TAX COURT OPINION

Case: James M. Sorrentino
Docket Number: 2967-17L
Judge: Morrison
Opinion Type: bench
Filed: 01/16/2018
Pages: 13

CT UNITED STATES TAX COURT WASHINGTON, DC 20217 JAMES M. SORRENTINO, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 2967-17 L. ORDER OF SERVICE OF TRANSCRIPT Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and respondent a copy of the pages of the transcript of trial in the above case before Judge Richard T. Morrison, at St. Louis, Missouri, on November 16, 2017, containing his oral findings of fact and opinion rendered at the conclusion of trial. In accordance with the oral findings of fact and opinion, an order will be issued. (Signed) Richard T. Morrison Judge Dated: Washington, D.C. January 16, 2018 SERVED Jan 17 2018 IN THE UNITED.STATES TAX COURT In the Matter of - JAMES M. SORRENTINO, ) ) ) ) Docket No. 29.67-17L Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. .) ) ) ) ) Thomas F. Eagleton U.S. Cthse. 111 South 10th Street Room 9.170, 9th Floor St. Louis, Missouri 63102 November 16, 2017 The above-entitled matter came on fo bench opinion, pursuant to notice at 5:00 p.m. BEFORE: HONORABLE RICHARD T. MORRI ON Judge . APPEARANCES: For the Petitioner No Appearance For the Respondent: No Appearance 1 2 3 4 5 6 7 8 9 10 11 12 13 14 16 17 20 21 22 23 24 25 (973)406-2250|operations®escïlbers.net|www.escribers.net P R O C E E i I N.G S . . (5:00 .p.m. ) 8 THE CLERK: Calli-ng docket number 2967-17L, JaInes M. Sorrentigo. (Whereupon, a ben0h ,opinion was reridered. ) 1 2 3 4. 5 11 13 15 18 19 20 22 23 24 25 3 1 2 3 4 5 6 7 8 9 Bench Opinion by Judge.Richard T. Morrison November 16, 2017 James M. Sorrentino v. Commissioner of Internal Revenue Docket No. 2967-17L THE COURT: THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF FACT AND OPINION IN THIS CASE, AND THE I FOLLOWING REPRESENTS THE COURT'S ORAL FINDINGS OF FACT AND OPINION. THE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED ON AS PRECEDENT IN ANY OTHER CASE. 10 .This bench opinion is made purs ant to the 11 authority granted by section 7459(b) of the Internal 12 Revenue Code of 1986, as amended, and Rule 152 of the Tax 13 Court Rules of Practice and Procedure. 14 15 In this bench opinion, all section numbers refer to the Internal Revenue Code of 1986, as dmended. All 16 Rule numbers refer to the Tax Court Rules of Practice and 17 Procedure. 18 19 . Under section 6330(d) we have Jurisdiction to review the determination of the Internal Revenue Service 20 Appeals Office, dated January 20, 2017, which sustained a 21 proposed levy to collect petitioner's income tax liability 22 23 from 2014. We remand for the Appeals Off ce to consider the change in petitioner's financial situation since the 24 determination. 25 Findings of Fact (973)406-2250|operations@escribersmet|vavwesenbersaet On May 13, 2016, respondent issued petitioner a 4 notice of proposed levy to collect petitioner's 2014 income tax liability. Petitioner timely requested a collection-due process, or CDP, hearing. On November 3, 2016, the Appeals Office requested petitioner complete a collection information statement. On December 20, 2016, petitioner sent the 1 2 3 4 5 6 7 8 9 10 Appeals Office a collection information statement. 11 12 The Appeals Office determined that petitioner had a monthly disposable income of $3,468. The Appeals 13 Office determined that petitioner qualified for a 14 streamlined installment agreement of $1,414 per month and 15 offered him such an agreement as a collection alternative. 16 17 Petitioner rejected the proposal. Petitioner stated he could not afford to pay any more than $750 per 18 month. 19 On January 20, 2017, the Appeals Office issued a 20 notice of determination sustaining the notice of proposed levy. 21 22 In February 2017, petitioner filed a timely 23 petition. He was a resident of Missouri when he did so. 24 25 On November 13, 2017, the Court held a trial of this case in St. Louis. Before trial, it granted 973)406-2250|operations@escribers.net|www.escribersnet respondent's motion under Rule 91(f) to deem his proposed 5 stipulation established. Discussion At a CDP hearing, the Appeals Office is required to consider various issues, including offers of collection alternatives. Sec. 6330(c) (2) (A) (iii); sec. 6330(c) (3) (B). One type of collection alternative is an installment agreement. Sec. 6330(c) (2) (A) (iii); sec. 6330(c) (3) (B). The taxpayer's current disposable income 1 2 3 4 5 6 7 8 9 10 affects what collection alternatives, including 11 12 installment agreements, the government is willing to consider. The Appellate Office's handling of collection 13 alternatives is reviewed by the Tax Court for abuse of 14 discretion. Sego v. Commissioner, 114 T.C. 604, 609-10 15 16 17 18 (2000). The petitioner raises several challenges to the amount of his monthly disposable income that was calculated by the Appeals Office and which affected the 19 Appeals Office's consideration of collection alternatives. 20 21 First, petitioner contends that his former employer, Bommarito Automotive Group, was withholding the 22 maximum amount from his pay. However, the Appeals Office 23 took into account the amount of tax withholding being 24 taken from petitioner's pay. The Appeals Office did not 25 abuse its discretion in its consideration of tax 73)406-2250|operations@escribers,net|v.ww.escribers.net 6 1 2 3 4 5 6 7 8 9 withholding. Second, petitioner contends that respondent kept his recent tax refunds and applied them against his income tax liabilities. However, the record does not show that respondent acted improperly in applying the refunds against his income tax liabilities. Third, petitioner contends that his earnings varied from month to month. However, the Appeals Office determined petitioner's earnings by considering his 10 earnings over an 11-month period, thus taking into account 11 month-to-month variation. The Appeals Office did not 12 13 14 abuse its discretion in considering petitioner's monthly income. Fourth, petitioner contends that the Appeals 15 Office failed to take into account his child support 16 obligations in determining his disposable income. 17 However, he did not list child support as an expense on 18 19 the financial information form. And petitioner admitted that he had no child-support obligations when the Appeals 20 Office conducted its hearing. The Appeals Office did not 21 err in this regard. 22 Fifth, petitioner contends that the Appeals 23 Office erred in not reducing his disposable income by the 24 25 $7,000 he pays for his daughter's college dorm rent. The collection information statement contained an instruction (973)406-2250Ioperations@escribers.net|www.escribersaet 7 1 2 3 4 5 6 7 8 9 that the IRS ordinarily does not allow a reduction for public or private college expenses, but that such expenses may be allowed if proven they are necessary for the health and welfare of the individual or family or for the production of income. Petitioner did not include any dorm expenses on the collection information statement. He testified that the Appeals Office orally informed him that such an expense would not be allowed. He further testified that because of the oral representation by the 10 Appeals Office, he had not listed the expense. Petitioner 11 did not provide the Appeals Office with any written 12 information concerning the dorm expense. He did not 13 orally explain to the Appeals Office why his daughter's 14 15 dorm expense was necessary and an exception to the general rule. We believe that he attempted to have a discussion 16 with the Appeals Office about the expense. However, we 17 18 19 20 21 observe that when he testified at trial petitioner frequently misdescribed the expense. As a result of this observation, we think that when petitioner was discussing the expense with the Appeals Office, he did not explain the expense with enough coherence or specificity for the 22 Appeals Office to understand exactly what he was talking 23 about. Thus, any confusion arising from what the Appeals 24 Office told him during this discussion was petitioner's 25 fault. In addition, petitioner should have realized, from (973)406-2250loperations@escribersmet|www.escribersaet 8 1 2 3 4 5 6 7 8 9 the instruction on the collection information statement, that he should present concrete information about the expense to the Appeals Office. We conclude that the Appeals Office did not abuse its discretion when it did not reduce petitioner's disposable income for the college dorm rent expenses. Sixth, petitioner testified and presented documentary evidence, which were marked as Exhibits 10-P through 16-P, that in October 2017 he had heart surgery, 10 that he had to quit his job at Bommarito, that he got a 11 12 13 14 15 16 new job at a different car dealership that required fewer hours of work, and that his pay at the new job is much less than at Bommarito. The Appeals Office necessarily reviews an offer by looking at a snapshot of a taxpayer's financial situation at the time of the CDP hearing. See Nihiser v. 17 Commissioner, T.C. Memo. 2008-135. In deciding whether 18 the Appeals Office abused its discretion, it obviously 19 makes no sense to consider information it did not have at 20 21 the time. Magana v. Commissioner, 118 T.C. 488, 494 (2002). We have excluded as immaterial any evidence that 22 the Appeals Office did not consider. Murphy v. 23 Commissioner, 125 T.C. 301, 321 (2005), aff'd, 469 F.3d 27 24 (1st Cir. 2006). Accordingly, the Court cannot now update 25 petitioner's snapshot and make our own determination based 973)406-2250|operations@escribers.net|www.escribers.net on new information that became available after the CDP hearing, such as petitioner's heart attack and his change 9 of job. Furthermore, we are required to follow the administrative record rule under the Eighth Circuit opinion in Robinette v. Commissioner, 439 F.3d 455 (8th Cir. 2006), rev'g 123 T.C. 85. The circuit to which this case would be appealed is the Eighth Circuit, barring a stipulation to the contrary. Sec. 7482(b)(1) (G) (i). 1 2 3 4 5 6 7 8 9 10 Therefore we follow the Eighth Circuit's Robinette opinion 11 under the rule of Golsen v. Commissioner, 54 T.C. 742, 757 12 (1970), aff'd, 445 F.2d 985 (10th Cir. 1971). The Eighth 13 Circuit in Robinette held that our scope of review in CDP 14 cases is limited to the administrative record of the 15 Appeals Office. Evidence of petitioner's heart attack and 16 his job change is not part of the administrative record. 17 Therefore we cannot review the determination of the 18 Appeals Office based on these changed circumstances. To 19 do so would violate the Supreme Court's admonition in Camp 20 v. Pitts, 411 U.S. 138, 142 (1973), quoted by the Eighth 21 Circuit in Robinette v. Commissioner, 439 F.2d at 459, 22 that "the focal point for judicial review should be the 23 administrative record already in existence, not some new 24 25 record made initially in the reviewing court." We have held that we have the authority to (973)406-2250|operations©escribers.net|www.escribersaet 10 1 2 3 4 5 6 7 8 9 10 11 remand the case to the Appeals Office for it to consider a change in financial circumstances, provided that the remand would be helpful, necessary, or productive. See Churchill v. Commissioner, T.C. Memo. 2011-182. Remanding a case to consider changed financial circumstances is not inconsistent with the Eighth Circuit's Robinette opinion. Doing so will not create a record "made initially in the reviewing court", i.e., the Tax Court. The supplementary record regarding changed financial circumstances will be created in the Appeals Office; and the Tax Court will review the supplemental determination. See Kelby v. 12 Commissioner, 130 T.C. 79, 86 (2008). 13 14 15 In this case, we believe it would be helpful for the Appeals Office to consider collection alternatives in light of petitioner's changed financial circumstances. 16 Petitioner's final day at Bommarito was September 18, 17 18 2017. He earned $8,694 of gross pay from his new employer during the period September 28, 2017 to November 3, 2017. 19 This period is approximately a period of one month. It is 20 roughly the same time of year as an earlier paystub from 21 Bommarito, which showed that petitioner earned $3,820.25 22 23 24 from the two-week period November 16, 2016, to November 30, 2016. Petitioner testified that his new job paid much less than his old job. The comparison of these two 25 paystubs corroborates his testimony. Petitioner also (9733406-2250Ioperations@escribers.net|www.escribers.net 11 testified credibly that this decrease in his earnings was permanent because it resulted from his heart condition. Respondent objects to petitioner's testimony regarding his changed circumstances and to Exhibits 10-P through 16-P. We overrule the objection and admit the challenged evidence. However, we have considered the evidence only for the purpose of evaluating whether the case should be remanded, not for the purpose of determining if the Appeals Office abused its discretion. For the reasons given above, we will remand this case to the Appeals Office for further proceedings consistent with this opinion. To reflect the foregoing, An appropriate order will be issued. That concludes this bench opinion. (Whereupon, at 5:13 p.m., the above-entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (973]406-2250|operations@escribers.net|www.escribers.net 12 1 2 3 4 5 6 7 8 9 10 11 12 CERTIFICATE OF TRANSCRIBER AND PROOFREADER CASE NAME: James M. Sorrentino v. Commi sioner DOCKET NO.: 2967-17L We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 12 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Gary Baldwin on November 16, 2017 before the U ited States Tax Cóurt at its session in St. Louis, MO, in accordance with the applicable provisions of the current erbatim reporting contract of the Court and have verified the accuracy of the transcript by comparing the typewritten 13 .transcript against the verbal recording. 14 16 17 18 19 20 21 22 23 24 25 ht o Lori Rahtes, CDLT-108 Transcriber . Dena Farbman, CET-629 Proofreader 11/25/17 Date 11/25/17 Date BEEEl 973)406-2250|operationseescribersmet|v(cid:0)523w.escribetsnet