TAX COURT OPINION

Case: George H. Patton & Felomina F. Patton
Docket Number: 16365-12L
Judge: Laro
Opinion Type: bench
Filed: 07/01/2013
Pages: 14

CMS UNITED STATES TAX COURT WASHINGTON, DC 20217 GEORGE H. & FELOMINA F. PATTON, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 16365-12 L. ) ) ) ) OR D E R 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 petitioners and to respondent a copy of the pages of the transcript of the trial in the abovereferenced case before Judge David Laro at Detroit, Michigan, containing his Oral Findings of Fact and Opinion, rendered at the trial session at which this case was heard. In accordance with the Oral Findings of Fact and Opinion, we will issue an Order that; 1) Grants respondent's Motion for Summary Judgment in part, in that Appeals did not abuse its discretion; 2) denies respondent's Motion for Summary Judgment in part, in that Appeals erred in failing to consider petitioners' underlying tax liabilities for years 2005 through 2008; and 3) remands this case to respondent's Appeals for a supplemental hearing under section 6330(c). Dated: Washington, D.C. July 1, 2013 (Signed) David Laro Judge SERVED Jul 01 2013 Capital Reporting Company IN THE UNITED STATES TAX COURT 1 In the Matter of: GEORGE H. & FELOMINA F. PATTON Petitioners, ) ) ) v. ) Docket No: 16365-12L COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) Room 1031 Levin U.S. Courthouse 231 W. Lafayette Boulevard Detroit, MI 48226 May 20, 2013 The above-entitled matter came on for bench opinion, pursuant to notice, at 11:49 a.m. BEFORE: HONORABLE DAVID LARO Senior Judge APPEARANCES: the Petitioners: For (No Appearance.) the Respondent: For (No Appearance.) 1 2 3 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 2 4 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company P R O C E E D I N G S 2 (11:49 a.m.) THE CLERK: Recalling from the calendar Docket No. 16365-12L, George H. & Felomina F. Patton. (Whereupon, a bench opinion was rendered.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 3 1 2 3 4 5 6 7 8 9 Bench Opinion by Senior Judge David Laro May 20, 2013 George H. & Felomina F. Patton v. Commissioner Docket No. 16365-12L THE COURT: The Court has decided to render an Oral Opinion in this case, and the following is the Court's oral opinion. This bench opinion is made under the authority granted by section 7459(b) and Rule 152. Presently before the Court is respondent's 10 motion for summary judgment under Rule 121. Unless 11 12 13 14 15 otherwise indicated, section references are to the Internal Revenue Code. Petitioners refers to George H. Patton and Felomina F. Patton, IRS refers to the Internal Revenue Service, and Appeals refers to the IRS Office of Appeals. Petitioners resided in 16 Michigan when they filed the petition. 17 18 19 Background On April 14, 2011, respondent issued to petitioners Letter 3172, Notice of Federal Tax Lien 20 Filing and Your Right to a Hearing Under IRC 6320 21 22 23 24 25 (CDP notice) to collect petitioners' self-assessed tax liabilities' that they reported on their returns for years 2005 through 2008. In response, petitioners filed a Request for a Collection Due Process or Equivalent Hearing (CDP request), which 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company respondent accepted as timely. The CDP request did not indicate the years for which petitioners sought to have a CDP hearing, but respondent deemed the CDP request to be for years 2005 through 2008. The CDP request stated the following: paid medical insurance since Spouse paid In August 2011, permanently I am 67 yrs. disabled public safety officer since 1984 living on pension. retired not given credit for. withholding not given credit for. Government placed us in a hardship condition with its continuous trespass with water on our commercial property. us unable to ascertain our deductions and correct amount of tax. File states abatement being considered. it destroyed our tax record and made (emphasis added). In addition, the CDP request indicated that petitioners sought withdrawal of the tax lien and an installment agreement as a collection alternative. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Petitioners explained that they believed withdrawal 16 17 18 19 20 of the lien was warranted because "Responsible [sic] for correct amount of tax never ascertained." On October 6, 2011, a settlement officer of respondent's Appeals held a CDP hearing with petitioners by telephonic conference. The settlement 21 officer's Case Activity Record, which would contain 22 23 24 25 the settlement officer's notes of what transpired during the CDP hearing, is not part of the record. Respondent alleges in his motion for summary judgment that the settlement officer told petitioners during 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 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 the CDP hearing that Appeals could not consider entering into an installment agreement with petitioners because Appeals did not receive the requested financial information from petitioners before the hearing. Petitioners submitted the requested financial information to Appeals after the hearing. Based on the information, Appeals determined that petitioners would qualify for an installment agreement to pay $750 per month. Respondent alleges the settlement officer attempted to contact petitioners several times without success. On May 30, 2012, respondent issued a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 sustaining the filing of the Notice of Federal Tax Lien (NFTL). The Notice of Determination stated that petitioners owed $51,493.78 for years 2005 through 2008 and that petitioners had not challenged these underlying liabilities. The notice concluded that Appeals was unable to enter into an installment agreement with petitioners because the settlement officer could not get in touch with petitioners to discuss any such agreement after the settlement officer reviewed petitioners' financial information. The notice also 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 determined that it could not withdraw the NFTL because petitioners had not satisfied their outstanding tax liabilities and did not meet any of the requirements under section 6323(j). On June 26, 2013, petitioners timely petitioned this Court for review of respondent's I 1 2 3 4 5 6 7 Notice of Determination. The petition stated, among 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 other things, the following points: (1) Mr. Patton's bank account was levied by the IRS based on its estimate of Mr. Patton's 2001 tax liability; (2) the IRS warned Mr. Patton that unless he filed the "rest of the forms in three weeks", IRS would continue to levy his bank account; (3) "the forms filed within time limit did not denote the correct tax"; (4) petitioners could not calculate the correct tax liability for which they were responsible because they lost·their tax records as a result of the government's--presumably, the municipal government's- -"continuous trespass with water"; and (5) petitioners felt that they could not delay the filing of their tax returns out of the concern that they would be penalized by the IRS. The petition does not contest Appeals's determinations relating to collection alternatives and withdrawal of the NFTL. Respondent has filed the instant motion for 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 summary judgment, claiming that the only issue for us to decide is whether Appeals abused its discretion in declining to enter into an installment agreement with petitioners and withdraw the NFTL. As respondent sees it, petitioners did not raise the underlying liabilities as an issue in either their CDP hearing or their petition with the Court. We disagree. Discussion Summary judgment may be granted with respect to all or any part of the legal issues in controversy where the record establishes "that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law." Rule 121(a) and (b). As the moving party, respondent bears the burden of proving that there is no genuine dispute of material fact, and factual inferences are viewed in the light most favorable to petitioner as the nonmoving party. Where a motion for summary judgment is made, an adverse party "must set forth specific facts showing that there is a genuine dispute for trial." Rule 121(d). Here, respondent supported the motion with the pleadings and various exhibits. Petitioners filed a response opposing the granting of respondent's motion. Based on the record viewed in the light most favorable to petitioners, we 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 will grant respondent's motion in part and deny it in 2 3 4 5 6 part. We review the Commissioner's determinations in a CDP hearing generally for abuse of discretion. However, if the validity of a taxpayer's underlying tax liability is properly at issue, we review the 7 matter de novo. Giamelli v. Commissioner, 129 T.C. 8 9 10 11 12 13 14 107, 111 (2007). 1. Underlying liabilities Contrary to respondent's assertion, petitioners contested their underlying liabilities in their CDP request. The CDP request clearly stated that petitioners believed they were not given credits or deductions for certain tax withholdings and 15 medical payments. The CDP request also claimed that 16 17 18 19 20 21 22 23 24 25 petitioners' tax records were destroyed by the "continuous trespass with water", preventing petitioners from ascertaining their deductions and correct amount of tax. These statements together clearly show that petitioners believed the tax liabilities that they reported on their returns to be incorrect. Because "underlying tax liability" referred to in section 6330 (c) (2) (B) encompasses self-assessed tax liability, petitioners were entitled to challenge the liabilities underlying 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 respondent's NFTL even though they had reported them on their own returns. Montgomery v. Commissioner, 122 T.C. 1, 7-8 (2004). Even when a taxpayer has made the underlying liability an issue in his CDP request, he is deemed to have abandoned the claim if he fails to pursue it in his CDP hearing. Schwartz v. Commissioner, T.C. M:emo. 2008-117, 95 T.C.M. (CCH) 1427, 1430 n.9, aff'd, 348 Fed. Appx. 806 (3d. Cir. 2009). Here, respondent has failed to submit the Case Activity Record as an exhibit to his motion. This is problematic because the Case Activity Record would have allowed us to determine whether petitioners pursued the liability issue and presented evidence to support their claim during their CDP hearing. Viewing the facts in the light most favorable to petitioners as the nonmoving party here, we conclude petitioners properly raised the issue at their CDP hearing. Indeed, petitioners continued to raise the issue when they petitioned this Court for our review of respondent's Notice of Determination. While the 23 petition was not well drafted, we disagree with 24 25 respondent's characterization that the petition does not contest the underlying tax liabilities. The 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 3 4 5 petition plainly indicates petitioners' belief that they incorrectly reported their tax liabilities on their returns because of the loss of tax records and that they nonetheless filed the returns because they did not want to be "penalized" for any delay. 6 Whether these arguments have some colorable merit and 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 would survive IRS or judicial scrutiny is not a question we can answer today due to Appeals's failure to address them during the administrative proceeding. Thus, we will remand the case for a supplemental hearing as to the issue of petitioners' tax liabilities that formed the basis of the filing of the NFTL. During the supplemental hearing, petitioners may challenge the underlying liabilities for years 2005 through 2008 and present evidence in support of their challenge. Petitioners are reminded that in presenting their arguments to Appeals to dispute their underlying tax liabilities, they should not make any frivolous arguments or arguments that lack any basis in law or fact. 2. Collection alternatives Petitioners' petition before the Court does not challenge Appeals's determinations as to the issues regarding collection alternatives and 25 withdrawal of the tax lien. Thus, we deem 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 petitioners to have abandoned any such challenge and any issues not raised in the petition. In any event, respondent's Appeals did not abuse its discretion when it did not enter into an installment agreement with petitioners and withdraw the lien. Petitioners failed to submit the necessary financial information before their CDP hearing. Even though they provided the requested information after the hearing for Appeals to determine the terms of an appropriate installment agreement, petitioners failed to make themselves available to discuss any agreement Appeals was willing to propose. Further, none of the conditions under section 6323(j) was present that would warrant withdrawal of the NFTL. Thus, we conclude that Appeals did not abuse its discretion as to the issues relating to collection alternatives and 17 withdrawal of the tax lien. 18 19 20 21 22 23 24 25 3. Conclusion Based on the foregoing, we will issue an order that (1) grants respondent's motion for summary judgment in part in that Appeals did not abuse its discretion with respect to its decisions relating to collection alternatives and withdrawal of the NFTL; (2) denies respondent's motion for summary judgment in part in that Appeals erred in failing to consider 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 petitioners' underlying tax liabilities for years 2005 through 2008, an issue that petitioners properly raised in the CDP request; and (3) remands this case to respondent's Appeals for a supplemental hearing under section 6330 (c) for the sole purpose of affording petitioners an opportunity to challenge their tax liabilities for years 2005 through 2008 and present evidence to support their challenge. This concludes the Court's Oral Findings of Fact and Opinion in this case. (Whereupon, at 12:01 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 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 13 1 2 3 4 5 6 7 8 9 CERTIFICATE OF TRANSCRIBER AND PROOFREADER CASE NAME: George H. & Felomina F. Patton v. Commissioner DOCKET NO.: 16365-12L We the undersigned, do hereby certify that the foregoing pages, numbers 1 through 13, inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Robert W. Scheid, Jr., on May 20, 2013, 10 before the United States Tax Court at its session in 11 Detroit, Michigan, in accordance with the applicable 12 13 14 15 16 17 18 19 20 21 22 23 24 25 provisions of the current verbatim reporting contract of the Court, and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording. Robert W. Scheid, Jr. 6/3/13 (Transcriber) (Date) Tracy Seabold 6/17/13 (Proofreader) (Date) 866.488.DEPO www.CapitalReportingCompany.com