TAX COURT OPINION

Case: Gary R. Beebe, Jr.
Docket Number: 4301-11L
Judge: Kroupa
Opinion Type: bench
Filed: 03/19/2012
Pages: 16

UNITED STATES TAX COURT WASHINGTON, DC 20217 GARY R. BEEBE, JR., Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) . ) ) ) ) Docket No. 4301-11 L ) ) ) ) ORD ER Pursuant to Rule 152(b), Tax Court Rules or Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial of the above case before Judge Diane L. Kroupa at Seattle, Washington on February 29, 2012, containing her oral findings of fact and opinion rendered at the conclusion of trial. In accordance with the oral findings of fact and opinion, a decision will be entered for respondent. (Signed) Diane L. Kroupa Judge Dated: Washington, D.C. March 19, 2012 SERVÉD MAR 20 2012 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 3 Bench Opinion by Judge Kroupa February 29, 2012 Beebe v. Commissioner Docket No. 4301-11L 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 by § 7459(b) and Rule 152. All section referenc.es are to the Internal Revenue 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 the filing of a notice. of lien filing and collection by federal tax levy to collect Petitioner's § 6672 trust fund liabilities of Vingage Corporation (that shall be referred to in this opinion as the Company) for the second, third and fourth quarters of 2001 and the first and second quarters of 2002 (all quarters shall be referred to in this opinion as the taxable periods at issue). This collection review matter is before the Court on Respondent's motion for summary judgment Heritage Reporting Corporation (202) 628-4888 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 filed on December 21, 2011. The Court ordered Petitioner to respond or object to Respondent's motion, and the Court scheduled Respondent's motion for a hearing on the Court's Seattle, Washington, trial session beginning February 27, 2012. Tuella Sykes appeared on behalf of Petitioner, and Danae Rawson appeared on behalf of Respondent. Findings of Fact. The record establishes or the parties do not dispute the following: Petitioner resided in Kirkland, Washington, at the time he filed the collection review petition in this case. Petitioner was a vice president and during ,the time he served in that capacity, the Company failed to pay its employment taxes for the taxable periods at issue. The revenue officer assigned to collect the unpaid employment tax liabilities of the Company made the determination that Petitioner was the person who was required to collect and pay over federal employment taxes and who willfully failed to do so, thus making him personally liable for the unpaid amounts under § 6672. The revenue officer sent to Petitioner a Letter 1153 entitled Notification Letter of 100 Percent Penalty Proposed Against Filer for Corporation Heritage Reporting Corporation (202) 628-4888 (cid:16)042 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 5 regarding the unpaid employment taxes for the taxable periods at issue. The letter advised Petitioner that he had 60 days from the date of the letter to submit a written appeal of the proposed liabilities. Petitioner acknowledges receiving the letter and in fact brought it to the Branerton conference with Respondent. Petitioner further acknowledged that he did not request an appeal with the revenue officer. As no appeal was filed, Respondent assessed all the trust fund liabilities against Petitioner. Petitioner failed to pay the assessed amounts, so Respondent issued to Petitioner a Notice of Federal Tax Lien Filing and Your Right to a Hearing under § 6320 for the taxable per:iods at issue. Petitioner timely requested a CDP hearing. Petitioner offered no collection alternatives in requesting the CDP hearing. Instead, Petitioner checked the box for Withdrawal, but provided no explanation why the lien should be withdrawn. Appeals Officer Woods reviewed Petitioner's CDP hearing request and reviewed his account showing the liability was attributable to trust fund responsible person's obligation of S A the Company. She b44- immediately requested the TFRP file to determine if Petitioner had received the notice proposing the Heritage Reporting Corporation (202) 628-4888 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 assessments, i.e. the Letter 1153. Appeals officer also reviewed the file and determined that it contained Forms 941 entitled Employer's Quarterly Federal Tax Returns for the Company for the taxable periods at issue, each of which Petitioner signed as VP Finance or Director Finance. Appeals Officer Woods sent Petitioner a letter scheduling a telephonic CDP hearing. The letter advised·Petitioner that Appeals may consider whether he owes the amount due, but only if he has not otherwise had an opportunity to dispute it with Appeals or did not receive a deficiency notice. (Emphasis in the original.) The letter also asked Petitioner to complete and return the enclosed Form 433, Financial Collection Information, along with all the required attachments. Petitioner returned the Form 433-A, but did not attach any proof of earnings-. She contacted Petitioner to provide: the requested information. During the call, Petitioner alleged he had not received the Letter 1153. Appeals Officer Woods reviewed the TFRP file and saw that it contained a copy of the Letter 1153. The file also contained Postal Service return receipt that Petitioner signed to acknowledge receipt of Letter 1153. Based on her Heritage Reporting Corporation (202) 628-4888 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 7 review, she determined that Petitioner had been given a prior opportunity to contest the tax liabilities for the taxable periods at i!ssue. Appeals Officer Woods determined, in preparing for the CDP hearing, that Petitioner had not filed a return for 2009. She also reviewed the financial information Peltitioner provided and calculated the allowable expenses to conclude that Petitioner could pay approximately $3,000 a month. Petitioner disagreed. ;Appeals Officer Woods also explained that she could :not consider any collection alternatives because Petitioner had not filed a return for 2009. Petitioner explained that he had not . f iled a return for that year because he:did not want the refund, if any, applied to the unpaid taxes at issue here. Petitioner also indicated to Appeals Officer Woods that he understood that he could not contest the underlying liability as he had received the Letter 1153 and therefore had a prior opportunity to contest the liabilities. Appeals Officer Woods determined to sustain the lien filing and proposed levy to collect the unpaid trust fund employment taxes at issue in a determination notice. Issuing the determination Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 8 notice after October 17, 2006, means that this Court has exclusive jurisdiction to redetermine collection review matters, even though the Court previously lacked subject matter jurisdiction over trust fund liabilities, the underlying tax liability at issue here. Pension Protection Act of 2006, Pub. L. No. 109-280, § 855(a), 120 Stat. 780, amending § 6330(d) (1) to provide all CDP determinations be appealed solely to the Tax Court. As previously.stated, Respondent filed a summary judgment motion. Petitioner filed an objection as the Court ordered. The Court scheduled Respondent's motion for a hearing in Seattle Washington. The Court heard oral arguments from both parties at the motion hearing. Opinion. We are asked to decide whether to grant summary judgment. Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. See e.g. FPL Group, Inc. v. Commissioner, 116 T.C. 73, 74 (2001). A motion for summary judgment will be granted if the pleadings and other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of Heritage Reporting Corporation (202) 628-4888 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 law. Rule 121(b); Elect. Arts, Inc. v. Commissioner, 118 T.C. 226, 238 (2002). The moving party has the burden of proving that no genuine issue of: material fact exists and that it is entitled to judgment as a matter of law. See e.g. Rauenhorst v. Commissioner, 119 T.C. 157, 162 (2002). The party opposing summary judgment must set forth specific facts thaft show that a genuine question of material fact exists and may not rely merely on allegations or denials in the pleadings. Casanova Co. v. Commissioner, 87 T.C.; 214, 217 (1986). We begin with the standard of review. Where the validity of the underlying tax liability is properly at issue, the Court will review the matter on a de novo basis. Sego v:. Commissioner, 114 T.C. 604, 610 (2000). Where, as is the case here, the validity 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, supra; Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). We must decide.whether Respondent exercised his discretion arbitrarily, capriciously or without sound basis in fact or law. See Woodral v. Commissioner, 112 T.C. 19, 23 (1999); Fargo v. Heritage Reporting Corporation (202) 628-4888 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 Commissioner, T.C. Memo 2004-13. Based upon our examination of the entire record before us, we find that Respondent did not abuse his discretion in determining that the collection action should proceed with respect to Petitioner's unpaid trust fund liabilities for each of the taxable periods at issue. Before we discuss general collection procedures, we focus on whether Petitioner otherwise had an opportunity to contest the underlying liabilities at issue. This Court and other Courts have held that the receipt of a Notice of a ;Proposed Trust Fund Recovery Penalty Assessment, otherwise known as a Letter 1153, constitutes a prior. opportunity to dispute the underlying tax liabilities in Appeals. McClure v. Commissioner, T.C. Memo 2008-136; Render v. United States, 389 F. Supp.2d 808, 810-811 (E.D. Mich. 2005); See also Jackling.v. Commissioner, 352 F. Supp.2d 129, 132 (D. N.H. 2004); Pelliccio v. United States, 253 F. Supp.2d 258, 261-26 (D. Conn. 2003). Cf. Planes v. United States, 98 A.F.T.R. 2d 2006-7044 (M.D. Fla. 2006). Thus, Petitioner is therefore precluded from contesting the underlying liability during the CDP hearing or with this Court. We now focus on an overview of collection Heritage Reporting Corporation (202) 628-4888 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 11 procedures. A lien in favor of the United States is imposed on all property and property rights of a taxpayer liable for taxes after a demand for the payment of the taxes has been made and the taxpayer fails to pay those taxes. Sec. 6321. The lien arises when the assessment is made. Sec. 6322. The Secretary ;generally must file a notice of federal tax lien with the appropriate state office for the lien to be valid against certain third parties. Sec. 6323. The Secretary is also required to send written notice to the taxpayer of the filing of the notice of lien and of the taxpayer's right to an administrative hearing on the ,matter. Sec. 6320(a). At the hearing, a taxpayer may raise any relevant issue, including appropriate spousal defenses, challenges to the appropriateness of the collection action and possible collection alternatives. Sec. 6330(c) (2) (A). A taxpayer may contest the validity of the underlying tax liability only if the taxpayer did not receive a deficiency notice or otherwise have an opportunity to dispute the tax liability. See § 6330(c) (2) (B); Sego v. Commissioner, 114 T.C. 604, 609 (2000). Following a hearing, the Appeals Office must Heritage Repòrting Corporation (202) 628-4888 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 12 issue a notice of determination regarding the validity of the filed federal tax lien. In making the determination, the Appeals Office is required to take into consideration: (1) Verification presented by the Secretary that the requirements of applicable law and administrative procedure have been met; relevant b' issues raised by the taxpayer; an whether the b'k- proposed collection actibn appropriately balances the need for efficient collection of taxes with phe CL taxpayer's concerns regarding the intrusiveness of the proposed collection action. Sec. 6330(c) (3). Petitioner argued in his objection to Respondent's motion that he was legally insane and suffering from prolonged alcoholism during the time the IRS informed him to appeal the Company's employment tax obligation. His attorney at the motion hearing also a.rgued the same, which is essentially that Petitioner's prolonged alcoholism constitutes reasonable cause and Petitioner should not be held liable for the unpaid trµst fund tax liabilities of the Company. This we cahnot do. Petitioner has·failed to establish that the untimely payment of the Company's employment taxes was due to a reasonable cause. In making this determination, it is well established that the Court Heritage Reporting Corporation (202) 628-4888 1 2 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 13 has found reasonable cause where the taxpayer or a member of the taxpayer's family experiences an illness or incapacity that prevents the taxpayer from filing his or her tax return. See. e.g. Tabbi v. Commissioner, T.C. Memo 1995-463. On the other hand, the Court has not found reasonable cause where the taxpayer is able to continue his or her business affairs despite the illness or incapacity. See e.g. Judge v. Commissioner, 88 T.C. 1175, 1189-1991 (1987); Jordan v. Commissioner, T.C. Memo 2005-266. In only one instance the Court has found that while.actual physical incapacitation in a (cid:16)042 hospital or drug treatment center serves as reasònable cause, a history of general substance abuse does not. Harbour v. Commissioner,.T.C. Memo 1991-532. Petitioner presented no evidence that he was so incapacitated that he was unable to perform normal business operations, which includes responding to the Letter 1153 that he acknòwledged receiving. There are no affidavits in the record from Petitioner or any medical professional that corroborate whether Petitioner suffered from alcoholism and the effect, if any, that it may have had on his ability to continue his business affairs. Heritage Reporting Corporation (cid:16)042 (202) 628-4888 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 14 In addition, Petitioner !failed to appear at the hearing to provide information under oath. The Court fails to understand why Petitioner failed to present any reliable information. We consistently have found that the failure of a party to introduce evidence which, if true, would be favorable to that party gives rise to the presumption that evidence would be unfavorable if produced. Wichita Terminal Elevator Go. v. Commissioner, 6 T.C. 1158, 1165 (1946), affd. 162 F.2d 513 (Tenth Cir. 1947). Taxpayers, including Petitioner, cannot make vague and uncorroborated statements regarding claimed alcoholism and the effect it would have on continuing his business affairs. Petitioner received a degree to be an accountant, yet stated in his objection that the other owners of the Company are wealthy individuals that forced Petitioner to sign the employment tax returns. In addition, Petitioner's authority to act was In name only, not by having an ownership stake in the Company. He further stated that hë was a check signer of the Company, but for only $5,000 or less. These statements are of no soment, and we cannot place any weight upon them. In addition, now is not the time to make these statements. The Heritage Reporting Corporation (202) 628-4888 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 appropriate time was when he received the Letter 1153. Issues that were not raised to Appeals cannot later be raised to the Court. Giamelli v. Commissioner, 129 . 15 T.C. 107 (2007). Petitioner's attorney at the motion hearing argued that the Commissioner filed a claim when the Company filed for bankruptcy and received approximately 90 percent of the unpa-id tax liabilities. She provided;no authority, and we know of none, where a taxpayer is absolved of any unpaid taxes if the Commissioner receives 90 percent in a bankruptcy proceeding. None of these.statements or arguments constitute reasonable cause. See Judge v. Commissioner, supra, at 1189-1191; Jordan v. Commissioner, supra. The record reflects that the appeals officer properly verified that all the legal and procedural requirements have been met. The appeals officer confirmed, using the transcript of Petitioner's accounts, that assessments were properly made for each of the periods at issue,·.that appropriate and timely notices were sent regarding the assessments and that Petitioner was properly informed of his rights with respect to the lien filing. The record also reflects that. the appeals Heritage Reporting Corporation (202) 628-4888 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 16 officer addressed all the issues that Petitioner raised, including Petitioner's inability to contest the underlying liability, Petitioner'N unsubstantiated disagreement with the appeals officer's calculation that he could afford to pay $3,000 monthly and Petitioner's questioning the appeals officer's denial to consider collection alternatives because Petitioner was not current with his!filing obligations. Compliance with all filing requirements is a prerequisite for an·installment agreement (IRM 5.14.1.4.1(3)) or an offer in compromise (IRM 5.8.3.4.1(1)). :See also Greqq v. Commissioner, T.C. Memo 2009-19 (it is well within the Commissioner's discretion to require the taxpayer to be in full compliance with:filing requirements). The record also reflects that the appealb officer properly balanced the need for efficient collection of taxes with Petitioner's legitimate concern that any collection be no more intrusive than necessary. Petitioner has not raised any challenges to the appropriateness of collection, did not assert any spousal defenses or otherwise offer any additional collection alternatives.! See § 6330(c) (2). Accordingly, these issues are now deemed conceded. Rule 331(b) (4). Heritage Reporting Corporation (202) 628-4888 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 17 In conclusion, we find that Petitioner has not presented any evidence or persuasive arguments to convince us that Respondent abused his discretion. We therefore conclude that Respondent did not abuse his discretion in upholding Respondent's lien filing to collect from Petitioner outstanding trust fund liabilities for each of the periods at issue. To reflect the foregoing, decision will be entered for Respondent and an appropriate order will , be issued sustaining the determinations set forth in the Determination Concerning Collection;Action(s) Under § 6320 and/or 6330 dated January 20, 2011, upon which this case is based, regarding Petitioner's unpaid trust fund recovery liabilities for the taxable years at issue. An order shall also be issued granting Respondent's motion for summary judgment. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 2:05 p.m. the bench opinion in the above-entitled matter was concluded.) // // // // // Heritage Reporting Corporation (202) 628-4888