, T.C. Memo. 2006-178. Further, generally, it is not an abuse of discretion where an Appeals Office employee relies on guidelines published in the Internal Revenue Manual when evaluating a proposed installment agreement. Maselli v. Commissioner, T.C. Memo. 2010- 19; Aldridge v. Commissioner, T.C. Memo. 2009-276. The IRS may request that financial information that is more than twelve months old be updated. Internal Revenue Manual pt. 5.15.1.1(4) (Oct. 2, 2012). 25 Additionally, Internal Revenue Manual 5.14.1.2(8)(F) 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 9 (Jun. 1, 2010) requires that current returns must be filed before an installment agreement can be approved and the Tax Court has held denying a collection alternative is not an abuse of discretion when the required returns are not filed. Assured Source, Inc. v. Commissioner, T.C. Memo.2010-243; Londono v. Commissioner, T.C. Memo. 2003-99. We review respondent's determination for abuse of discretion. The settlement officer asked 10 for financial information and the required returns 11 multiple times. The settlement officer even extended 12 13 14 15 16 17 18 19 20 the time per Mr. Bender's request. However, Affinity has not, even up until the date of trial, provided this information. Mr. Bender claims that he had previously submitted the Form 433-B in reference to other years, but that is unsatisfactory. The letter provided by Affinity referencing previously submitted information is dated before the period at issue, well before the collection activity had begun, and certainly more than a year before Affinity 21 Mechanical's CDP request. 22 At various points, Mr. Bender claimed that 23 Affinity was in financial trouble and at trial Mr. 24 25 Bender stated that if respondent levies the business assets, the business will not be able to continue. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 Although, in some instances, the IRS may not proceed 2 with a levy if it would cause financial hardship, 3 Affinity never provided financial information to 4 5 6 7 8 9 10 11 12 13 either respondent or the Court to substantiate this claim. See, e.g., Vinatieri v. Commissioner, 133 T.C.392 (2009). Accordingly, respondent did not abuse its discretion in rejecting Affinity's request for collection alternatives. Affinity was given multiple opportunities over the course of several months to submit financial information and outstanding returns to respondent. This information was never submitted. Therefore, respondent could not properly evaluate 14 Affinity mechanical's suitability for a collection alternative and was justified in its determination. An appropriate order will be forthcoming. (Whereupon the above-entitled matter was concluded at 9:14 a.m.) 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com