TAX COURT OPINION

Case: Barbara J. Rader
Docket Number: 11166-11SL
Judge: Armen
Opinion Type: bench
Filed: 11/22/2011
Pages: 13

UNITED STATES TAX COURT WASHINGTON, DC 20217 BARBARA J. RADER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent I ) ) ) ) ) ) ) ) O R D E R ' Docket No. 11166-11SL. Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Cou t shall transmit herewith the hearing of the above ;case before Special Trial the pages of the to petitioner and to respondent a copy of transcript of Judge Robert N. Armen, Jr. at Peoria, 2011, containing his oral findings of at the conclusion of the hearing. llinois, on November 1, fact and opinion rendered In accordance with the oral findings of fact and opinion, an Order and Decision will be entered for respondent. (Signed) Robert N. Armen, Jr. Special Trial Judge Dated: Washington, D.C. November 22, 2011 SERVED NOV 23 2011 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 Bench Opinion by Special Trial Judge Robert N. Armen, Jr. b | Barbara J. Rader v. Commissioner Docket No. 11166-11SL 3 November 1, 2011 I THE COURT: THE COURT HA$ 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. THE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE . II. This proceeding was heard as a Small Tax Case pursuant to the provisions of Section 7463 (f) (2) of the Internal Revenue Code of 1986, as amended, and Rules 170 through 175 of the Tax Court Rules of Practice and Procedure. See and compare Rules 330 through 334 of the Tax Court Rules of Practice and Proce ure . III. 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 Rules of Practice and Procedure. Hereinafter in this ben¼h opinion, and unless otherwise indicated, all section numbers refer to the Internal Revenue Code of 1986, as amended, and all Rule numbers refer to the Tax Court Rules of Practice and Heritage Reporting Corporation (202) 628-4888 1 Procedure . 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Barbara J. Rader, hereinafter referred to as "Petitioner", appeared on her own behalf . Michael Dancz appeared on behalf of Respondent. V. This docket represents án appeal by Petitioner from the determination of Respondent's Office of Appeals regarding a proposed levy to collect petitioner's outstanding Federal income tax liabilities for 2003, 2004, and 2005, the taxable years in issue. In sustaining the proposed collectiorì action, Respondent's Office of Appeals determined that, "The proposed levy action balances the need for efficient collection of taxes with the taxpayer's legitimate concern that any collection action is no more intrusive than necessary and the rejection of the Offer in Compromise is sustained. " Presently pending before the Court is Respondent's Motion For Summary Judgment, filed August 24, 2011, and supplemented September 12, 2011, and October 17, 2011. VI. The record establishes and/or the parties do not dispute the following: Petitioner resided in the State of Illinois at the time that the petition was filed. 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 5 Petitioner's Tax Liabilities On June 16, 2010, Respondent sent to Petitioner a Final Notice Of Intent To Levy AndlNotice Of Your Right To A Hearing (hereinafter, "final notiâe"). Respondent issued the final notice in respect of Petitioner's outstanding ·| Federal income tax liabilities.for 2003, 2004, and 2005, which then aggregated $45,358. The liability for 2003 was based on (1) Petitioner's failure to file a return and (2) Petitioner's failure to appeal from a notice of deficiency sent to her by certified mail on September 10, 2007, at the same address as that listed by Petitioner in the instant case. Il The liabilities for 2004 and 2005 were based on returns filed by Petitioner in or about April 2009 and were assessed on June 1, 2009. In response to the fina notice, Petitioner timely filed with Respondent a Form 12157, Request For A Collection Due Process Or Equivalent Hearing. On the Form 12157, Petitioner professed an inability to pay her taxes, made mention of a prior bankruptcy proceeding, and requested a collection alternative in the form of an offer-in- compromise. In or about October 2010, Petitioner submitted to Respondent a Form 656, Offer In Compromise, in which Petitioner proposed to compromise, solely on the basis 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 doubt as to collectibility, her o standing liabilities for a lump-sum payment of $500, of which $100 was paid with the offer, with the balance payable after acceptance of the offer in four monthly installments of $100. Petitioner accompanied the offer-in-compromi with Form 433-A, Collection Information Statement F r Wage Earners And Self - Employed Individuals. The Form 433-A included a Monthly Income/Expense Statement specifyinj Petitioner's total monthly income as $3, 281 .and her total monthly living expenses as $2,961, 1.e., a positive net monthly difference of $320. Petitioner's offer-in-compromise was referred to one of Respondent's offer special sts, who accepted Petitioner' s total monthly income as $3, 281 but determined that Petitioner's total monthly living expenses were $2,658, thereby resulting in a positive net monthly difference of $623 (i.e., $3,281 less $2,658). The offer specialist recommended that Petitioner's offer-in-compromise be rejected on the basis that Petiti ner could pay in full her outstanding liabilities with futu e income. Respondent's settlement officer in the Office of Appeals concurred with the recomn ndation of the offer specialist and proposed to Petiti ner a monthly installment payment agreement in the amount of $623 . Af ter giving the matter some thought, petitioner concluded that she could not Heritage Reporting Corporation (202) 628 888 . 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 afford to pay that amount; however Petitioner did not propose any lesser amount. Thereaf ter, on April 11 2011, Respondent ' s Of f ice of Appeals issued its Notice Of Determination Concerning Collection Action (s) Under Sectio 6320 and/or 6330 . Petitioner then appealed to this Court. On August 24, 2011, Resp ndent filed his Motion For Summary Judgment, together with a lengthy Declaration. By Order dated August 25, 2011, the Court directed Respondent to supplement his motion to (1) address the effect, if any, of Petitioner's bankruptcy filing on Respondent's collection efforts a (2) furnish transcripts of account for the years in issue. In that same Order, the Court provided an opportunity to Petitioner to respond to Respondent's motion and set forth whatever objections she might have to its granting. Petitioner was expressly advised that in the absence of a cogent response, the Court might grant Respondent's motion. On September 12, 2011, Respondent complied with the Court's August 25, 2011 Order. In contrast, the Court did not receive any response from Petitioner. Upon review of the transcripts of account furnished by Respondent, the cour issued an Order dated September 27, 2011, directing Respondent to file a second supplement . Respondent did so on October 17, 2011. 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 Thereafter, pursuant to notice, this case was called from the. calendar on October 31, 2011, at Peoria, Illinois. Petitioner's Bankruptcy Case On August 26, 2008, Petitioner filed a voluntary petition under Chapter 7 of the Bankruptcy Act with the United States Bankruptcy Court for the Northern District of Illinois. On December 3, 2008, the Bankruptcy Court issued a discharge. Shortly thereafter, n December 10, 2008, the Bankruptcy Court closed the case. VII. Summary Judgment Summary judgment is intended to expedite litigation and avoid unnecessary a d expensive trials . Fla. Peach Corp. v. Commissioner, 90 T. C. 678, 681 (1988) . Summary judgment may be granted with respect to all or any part of the legal 1ssues in controversy "if the pleadings, answers to interrogatories, depos tions, admissions, and any 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 law. " Rule 121(a) and (b) . When a motion for summary judgment is made and properly supported, Rule 121(d) p ovides that the adverse party may not rest on the mere allegations or denials 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 such party's pleadings, but must i stead respond, by affidavit or in an otherwise acceptable manner, by setting forth specific facts showing that there is a genuine issue for trial. If the adverse party fails to do so, then a decision, if appropriate, may be entered against such party. After carefully reviewing the record, we are satisfied that there is no genuine issue as to any material fact, and a decision may be rendered as a matter of law. Accordingly, we shall grant Respondent's Motion For Summary Judgment, as supplemented. VIII. Procedures applicable to proposedllevies Section 6330 generally provides that the Commissioner cannot proceed with collection by levy until the person has been given notice and the opportunity for an administrative review of the matter (in the form of an Appeals Office hearing) and, if dissatisfied, with judicial review of the administrative determination. See Davis v. Commissioner, 115 T.C. 35, 37 (2000); Goza v. Commissioner, 114 T.C. 176, 179 (2000). Section 6330(c) prescribes the matters that a person may raise at an Appeals Office hearing. In sum, Section 6330(c) provides that a phrson may raise collection issues such as spousal defenses, the appropriateness of the Commissioner's intended collection action, and possible 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 10 alternative means of collection. Section 6330 (c) (2) (B) provides that the existence and a unt of the underlying tax liability can be contested at an Äppeals Office hearing only if the person did not receive a notice of deficiency for the tax in question or did not otherwise have an earlier opportunity to dispute the tax liability. See Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, supra. Section 633Ó (d) provides for judicial review of the admiÊistrative determination. In a case such as the present one where the underlying tax liabilities are not at issue and the taxpayer has expressed an.interest in a collection alternative such as an offer-in-compromise, the Court reviews the administrative determination of Respondent's Office of Appeals for abuse of discretion. Lundsford v. Commissioner, 117 T.C. 183, 185 (2001); Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 182 (2000). A settlement officer ab ses her discretion if her determination is exercised arbitr rïly, capriciously, or without sound basis in law, or if it is not justifiable in light of the facts and circumstances. Mailman v. Commissioner, 91 T.C. 1079, 1084 (1988); Willis v. Commissioner, T.C. Memo. 2003-30 . The only matter raised by petitioner in 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 11 administrative hearing with Respondent's Office of Appeals was a collection alternative. In phat regard, Petitioner proposed to satisfy an existing liability in excess of $45,000 for a lump-sum payment of $500, of which $100 was paid with the offer, with the balánce being payable after acceptance of the offer in four monthly installments of $100. Yet Petitioner, in her For 433-A, specified her total monthly income as $3,281 and her total monthly living expenses as $2,961, i.e., a positi e net monthly difference of $320. Analysis of Petitioner's monthly income and expenses ultimately led to a proposal by the settlement officer that petitioner agree to a collection alternative in the form of an installment payment agreement. Petitioner rejected as unaffordable the specific proposal put forth by the settlement officer; however, Petitioner never proposed a lesser amount, e.g., an amount more in line with the numbers that Petitioner herself had set forth in the monthly income and expense statement on her Form 433-A. Thus, Petitioner was content to let Respondent's Office of Appeals proceed with the issuance of the notice of determination. Under these circumstances, we conclude that the settlement officer did not act arbitrarily or capriciously, nor did she lack sound basis in 1 w, nor was her decision unjustifiable in the light of the facts and circumstances before her. The settlement officer did not, therefore, Heritage Reporting Corporation (202) 628-4888 . 12 abuse her discretion in rejecting Petitioner's offer-in- compromise and in recommending that the levy could proceed. Indeed, at the hearing on October 31, 2011, in Peoria, Petitioner candidly acknowledged t!hat her of fer was "ridiculous", and she forthrightly conceded that the settlement officer did not abuse her discretion. Bankruptcy Considerations Finally, we consider th fact that Petitioner filed for bankruptcy under Chapte 7 in August 2008 and received a discharge in December 008. Petitioner did not file.an income tax return for 2003. Accordingly, Petitioner's ax liability for that year was not discharged in bankruptcy. See 11 U.S.C. Sec. 523 (a) (1) (B) (i) , barring discharge when a required return has not been filed; Swanson v. Commissioner, 121 T.C. 111, 120-125 (2003) . Although Petitioner did file income tax returns for 2004 and 2005, those returns were not filed until 2009, well after their due dates and after the Bankruptcy Court had issued Petitioner a discharge and closed the bankruptcy case. Thus, Petitioner's tax lia ilities for those years were not discharged in bankruptcy. See 11 U.S.C. Sec. 523 (a) (1) (B) (i) ; Swanson. v. Commi sioner, supra. See also 11 U. S . C. Section 523 (a) (1) (B) (ii) , barring discharge of tax 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. liabilities in respect of returns filed both after their due Heritage Reporting Corporation (202) 628J4888 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 dates and after two years before the date of the filing of the bankruptcy petition; Ramsdelliv. Commissioner, T.C. 13 Memo. 2003-317. IX. In view of the foregoin we conclude that Respondent is entitled to judgmen as a matter of law sustaining the notice of determin tion. Accordingly, we shall grant Respondent's motion, as supplemented, and thereby sustain the determination of Respondent's Office of Appeals permitting the proposed le ry. X. In sum, we shall enter an Order And Decision in which we shall (1) grant Responde t's Motion For Summary Judgment filed August 24, 2011, arid supplemented September 12, 2011, and October 17, 2011, and (2) decide that Respondent may proceed with the proposed levy to collect Petitioner' s outstanding ederal income tax liabilities for 2003, 2004, and 2005, as determined by Respondent's Office of Appeals in its notice of determination dated April 11, 201 , upon which notice this case is based. XI. Finally, a postscript. At the hearing in Peoria on October 31, 2011, counsel for Respondent indicated that Respondent would entertain another offer-in-compromise by Heritage Reporting Corporation (202) 62844888 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 Petitioner. It was made clear by t he Court, however, that acceptance of such an offer would be a matter within 1 Respondent's sole discretion and would not be reviewable by 14 the Court in the future. XII. THIS CONCLUDES THE COURT. S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE . (Whereupon, at 8 : 54 a . m . , the bench opinion in the above-entitled matter was concluded.) // // // // // // / // // // // // // // // // , Heritage Reportin Corporation (202) 628-4888