TAX COURT OPINION

Case: Brian Franklin Drazich
Docket Number: 2433-08S
Judge: Colvin
Opinion Type: bench
Filed: 04/10/2009
Pages: 16

UNITED STATES TAX COURT WASHINGTON , DC 2021 7 BRIAN FRANKLIN DRAZICH, Petitione r v . ) Docket No . 2433-08S . COMMISSIONER OF INTERNAL REVENUE, Respondent O R D E R Pursuant to Rule-152(b), Tax Court Rules of Practice and Procedure, it i s 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 Special Trial Judge Robert N . Armen, Jr . at Los Angeles, California, on March 23, 2009, containing his oral findings of fact and opinion rendered at the conclusion of the trial . In accordance with the oral findings of fact and opinion, a Decision will be entered for r esspoonnd en t (Signed) Robert N. Armen, Jr. Special Trial Judg e Dated : Washington, D .C . April 10, 2009 SERVED Apr 13 2009 1 Bench Opinion by Special Trial Judge Robert N . Armen, Jr . 2 DRAZICH v . COMMISSIONER . Docket No . 2433-08S 3 3 March 23, 200 9 4 I . 5 The Court has decided to render oral findings of 6 fact and opinion in this case, and the following represents the Court's oral findings of fact and opinion . The ora l findings of fact and opinion shall not be relied upon a s 9 precedent in any other case . 1 0 11 II . This proceeding was heard as ,a Small Tax Cas e 12 pursuant to the provisions of section 7463(f)(2) of the 13 Internal Revenue Code of 1986, as amended, and Rules 170 14 through 175 of the Tax Court Rules of Practice an d 15 Procedure . See and compare Rules 330 through 334 of the Tax 16 Court Rules of Practice and Procedure . 17 III . 18, This bench opinion is made pursuant to the 19 authority granted by section 7459(b) of the Internal Revenue 20 Code of 1986, as amended, and Rule 152 of the Tax Cour t 21 Rules of Practice and Procedure . 22 Hereinafter in this bench opinion, and unless 23 otherwise indicated, all section numbers refer to the 24 Internal Revenue Code of 1986, as amended, and all Rule 25 numbers refer to the Tax Court Rules of Practice and Heritage Reporting Corporation (202) 628-4888 4 1 Procedure . 2 IV . 3 Brian Franklin Drazich (Petitioner) appeared on 4 his own behalf . Lorraine Y . Wu appeared on behalf o f 5 respondent . 6 V . 7 This case represents an appeal by Petitioner from 8 the determination of Respondent's Office of Appeals t o 9 proceed with the 'collection of Petitioner's outstanding 10 liabilities for 2002 through 2005,1the taxable years in 11 issue, by way of a notice of Federal tax lien . 12 The issue for decision is whether Respondent' s 13 Appeals Office abused its discretion in failing to withdraw 14 the notice of Federal tax lien . 15 VI . 16 Some of the facts have been stipulated and they 17 are so found . 18 Petitioner resided in the State of California, at 19 the time that the petition was filed with the Court . 20 Petitioner, a patent attorney, filed Federa l 21 income tax returns (Forms 1040) for 2002, 2003, 2004, and 22 2005 . On those returns, Petitioner reported adjusted gross 23 income in the rounded amounts of $124,000, $182,000 , 24 $184,000, and $188,000, respectively . For each year, 25 Petitioner reported a tax liability, but because he was Heritage Reporting Corporatio n (202) 628-4888 5 1 chronically underwithheld, he failed to pay the reported 2 liability in full . 3 As time passed, Petitioner entered into two 4 installment payment agreements . In each instance , 5 Petitioner defaulted on the agreement . 6 On or about July 24, 2007, Respondent filed a 7 notice of Federal tax lien in respect of Petitioner' s 8 outstanding liabilities for 2002 through 2005 . Shortly 9 thereafter, Respondent sent Petitioner a Notice Of Federal 10 Tax Lien Filing And Your Right To A Hearing Under IRC 6320 11 (lien notice) . The lien notice stated, inter alia, that the 12 Federal tax lien would be released upon full payment o r 13 after acceptance of a bond guaranteeing payment of the 14 amount owed . 15 In response to the lien notice, Petitioner filed 16 with Respondent a Form 12153, Request for a Collection Due 17 Process or Equivalent Hearing . In the Form 12153 , 18 Petitioner checked only the box for "installment agreement" 19 and stated only that he wished to "arrange for a n 20 installment agreement for monthly payments ." Petitioner did 21 not check the box indicating that he wished the lien to be 22 withdrawn . 23 A telephone conference was held on November 29, . 24 2007, between Petitioner and Respondent's settlemen t 25 officer . Petitioner proposed an installment agreement Heritage Reporting Corporatio n (202) 628-4888 J 1 payable at the rate of $1,000 per month ; the settlement 2 officer thought that Petitioner had the ability to pay a 3 greater amount . Ultimately, the parties agreed to a $1,100 4 monthly payment . But, perhaps because Petitioner ha d 5 already defaulted on two prior installment agreements, the 6 settlement officer required Petitioner to agree to payment 7 on a .direct debit basis . Also, because Petitioner by this 8 time had an outstanding liability in respect of his 2006, 9 income tax, the installment agreement included not onl y 10 -Petitioner's outstanding liabilities for 2002 through 2005, 11 but also his liability for 2006 . 12 By . December 14, 2007, both Petitioner an d 13 Respondent's Appeals team manager had executed Form 433-D, 14 Direct Debit Installment Agreement . The executed form 15 expressly acknowledged that a notice of Federal tax lie n 16 "has already been filed" . Also, the terms of the agreement 17 expressly included a provision stating that Respondent "may 18 file a Federal tax lien if one has not been file d 19 previously . " .20 The written communications initiated by 21 Respondent's settlement officer during the administrative 22 stage of this case make no mention of any request by 23 Petitioner that the Federal tax lien be withdrawn, and the 24 administrative record includes no written communication from 25 Petitioner making such a request . (Parenthetically, we note Heritage Reporting Corporatio n (202) 628-4888 1 that the trial record is also silent on this point . ) 2 Further, the settlement officer's case activity 3 record makes no mention of any request by Petitioner that 4 the Federal tax lien be withdrawn . However, the cas e 5 activity record does indicate that the settlement officer 6 determined that "the lien was filed properly" and tha t 7 Petitioner "didn't meet any criteria for lien withdrawal ." 8 On December 20, 2007, shortly after the Direc t 9 Debit Installment Agreement had been executed by both 10 parties, Respondent's Appeals Office issued a Notice O f 11 Determination sustaining the filing of the Federal tax lien . 12 Petitioner timely filed a petition with this Court o n 13 January 28, 2008 . See secs . 6330(d)(1), 7502(a), 7503 . 14 In the petition, Petitioner alleges only that the 15 settlement officer did not consider his request that th e 16 Federal tax lien be withdrawn on grounds of hardship . I n 17 that regard, Petitioner alleges that withdrawal is necessary 18 (1) to permit him to purchase a home and (2) to allow him to 19 obtain, or co-sign, education loans for his daughter . 20 We return to the Direct Debit Installmen t 21 Agreement . This agreement provided that Petitioner would 22 pay, by direct debit, $1,100 on the 15th of each mont h 23 beginning in January 2008 . The initial payment . was so made . 24 However, after Petitioner appealed to this Court from the 25 December 2007 notice of determination, Respondent suspende d Heritage Reporting Corporation (202) 628-4888 8 1 further direct debits pending disposition of this case by 2 the Court . Nevertheless, it would appear that Petitioner 3 made "manual" payments of $1,100 for February and Marc h 4 2008, but then stopped and has made no further payment under 5 the installment agreement for the past year . 6 At trial, Petitioner filed a trial memorandum and 7 offered oral testimony . Petitioner stated that in earl y 8 2008 he "negotiated for the purchase of a home located at 9 204 Barbara Avenue in Ridgecrest, California" but that the 10 Federal tax lien "has been and continues to the present to 11 be an insurmountable impediment to home ownership . " 12 Petitioner also stated that as a patent attorney 13 employed by the Department of the Navy at China Lake , 14 California, he is required .. to hold a security clearance, 15 maintenance of which "is effectively conditioned upon 16 payment of tax liabilities and other legal obligations ." .17 According to Petitioner, the possibility of loss 18 of employment insures that he will pay all outstandin g 19 liabilities and that the Federal tax lien "provides no 20 further incentive to pay the taxes owed in full . " 21 At trial, Petitioner said virtually nothing about 22 the alleged impact of the Federal tax lien on his ability to 23 finance his daughter's college education . 24 25 VII . Section 6321 imposes a lien in favor of the Unite d Heritage Reporting Corporation (202) 628-4888 9 1 States on all property and rights to property of a perso n 2 when demand for payment of that person's liability for taxes 3 has been made and the person fails to pay those taxes . The 4 lien arises when the assessment is made . Sec . 6322 . 5 Section 6323(a) requires the Secretary to file notice of 6 Federal tax lien if such lien is to be valid against an y 7 purchaser, holder of a security interest, mechanic's lienor, 8 or judgment lien creditor . Behling v . Commissioner , 11 8 9 T .C . 572, 575 (2002) . 10 Thus, a lien is a . security device that assures the 11 government of its priority over other possible creditors . 12 Elliott, Federal Tax Collections, Liens, and Levies , par . 13 9 .05 (2d ed . 2005) . Unlike alevy, a lien does not deprive 14 a taxpayer of property . Id . ; see also United States v . 15 Whiting Pools, Inc ., 462 U .S . 198, 210-211 (1983) . 16 VIII . 17 Section 6320 provides that the Secretary shall 18 furnish the person described in section 6321 with written 19 notice of the filing of a notice of lien under section 6323 . 20 Section 6320 further provides that the person may request 21 administrative review of the matter in the form of a n 22 Appeals Office hearing . Section 6320(c) provides that the 23 Appeals Office hearing generally shall be conducte d 24 consistent with the procedures set forth in section 6330(c), 25 (d), and (e) Heritage Reporting Corporation (202) 628-4888 1 0 1 Section 6330(c) provides for review with respect 2 to collection issues, the appropriateness of th e 3 Commissioner's intended collection action, and possible 4 alternative means of collection . Section 6330(c)( .2)(B ) 5 provides that the existence or the amount of the underlying 6 tax liability may be contested at an Appeals office hearing, 7 but only if the person did not receive a notice o f deficiency or did not otherwise have an earlier opportunity , 9 to dispute such tax liability . Goza v . Commissioner , 114 10 T .C . 176, 180-181 (2000) ; see Sego v . Commissioner , 114 T .C . 11 604, 609 (2000) . Section 6330(d) provides for judicia l 12 review of the administrative determination in the Tax Court . 13 IX . 14 Section 6323(j) authorizes the Commissioner t o 15 withdraw a notice of Federal tax lien under certai n 16 circumstances . See sec . 301 .6323(j)-1, Proced . & Admin . 17 Regs . ; I .R .M . 5 .12 .3 .27 (Sept . 7, 2006), et seq . 18 Entering into an installment agreement does not 19 preclude the filing of a notice of Federal tax lien, nor is 20 the Commissioner required to withdraw a notice of Federal 21 tax lien after an installment agreement has becom e 22 effective . Sec . 6323(j)(1) ; see Ramirez v . Commissioner , 23 T .C . Memo . 2005-179 ; Stein v . Commissioner , T .C . Memo . 24 2004-124 . Section 6323(j)(1) is permissive ; thus, the 25 Commissioner "may" withdraw a notice of Federal tax lien , Heritage Reporting Corporation (202) 628-4888 1 but failure to do so is not an abuse of discretion . 2 Sec . 6323(j)(1) ; sec . 301 .6323(j)-l(c), Proced . & Admin . 3 Regs . ; see also Crisan v . Commissioner , T .C . Memo .'2007-67 . 4 Indeed, the last two sentences of section 301 .6323(j)-l(c), 1 1 5 Proced . & Admin . Regs ., are instructive : 6 "If the Commissioner determines that 7 conditions authorizing the withdrawa l 8 are not present, the Commissioner ma y 9 not authorize the withdrawal . If the 10 Commissioner determines conditions fo r 11 withdrawal are present, the Commissioner 12 mav ( but is not required to ) authorize 13 the withdrawal ." (Emphasis added . ) 14 The'foregoing may very well be dispositive of the 15 matter before us . Nevertheless, we proceed with additional 16 analysis in order .to demonstrate further that Petitioner's 17 contention is devoid of merit . 18 X . 19 Petitioner argues that Respondent bears the burden 20 of proof pursuant to section 7491(a) . However, that section 21 is irrelevant because there is no issue in the present case 22 regarding Petitioner's liability . Indeed, the amounts for 23 which Petitioner is indebted represent self-assessed taxes 24 that Petitioner reported on his returns but has not paid in 25 full . And, at no time during either the administrative o r Heritage Reporting Corporation (202) 628-4888 12 1 judicial stage of this case has Petitioner ever sought to 2 challenge the existence or amount of his liability for any 3 taxable year . See secs . 6330 (c)(2)(B), 6320(c) . 4 In short, Petitioner bears the burden of proof , 5 and he must therefore prove that Respondent's Appeals Office 6 abused its discretion in sustaining the filing of th e 7 9 10 Federal tax lien . See Sego v . Commissioner , supra at 610 ; Goza v . Commissioner , supra at 181-183 . XI . In reviewing for abuse of discretion, we generall y 11 consider only "arguments, issues, and other matter that were 12 raised at the collection hearing or otherwise brought to the 13 attention of the Appeals Office ." Mariana v . Commissioner , 14 118 T .C . 488, 493 (2002) . 15 At trial, Petitioner failed to prove that he made 16 a request with Respondent's Appeals Office that the Federal 17 tax lien be withdrawn on grounds of hardship . 18 First, in his Form 12153, Petitioner checked only 19 the box for "installment agreement" and stated only that he 20 wished to "arrange for an installment agreement for monthly 21 payments ." Petitioner did not check the box indicating that 22 he wished the lien to be withdrawn, even though th e 23 instructions that accompanied the Form 12153 specifically 24 discussed lien withdrawal . 25 Second, the written communications from Heritage Reporting Corporation (202) 628-4888 1 3 1 Respondent's settlement officer during the administrative 2 stage of this case make no mention of any request by 3 Petitioner that the Federal tax lien be withdrawn . 4 Third, neither the administrative record nor the 5 trial record includes any written communication from 6 Petitioner requesting that the Federal tax lien b e 7 withdrawn . Petitioner is an attorney and undoubtedl y understands the importance of documenting .. a request . Fourth, the settlement officer's case activit y 10 record includes no mention of any request by Petitioner that 11 the Federal tax lien'be withdrawn . Granted, the cas e 12 activity record does indicate that the settlement officer 13 determined that "the lien was filed properly" and that 14 Petitioner ."didn't meet any criteria for lien withdrawal ." 15 However, this hardly proves that Petitioner made a request ; . 16 rather, it demonstrates only that the settlement office r 17 satisfied herself, as part of her duty to investigate, tha t 18 the lien was properly filed and should remain in place . See 19 secs . 6330(c)(1), (3), 6320(c) . . 20 Section 301 .6323(j)-1(d)(1), Proced . & Admin . 21 Regs ., provides that a request for the withdrawal of a 22 notice of Federal tax lien must be made in writing . Th e 23 regulation goes on to provide that the written request must 24 be made in accordance with procedures prescribed by th e 25 Commissioner . Heritage Reporting Corporation (202) 628-4888 1 4 Likewise, the Internal Revenue Manual provide s 2 that "All requests for withdrawal of the Notice of Federa l 3 Tax Lien must be in writing ." I .R .M . 5 .12 .3 .32(1) (Sept . 7, 4 2006) . Although the manual goes on to prescribe a form for 5 this purpose, the manual makes clear that a taxpayer nee d 6 only provide specified information in written form, 7 including a fax, in order to satisfy the "writing " 8 requirement . See also sec . 301 .6323(j)-l(d)(2), Proced . & 9 Admin . Regs . 10 As previously discussed, there is nothing in the 11 record to demonstrate that Petitioner ever made a request in 12 writing that the Federal tax lien be withdrawn, an d 13 Petitioner does not contend to the contrary . 14 XII . 15 Even if we were to regard sectio n 16 301 .6323(j)-l(d)(1), Proced . & Admin . Regs ., as being merely 17 directory, and not mandatory, in providing that a withdrawal 18 request.. must be in writing, Petitioner has not proven that 19 he even made an oral request that the Federal tax lien b e 20 withdrawn . In that regard, we incorporate our previous 21 discussion of the four factors leading to our conclusion 22 that Petitioner failed to prove that he made a request of 23 Respondent's Appeals Office that the Federal tax lien be 24 withdrawn . 25 Heritage Reporting Corporation (202) 628-4888 1 5 1 XIII . 2 Finally, we are unable to conclude that "special 3 circumstances" are present in this case so as to permit a 4 departure from our customary approach of considering onl y 5 "arguments, issues, and other matter that were raised at the 6 collection hearing or otherwise brought to the attention of 7 the Appeals Office ." See Magana v . Commissioner , 118 T .C . 8 at 493-494 . 9 First, . Petitioner's allegation that the filed lien 10 has proven to be "an insurmountable impediment" to ownership 11 of a home located at 204 Barbara Avenue in Ridgecrest , 12 California, is undercut .by the fact that Petitioner listed 13 his address in the petition as 204 Barbara Avenue , 14 Ridgecrest, California, and that he continued to list . his 15 address as 204 Barbara Avenue in the Stipulation Of Facts 16 and Supplemental Stipulation Of Facts that he executed on 17 March 16, 2009 . Indeed, Petitioner used the 204 Barbar a 18 Avenue address during the administrative stage of this case, 19 and it was to that, address that Respondent sent the lie n 20 notice and the notice of determination, documents that 21 Petitioner admittedly received . 22 Second, Petitioner's contention that the need to 23 maintain .his security clearance obviates Respondent's need 24 for a filed lien is undercut by the fact that Petitioner has 25 not made any monthly payment for nearly a year . Granted , Heritage Reporting Corporation (202) 628-4888 1 6 1 Respondent suspended the direct debits upon learning that 2 Petitioner had commenced an action in this Court . However, 3 Petitioner made $1,100 payments "manually" for February and 4 March 2008 but then stopped . This does not evidence goo d 5 faith on Petitioner's part and belies his allegation that 6 his security clearance is "effectively conditioned upo n 7 payment of tax liabilities and other legal obligations ." 8 But, much more fundamentally, Petitioner's tax 9 liabilities exist independently of the Federal tax lien . 10 Even if the notice of Federal tax lien were withdrawn , 11 Petitioner would remain fully liable and the lien prescribed 12 by section 6321 would remain by operation of law . Thus , 13 Petitioner has failed to demonstrate that the filed lien has 14 any effect whatsoever on either his security clearance o r 15 his employment with the Navy . 16 Additionally, as we discussed much earlier in this 17 bench opinion, .a lien is a security device that assures the 18 government of its priority over other possible creditors . 19 If Petitioner has been lax with his Federal ta x 20 responsibilities, as the record amply demonstrates, 21 Petitioner may be equally lax in satisfying non-ta x 22 liabilities, and the Commissioner is fully justified in 23 concluding (as his Appeals Office has done) that a filed 24 Federal tax lien is appropriate to assure priority over 25 other of Petitioner's possible creditors . Heritage Reporting Corporation (202) 628-4888 1 7 Third, Petitioner's allegation in the petitio n 2 that the Federal tax lien negatively affects his ability to 3 obtain, or even to co-sign for, student loans for hi s 4 daughter's college education is unsupported in the record b y either documentary or persuasive testimonial evidence . See Tokarski v . Commissioner , 87 T .C . 74, 77 (1986) . XIV . In conclusion, we hold that Respondent did no t 9 abuse his discretion in failing to withdraw the Federal tax 10 lien in question . 11 As Petitioner raised no issue other than lie n 12 withdrawal, all other matters are deemed to be conceded by 13 him . See Rule 331(b)(4) ("Any issue not raised in th e 14 assignments of error shall be deemed to be conceded .") . 15 XV . 16 In view of the foregoing, we shall enter a 17 Decision to the effect that Respondent may proceed with the 18 collection action for the taxable years 2002 through 2005 as 19 determined in the notice of determination dated December 20, 20 2007, upon which notice this case is based . 21 XVI . 22 This concludes the Court's oral findings of fact 23 and opinion in this case . 24 (Whereupon, at 1 :57 p .m ., .the bench opinion in the 25 above-entitled matter was concluded . ) Heritage Reporting Corporation (202) 628-4888