TAX COURT OPINION

Case: Eldo Klingenberg
Docket Number: 17632-13L
Judge: Holmes
Opinion Type: bench
Filed: 01/05/2015
Pages: 12

UNITED STATES TAX COURT WASHINGTON, DC 20217 ELDO KLINGENBERG, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) ) O R D E R Docket No. 17632-13L. 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 to respondent a copy of transcript of Holmes on November, 19, 2014 at Los Angeles, California, containing his oral trial session at which the case was heard. the pages of findings of the the trial in the above case before Judge Mark V. fact and opinion rendered at the In accordance with the oral findings of fact and opinion, a decision for Respondent will be entered. (Signed) Mark V. Holmes Judge Dated: Washington, D.C. January 5, 2015 SERVED JAN - 6 2015 Capital Reporting Company 3 1 2 3 4 5 6 7 8 9 10 11 12 13 Bench Opinion by Judge Mark V. Holmes November 19, 2014 Eldo Klingenberg v. Commissioner Docket No. 17632-13L THE COURT: THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF FACT AND OPINION AND THE FOLLOWING REPRESENTS THE COURT'S ORAL FINDINGS OF FACT AND OPINION. This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986 as amended, and Rule 152 of the Tax Court's Rules of Practice and Procedure. Mr. Klingenberg was a resident of 14 California and did sign a stipulation; however, he 15 16 17 did not show up at calendar call or trial. This is a collection due process, or CDP case, and an appeal from the attempt by the IRS to collect Mr. 18 Klingenberg's '07 income tax bill. 19 20 21 22 Mr. Klingenberg is a serial non-filer.and non-payer, as detailed in a couple of published decisions of the Tax Court. Klingenberg v. Commissioner, 104 T.C.M. 470 (2012) which dealt with 23 Mr. Klingenberg's '91 to '97 and 2004 taxes, and a 24 25 very similar case, Klingenberg v. Commissioner, 0102 T.C.M. 398 (2011) which dealt with his 2005 taxes. 866.488.DEPO www.CapitalReportingCompany.com . Capital Reporting Company 4 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 But we were here for his 2007 tax year; Mr. Klingenberg again did not file a return, he again did not pay any taxes, and again the IRS issued him a notice of deficiency and assessed his tax liability when he did not pay it, and then came to collect. The Commissioner issued him both an notice of intent to levy and a notice of the federal tax lien, which automatically applied upon assessment to his 2007 tax debt. He challenged both of these too late in the case of the notice of intent to levy, but timely in the case of the notice of filing of the federal tax lien. In his request for another CDP hearing Mr. Klingenberg asked "to verify whether or not the IRS followed all proper procedure as required by law, I don't believe I am liable for the assessed tax. I should not be held responsible for the penalties accrued, to challenge this 'liability' seeing that I never had a chance to challenge it before. If this liability is indeed a proper assessment and can be proven that it is authentic and owed, I would like to discuss what collection alternatives are available to me to include but limited to offer in compromise, installment 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 8 9 agreements, and any other payment arrangements that may be available to me." His request for relief from the federal tax lien was denied and he timely appealed his case to this Court. In his amended petition he did not raise the issue of collection alternatives. Not surprising since he presented no evidence of his financial condition, and was not current in his later filing 10 obligations, and so it would have been denied anyway. 11 12 13 14 15 16 But instead said, "Respondent did not meet all of the applicable requirements during the collection due process hearing. Respondent did not allow Petitioner the opportunity to challenge the liability of the assessed tax. Petitioner did not receive a fair anz impartial hearing. Respondent did not provide 17 Petitioner with the request documents or files. 18 19 20 Respondent did not allow Petitioner to dispute any discrepancies. Respondent did not inform Petitioner of his rights. Respondent did not provide Petitioner 21 with any admissible evidence that would support the 22 23 24 25 IRS's claim to this assessed tax. Petitioner never received a notice of deficiency for the tax years in question, and therefore has never had a chance to challenge the liability of the proposed tax." 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 Now many of these are completely frivolous and were not pursued in any fashion by Mr. Klingenberg before the Court. The notion that the Respondent didn't inform him of his CDP rights where there is a stuffer in the envelope, stipulated in the record that he was informed of his rights, is obviously completely frivolous. The Respondent detailed in his recommendation and proposed notice of determination 10 that everything that had to be followed, in terms of 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 administrative procedure, had been followed. So what this really comes down to is two specific problems. One is the use by the IRS of inadmissible evidence, as Mr. Klingenberg calls it, and one is whether he received the notice of deficiency which gave rlse to the assessed liability. The scope of review here is limited to the administrative record, probably. As this Court held in Robinette v. Commissioner, 123 T.C. 85, 101 (2004), reversed 439 F3d 455 (8th Circuit 2006) ¥hat we're not limited to the administrative record in reviewing CDP determination, but this case would ordinarily be appealable to the Court of Appeals for the 9th Circuit, and we would ordinarily follow the rules in the 9th Circuit, See Gols n v. Commissioner, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 53 T.C. 742, 757 (1970) Affirmed 445 F2e 985 (10th 2 Circuit 1971). 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 That Court has limited the review of the administrative determination to the administrative record. See Keller v. Commissioner, 568 F3d 710, 718 (9th Circuit 2009) ("Our view is confined to the record at the time of the Commissioner's decision was rendered."). However, there's a bit of a dispute now in one of the circuit courts on appellate venue. It is not entirely clear that an appeal of this case would ordinarily go to the 9th Circuit. See Byers v. Commissioner, 740 F3d 668 (D.C. Circuit 2014). So the Commissioner's request to go to trial despite the non-appearance of Mr. Klingenberg, an option available under Tax Court Rule 149(a), kind of made sense. The standard of review in this case is ßod abuse of discretion. Abuse of discretion is defined as occurring when an appeals officer makes a determination grounded on an error of law, or rested on a clearly erroneous assessment of the facts, or he applied the correct law to facts that weren't clearly erroneous but ruled in an irrational manner. See Fargo v. Commissioner, 447 F3d 706, 709, (9th Circuit 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 2006). As to the question of the settlement officer relying on inadmissible evidence, that has been routinely dealt with in appeals of administrative action. A sample is from the Court of / Federal Claims which dealt with a similar argument 7 with, "Of course if Plaintiff is right the IRS would 8 9 be obliged to apply evidence rules derivatively. Lest this Court strike materials that are relied upon 10 in denying an exemption, but contrary to Plaintiff's 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 importuning's Court's generally have refused to consider collateral attacks upon the materials in administrative records based upon the post hoc application of evidence rules." New Dynamics Foundation v. United States, 70 Fed. C1. 782, 797 (2006). Tax Court itself has indicated that items in administrative record need not be independently admissible. See Hoyle v. Commissioner, 136 T.C. 463, 468-69 (2011). If they needed to be independently admissible then the appeal's officer would abuse his discretion if he relied on any document that would not be admissible in a deficiency case. This would effectively merge deficiency along CDP law, a result 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 which this Court has never adopted. As to Mr. Klingenberg's second point, and really the big issue in this case, did he receive the notice of deficiency which triggered the assessment of his tax liability for 2007? This is precisely the same argument he made for his '91 through '97, his 2004, and his 2005 tax years, and is really no different from this, his 2007 year. There is a routine shifting of proeedere, I l' 1 2 3 4 5 6 7 8 9 10 guess one could call it, when a taxpayer claims not 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 to have received a notice of deficiency. Initially an appeals officer is entitled to rely on the computerized records of the IRS, but when a taxpayer identifies some defect, the appeals officer has to dig deeper and can't just rely on those computerized records. We have said that, "The appeals officer may be required to examine the underlying documents in addition to the tax transcripts, such as the taxpayer's return, a copy of the notice of deficiency, and the certified mailing list.". See Hoyle v. Commissioner, 131 T.C. at 205, note seven (quoting Chief Counsel notice CC-2006-19). Therefore, the appeals officer here had a duty to dig deeper because Mr. Klingenberg was 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 3 4 5 6 7 8 9 claiming that he had never received the notice of deficiency, and he had to examine other evidence. This is precisely what he did. After Mr. Klingenberg made his argument that he had never received the notice of deficiency, the appeals officer here dug into the IRS records and found the actual envelop in which the notice of deficiency had been sent to his last known address. There is little doubt that he did not abuse 10 his discretion in concluding that Mr. Klingenberg was 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 just not telling the truth about not getting the notice of deficiency. It may well be the case that Mr. Klingenberg never claimed the notice. That's indicated on the envelope as well. But we have held-- quote commonsensically in that recent case called Onyango, 142 T.C. No. 24 (2014) that the refusal to claim ones mail doesn't mean y haven't received that mail. It means you've just refused to open it and send it back. Of course, it's entirely in keeping with the evidence in the administrative record for the appeals officer to have concluded that that is exactly what happened here with Mr. Klingenberg's notice of deficiency for his 2007 tax year. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 4 In finding that Mr. Klingenberg in fact received his notice of deficiency I can find not only no clear error, no abuse of description, but absolutely correctness on the part of the appeals 5 officer. 6 7 8 9 Nevertheless, because of this problem with appellate venue these days in CDP cases, the case went to trial and the Government's lawyer presented entirely credible testimony, both from the Post 10 Office, what goes on with certified mail, and most 11 importantly with a person knowledgeable about the 12 mail box location that Mr. Klingenberg receives his 13 mail at. That he simply instructed his Mail Box's 14 15 16 17 18 19 20 21 22 23 24 25 Etc. or Post Office it's a commercial mail drop not to accept certified mail on his behalf. Well, when Onyango applies, Mr. Klingenberg loses. So under 6320(c) and 6330(c)(2)(b), he has no right to challenge the underlying tax liability for the 2007 tax year. He loses again. All that's left is a motion for sanctions under 6673. Mr. Klingenberg is of course a repeat offender, as we've noted in previous Tax Court opinions. In Klingenberg Two, that's the 104 T.C.M. opinion at page 470, we concluded, "We are mindful that Respondent having received no help from 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 1 Petitioner has computed the maximum tax which may be 2 3 4 5 6 7 8 9 10 11 12 due for each of the eight years at issue here. Because the payment of this tax is now delinquent by up to 20 years, the accrued interest and additions to tax for failure to file returns or make estimated tax payments, plus the tax itself, now exceed $3 million. This amount Respondent is unlikely to collect. Nevertheless, even though only a token amount, given Petitioner's action, a 6673 penalty is appropriate here. We have, in accordance with our general first-time penalty imposition for other taxpayers exercised restraint in penalizing 13 Petitioner under Section 6673; however, if Petitioner 14 15 16 17 18 19 20 21 22 23 24 25 insists on continuing to waste the time of this Court when he cannot be bothered to voluntarily file his returns, we will be inclined to impose a significantly higher Section 6673 penalty in the future." That day has now arrived, and I am going to fine Mr. Klingenberg under 6673 for continuing to engage in a pattern of delay tactics against the IRS under penalty in the amount of $10,000. This of course, allows the penalty room to grow if Mr. Klingenberg files a fourth case. Decision will be entered for Respondent. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company This concludes the Court's oral findings of fact and opinion in this case. 13 (Whereupon, at 10:14 a.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