TAX COURT OPINION

Case: Theron Eugene & AnneMarie Johnson
Docket Number: 15586-12L
Judge: Kroupa
Opinion Type: bench
Filed: 06/20/2013
Pages: 13

SEC UNITED STATES TAX COURT WASHINGTON, D.C. 20217 THERON EUGENE & ANNEMARIE JOHNSON, ) ) ) ) ) ) ) ) ) COMMISSIONER OF INTERNAL REVENUE, Respondent. Petitioners, v. Docket No. 15586-12L ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit to petitioners and to respondent a copy of the pages of the transcript of this case before Judge Diane L. Kroupa in San Francisco, California on June 5, 2013, containing her oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, an appropriate decision will be entered for respondent. (Signed) Diane L. Kroupa Judge Date: Washington, D.C. June 20, 2013 SERVED Jun 21 2013 Capital Reporting Company 3 1 2 3 4 5 6 7 8 9 10 11 12 13 Bench Opinion by Judge Diane L. Kroupa June 5, 2013 Theron Eugene & AnneMarie Johnson v. Commissioner Docket No. 15586-12L BENCH OPINION THE COURT: THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF FACT AND OPINION IN THIS CASE, AND THE FOLLOWING REPRESENTS THE COURT'S ORAL FINDINGS OF FACT AND OPINION. THESE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE. This bench opinion is made pursuant to the authority granted in section 7459(b) and Rule 152. 14 All section references are to the Internal Revenue 15 16 17 18 19 20 21 22 23 24 25 Code as amended and in effect for the years at issue, as later defined, and all Rule references are to the Tax Court Rules of Practice and Procedure. This is a collection review case involving a lien and a proposed levy to collect petitioners' unpaid federal income tax liabilities for the years 2000, 2001, 2002, 2003, 2004, and 2005 (the years at issue.) Petitioners appeared pro se, and Kim Kazda appeared on behalf of respondent. FINDINGS OF FACT 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 Petitioners resided in Sacramento, 2 California at the time they filed the collection 3 review petition. Petitioner husband is a pilot for 4 United Airlines and petitioner wife is a homemaker. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Respondent mailed a deficiency notice to petitioners determining a deficiency and additions to tax and pemalties for the tax years 2000 through 2004. Petitioner timely filed a petition contesting respondent's determinations for those years but failed to present any documents or otherwise prosecute their case. Respondent then filed a Motion to Dismiss for Lack of Prosecution, which the Court granted. Petitioners late filed their return for 2005. Respondent thereafter assessed a late-filing addition to tax and interest against petitioners for 2005. Overpayment credits were transferred from petitioners' 2006 tax account to pay the balance due for 2005. Thus, the late-filing penalty and interest was abated and a refund was issued to petitioners. Respondent later determined that petitioners were not entitled to overpayment credits for 2006 and determined the refund was erroneously issued. Petitioners failed to pay the unpaid tax 25 liabilities and the erroneous refund. Respondent 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 then sought to collect the amounts. Respondent issued a Notice of Intent to Levy and Notice of Your 3 Right to a Hearing to petitioners for balances owed 4 5 6 7 8 9 for the years at issue. Petitioners requested a collection due process (CDP) hearing. Respondent requested petitioners submit a Form 433-A containing their financial information. Petitioners failed to submit a Form 433-A. Rather, they asserted that they are not "a person" liable for tax. Petitioners also 10 requested their CDP hearing be held face-to-face. 11 Petitioners also indicated they did not wish to 12 13 pursue an offer in compromise until respondent explained what argument of theirs was frivolous and 14 until respondent determined the appropriateness of 15 16 17 18 the collection action. Respondent again asked petitioners to complete Form 433-A. Again, petitioners declined to complete the form and provide it to the Appeals 19 Officer. Several other communications occurred 20 between the Appeals Office and petitioners. 21 Petitioners persisted in asking which of their 22 23 24 25 arguments was frivolous. Throughout their communications with Appeals, petitioners failed to provide the requested and required financial information and failed to 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 provide any collection alternatives. Respondent therefore issued a Notice of Determination Concerning 3 Collection Action(s) under sections 6320 and/or 6330 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 for the years at issue. The Determination Notice sustained the proposed collection action to collect from petitioners all unpaid tax liabilities for each of the six years at issue. Petitioners timely filed a petition with this Court. In the petition, petitioners assert that no hearing was conducted, no recording was made of any hearing, the IRS erroneously determined they were not eligible for due process and the IRS misapplied the eligibility requirements for a face-to-face hearing. At trial, respondent orally moved to impose a $15,000 penalty against petitioners based on the number of years involved here and the number of additional cases petitioners have with respondent. OPINION We are asked whether to sustain respondent's collection action set forth in the 21 Determination Notice. Where, as here, the validity 22 23 24 25 of the underlying tax liability is not properly placed at issue, the Court will review respondent's determination for abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 Commissioner, 114 T.C. 176, 181-182 (2000). We must decide whether respondent exercised his discretion 3 arbitrarily, capriciously or without sound basis in 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 fact or law. See Woodral v. Commissioner, 112 T.C. 19, 23 (1999). Based upon our examination of the record, we find that respondent did not abuse his discretion in determining that the collection action should proceed with respect to petitioners' unpaid tax liabilities for the years at issue. We will begin with a brief overview of the collection proceedings. If any person liable for a Federal tax liability neglects or refuses to make payment within ten days of notice and demand, the Commissioner is authorized to collect the tax by levy on that person's property. See sec. 6331(a). At least thirty days before enforcing collection by levy on the person's property, the Secretary is obliged to provide the person with a final notice of intent to levy, including notice of the administrative appeals available to the person. See sec. 6331(d). The person is entitled, upon request, to an administrative review hearing before the Office of Appeals. Sec. 6330(b) (1). If the taxpayer requests a hearing, he or she may raise at that hearing any relevant issues relating to the unpaid tax or the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 proposed levy. Sec. 6330 (c) (2) (A); 6320 (c). 2 Relevant issues include any appropriate spousal 3 4 5 6 7 8 9 10 11 12 13 14 15 16 defenses, challenges to the appropriateness of collection and possible alternative means of collection such as an installment agreement or an offer-in-compromise. Sec. 6330 (c) (2) (A). A taxpayer is precluded from contesting the existence or amount of the underlying tax liability unless the taxpayer did not receive a notice of deficiency for the liability in question or did not otherwise have an earlier opportunity to dispute the liability. Sec. 6330 (c) (2) (B). A CDP hearing is conducted informally and may consist of a face-to-face meeting, written or oral communications between the settlement officer and the taxpayer's representative or a combination of 17 meetings and communications. Sec. 301.6320-1(d) (2), 18 19 20 Proc. & Admin. Regs. After the hearing, the Appeals officer is required to make a determination that addresses issues the taxpayer raised, verifies that 21 all requirements of applicable law and administrative 22 23 24 25 procedures have been met, and balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary. Sec. 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 6330 (c) (3) (C). The Settlement Officer may deny a face-to- face hearing if the taxpayer does not intend to discuss relevant issues or intends to espouse frivolous and groundless arguments. Secs. 301.6320- 1(d) (2), Proc. & Admin. Regs. Once a taxpayer is given a reasonable opportunity for a hearing and fails to avail himself of the opportunity, this Court may sustain the Commissioner's determination to proceed with collection based on an Appeals officer's review of the case file. See Rivas v. Commissioner, T.C. Memo. 2012-20. Petitioners again asked at trial which of their arguments was frivolous. Petitioners' main argument is that they are not a person required to file a return and pay tax. Simply put, they are taxpayers required to file a return and pay tax. 18 Petitioners follow in the footsteps of numerous 19 20 21 others who have unsuccessfully attempted to avoid paying Federal income taxes. We need not discuss petitioners' erroneous positions at length. See 22 Wnuck v. Commissioner, 136 T.C. 498 (2011). To 23 24 25 refute petitioners' arguments with somber reasoning and conspicuous citation of precedent might suggest that these arguments have some colorable merit. 866.488.DEPO www.CapitalReportingCompany.com I Capital Reporting Company 1 Crain v. Commissioner, 737 F.2d 1417, 1418 (5th Cir. 10 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 1984). Moreover, addressing a frivolous argument wastes the Court's and respondent's limited time and resources that.would be better spent on a litigant asserting a legitimate, relevant claim. See Wnuck v. Commissioner, supra. Petitioners also contend that respondent is required to conduct the hearing face-to-face. We disagree. We have consistently held that a face-to- face CDP hearing is not required under section 6330. Katz v. Commissioner 115 T.C. 329 (2000) (taxpayer not entitled to face-to-face hearing; telephone conference procedurally proper); Leineweber v. Commissioner, T.C. Memo. 2004-17 (face-to-face hearing not required; prior telephone conversations and correspondence constituted CDP hearing). The failure to provide necessary financial documentation prevents a productive and meaningful communication about potential collection alternatives. Failure to provide such information alone is sufficient to sustain the determination the Appeals Office made to proceed with a levy against the taxpayer. TGI 23 Enterprises, Inc. v. Commissioner, T.C. Memo. 2009- 24 25 123. Respondent's Settlement Officer informed petitioners that, before they could be afforded a 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 face-to-face hearing, they needed to provide the Form 433-A and the supporting financial documentation. 3 Petitioners failed to supply the necessary form and 4 5 6 7 8 9 10 11 financial information. Petitioners have failed to advance arguments that allow us to conclude that the determination to sustain the proposed collection action was arbitrary, capricious, or without sound basis in fact or otherwise an abuse of discretion. See, e.g., Giamelli v. Commissioner, 129 T.C. 107, 112, 115 (2007). Respondent therefore has not abused any discretion in sustaining the collection action. 12 Accordingly, we sustain respondent's determination in 13 14 15 16 17 the Determination Notice. Petitioners have not raised any valid challenges to the appropriateness of collection, did not assert any spousal defenses, or otherwise offer any collection alternatives. See sec. 6330 (c) (2). 18 Accordingly, these issues are now deemed conceded. 19 20 21 22 23 24 Rule 331(b) (4). We now address respondent's motion to impose a penalty against petitioners pursuant to section 6673. Section 6673 authorizes the Tax Court to require a taxpayer to pay to the United States a penalty up to $25,000 whenever it appears that 25 proceedings have been instituted or maintained 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 primarily for delay or that the taxpayer's position in such proceedings is frivolous or groundless. See sec. 6673; Scruggs v. Commissioner, T.C. Memo. 1995- 355, aff'd. without published opinion, 117 F.3d 1433 (11th Cir. 1997) . The purpose of section 6673 is to compel taxpayers to think and to conform their conduct to settled tax principles. See Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir 1986) . Despite numerous warnings from the Court and from respondent, petitioners persisted and wasted this Court's limited time and resources. Respondent ' s counsel recommended that $15, 000 would be an appropriate amount given the facts of this case and the other cases petitioners have with respondent. The Court agrees that the penalty should be substantial if it is to have the desired deterrent effect. See Grasselli v. Commissioner, T.C. Memo. 1994-581) . Cf. Talmage v. Commissioner, T.C. Memo. 1996-114, aff'd. without published opinion, 101 F.3d 695 (4th Cir. 1996). Petitioners' tactics have consumed valuable Government resources. These tactics should not be condoned. They damage the integrity of the Federal tax litigation system because of the time and 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 attention the Court and respondent must devote to 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 13 1 these frivolous arguments deprives other taxpayers 2 with genuine tax controversies. See Abrams v. 3 Commissioner, 82 T.C. 403, 412 (1984). We are 4 mindful that petitioners are representing themselves 5 6 7 and may not be familiar with all the Court's rules and procedures. Pro se status, however, is not a license to litter the dockets of the Federal courts 8 with ridiculous allegations concerning the Code. 9 Parker v. Commissioner, 117 F.3d 785 (5th Cir. 1997). 10 11 12 13 14 15 16 The Court will impose a substantial penalty under section 6673 against petitioners as there are six years at issue involving over $350,000 of unpaid tax liabilities and they have other cases for other years with respondent. We rely upon respondent's recommendation and shall impose a $15,000 penalty against petitioners under section 6673(a) (1). 17 Moreover, petitioners are warned that the Court will 18 19 20 21 22 23 24 25 consider imposing a larger penalty if they return to the Court and advance similar arguments in the future and waste the Court's and respondent's limited resources. To reflect the foregoing, decision will be entered for respondent and an appropriate order will be issued sustaining the determinations set forth in the Notice of Determination Concerning Collection 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 14 1 Action(s) under Section 6320 and/or 6330, upon which 2 3 this case is based, regarding the unpaid tax liabilities for all the years at issue. The order 4 will also impose a $15,000 penalty against petitioners. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 5:15 p.m., the above- entitled matter was concluded.) 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