TAX COURT OPINION

Case: George D. Leaks
Docket Number: 9257-08L
Judge: Colvin
Opinion Type: bench
Filed: 03/12/2009
Pages: 13

UNITED STATES TAX COURT WASHINGTON , DC 2021 7 GEORGE D . LEAKS, Petitione r V . ) Docket Nos . 9257-08L . 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 in the above case before Judge David Gustafson at Philadelphia, Pennylvania, on February 25, 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, decision will be entered for respondent . (Signed) David Gustafson Judge Dated : Washington, D .C . March 12, 2009 SERVED Mar 12 2009 3 1 Bench Opinion by Judge David Gustafson 2 February 25, 200 9 3 George D . Leaks No . 9257-08 L 4 THE COURT : The Court has decided to render 5 oral Findings ofFact and Opinion in this case, an d 6 the following represents the Court's oral Findings of 7 Fact and Opinion . The oral Findings of Fact an d 8 Opinion shall not be relied on as precedent in any 9 other case . 10 This Bench Opinion is made pursuant to the 11 authority granted by section 7459(b) of the Internal 12 Revenue Code of 1986, as amended, and Rule 152 of the .13 Tax Court Rules of Practice and Procedure . 14 By a Notice of Determination dated March 17, 15 2008 (Ex . 9-J), the IRS gave notice to Petitione r 16 George D . Leaks and his wife that the IRS's Office of 17 Appeals had sustained the determination to file a 18 Notice of Federal Tax Lien . We will affirm that 19 determination . 20 However, this lawsuit does not end the 21 Leakses' opportunities to propose collectio n 22 alternatives . Both the settlement officer at the 23 conclusion of the CDP hearing (see Ex . 7-J, entry 24 2/12/2008) and Respondent's counsel at the conclusion 25 of trial affirmed the Leakses' continuing opportunity Heritage Reporting Corporatio n (202) 628-4888 4 1 to propose an installment agreement to the IRS based, 2 of course, on their current financial information . 3 Trial of this case was conducted o n 4 February 23, 2009 in Philadelphia, Pennsylvania . The 5 parties' Stipulation of Facts, with Exhibits 1- J 6 through 9-J was admitted into evidence, and Mr . and 7 Mrs . Leaks gave their testimony . We find th e 8 following facts : 9 Mr . Leaks resided in New Jersey when he 10 filed the petition in this suit . 11 Mr . and Mrs . Leaks filed timely joint tax 12 returns for the years 2002, 2003, and 2004 . Those 13 returns included Schedule C reporting income an d 14 expenses of Mr . Leaks's wallcovering and paintin g 15 business . After an audit the IRS proposed adjustments 16 to items on Schedule C, and on October 12, 2006, Mr . 17 and Mrs . Leaks executed Form 4549 (Ex . 1-J) to consent 18 to the assessment of deficiencies of tax in each o f 19 those years, plus penalties and interest, in amounts 20 for the three years that totaled about $91,000 at that 21 time . 22 -Eight months later, on June 13, 2007, the 23 IRS . mailed to each of Mr . and Mrs . Leaks a separate 24 copy of a "Notice of Federal Tax Lien Filing and Your 25 Right'to a Hearing Under IRC 6320" (Exs . 2-J and 3-J) . Heritage Reporting Corporation (202) 628-4888 5 1 The notices pertained to the years 2002, 2003, and 2 2004, and stated liability amounts that totaled more 3 than $90,000, and reported that the IRS had filed a 4 Notice of Tax Lien on June 12, 2007 . The June 1 3 5 notices informed the Leakses of their right to a 6 hearing and invited them to request that hearing by 7 filing Form 12153 . 8 Mr . and Mrs . Leaks both signed a Form 12153 9 requesting a hearing, and it was received timely by 10 the IRS on July 9, 2007 . The Form 12153 referred to 11 four tax years (i .e ., the three years in the IRS' s 12 notices, plus 2005) . An attachment to the form 13 stated, "I would like to request that you reconsider 14 an installment agreement that I can afford to pay for 15 these tax years if at all- possible .- We do not have 16 $101,409 .52 ." The Form 12153 did not propose a 17 specific installment agreement . With the Form 12153, 18 they also included a Form 8857 "Request for Innocent 19 Spouse Relief" signed by Mrs .-Leaks . 20 The IRS conducted their CDP hearing by 21 telephone . The settlement officer discusse d 22 collection alternatives with Mr . and Mrs . Leaks but 23, told them that it appeared they could fully pay the 24 tax, which would make an installment agreemen t 25 impossible . The settlement officer asked them to send Heritage Reporting Corporatio n (202) 628-4888 6 1 in financial information on Forms 433-A and 433-B . 2 On January 28, 2008, Mr . and Mrs . Leaks did 3 submit a Form 433-A ("Collection Information Statement 4 for Wage Earners and Self-Employed Individuals") and a 5 Form 433-B ("Collection Information Statement fo r 6 Businesses"), under a cover letter again asking for "a 7 payment plan that we can pay", but not making specific 8 proposal for a payment plan . The Form 433-B reported 9 information for "Leaks Wallcovering and Painting" . 10 The Form 433-A bore the name George D . Leaks and not 11 the name of Mrs . Leaks, but it was signed by both of 12 them, and it did include her checking account (in item 13 11(b)) and most notably her TIAA CREF retiremen t 14 account, with a stated value of $139,946 .89 . The Form 15 433-A reported gross monthly income from both spouses 16 combined as $7,754, and monthly expenses of $4,691 , 17 leaving an apparent monthly positive cash flow of more 18 than $3,000 . 19 After the Leakses made this submission they 20 had another telephone conversation with the settlement 21 officer, to whom they again suggested that they would 22 like an installment agreement, but again withou t 23 making a specific proposal . The settlement officer 24 "re-did the financials" on their Form 433-A to reduce 25 their apparent ability to pay and proposed that the y Heritage Reporting Corporation (202) 628-4888 7 1 agree to pay installments of $1,500 per month . They 2 said that they could not pay that amount . Th e 3 settlement officer suggested they obtain money from 4 the retirement account identified on the Form 433-A, 5 and the settlement officer persisted in tha t 6 suggestion even after he came to understand that the 7 retirement fund was Mrs . Leaks's . 8 At the time, Mrs . Leaks's request fo r 9 innocent spouse relief was still pending . Mr . and 10 Mrs . Leaks both evidently considered the deficiencies 11 for 2002 through 2004, and the liabilities for which 12 notices of lien had been filed by the IRS, to be Mr . 13 Leaks's liabilities . Consequently, they considered it 14 an error by'the settlement' officer to consider Mrs . 15 Leaks's retirement fund as relevant to the 16 collectibility of the liabilities at issue . 17 Nonetheless, Mrs . Leaks thereafter investigated the 18 possibility of taking money out of the retirement 19 fund, and she learned that the maximum she would b e 20 able to withdraw was $48,000, an amount not sufficient 21 to satisfy the liabilities in full . She tried t o 22 telephone the settlement officer to give thi s 23 information but did not succeed in getting through to 24 him . 25 On March 17, 2008, the IRS issued to both Heritage Reporting Corporatio n (202) 628-4888 6 8 1 Mr . and Mrs . Leaks a "Notice of Determinatio n 2 Concerning Collection Action(s) Under Section 632 0 3 and/or 6330" (Ex . 9-J) . The notice reported (a) that 4 the determination to file the notice of lien wa s 5 sustained and (b) that Mrs . Leaks's request fo r 6 innocent spouse relief was denied . The determination 7 was summarized as follows : 8 "Appeals could not offer you an installmen t 9 agreement, as an agreeable amount could not be 10 reached . You were instructed to conside r 11 borrowing against your retirement plan . Your 12 request for innocent spouse relief is als o 13 denied . " 14 The notice advised that there was a 30-day deadlin e 15 for disputing in the Tax Court the determination as to 16 the notice of lien, and a 90-day deadline for 17 disputing in Tax Court the innocent spouse 18 determination . 19 On April 21, 2008 -- within the 30-day 20 deadline -- Mr . Leaks filed a petition in this Court 21 in his name only . Mrs . Leaks is not named as a 22 petitioner, and she did not sign the petition . Of the 23 four options appearing under item 1 on the for m 24 petition, only one option is checked ("Notice o f 25 Determination Concerning Collection Action") ; and the Heritage Reporting Corporatio n (202) 628-4888 9 1 innocent spouse relief item ("Notice of Determination 2 Concerning Your Request for Relief From Joint an d 3 Several Liability") is not checked . On item 5, Mr . 4 Leaks explained his disagreement as follows : 5 "I disagree with the IRS determination in this 6 case because of [1] the amount that is owed, [2] 7 the method that Appeals require[d] for payment 8 and [3] the innocent spouse relief . " 9 Mrs . Leaks has not ever filed a petition . 10 Innocent Spouse Relie f 11 Only Mrs . Leaks filed a Form 8857 ."Request 12 for Innocent Spouse Relief" (Ex . 5-J) . After th e 13 denial of her request (Ex . 9-J), no petition was ever 14 filed in her name within the 90-day period prescribed 15 in section 6015(e) (1) (A) (ii) . We therefore do no t 16 have jurisdiction to review the IRS's denial of 17 innocent spouse relief . 18 Collection Due Process Revie w 19 If a taxpayer fails to pay any Federa l 20 income tax liability after notice and demand, section 21 6321 imposes a lien in favor of the United States on 22 all the property of the delinquent taxpayer, and 23 section 6323(f) authorizes the IRS to file notice of 24 that lien . However, Congress has added to chapter 64 25 of the Code certain provisions as "Due Process fo r Heritage Reporting Corporation (202) 628-4888 1 0 1 Collections", and those provisions must be complied 2 with after the IRS files a tax lien, and before the 3 IRS can proceed with a levy : Within five business 4 days after filing a notice of tax lien the IRS mus t 5 provide written notice of that filing to the taxpayer . 6 Sec . 6320(a) . After receiving such a notice, th e 7 taxpayer may request an administrative hearing before 8 the Office of Appeals . Sec . 6320(b)(1) . At that CDP 9 hearing, the taxpayer may generally raise relevan t 10 issues relating to the unpaid tax, including offers of 11 collection alternatives . Such collection alternatives 12 may include, among other things, an installmen t 13 agreement or offer in compromise . Sec . 6330(c)(2)(A) . 14 The appeals officer must make a determination whether 15 or not the lien should be released . The appeal s 16 officer is required by section 6330(c)(3) to take into 17 consideration : (1) "verification from the Secretary 18 that the requirements of any applicable law an d 19 administrative procedure have been met" ; (2) relevant 20 issues raised by the taxpayer ; and (3) "whether any 21 proposed collection action balances the need for the 22 efficient collection of taxes with the legitimat e 23 concern of the person that any collection action be no 24 more intrusive than necessary" . 25 If the .Office of Appeals then issues a Heritage Reporting Corporation (202) 628-4888 ?s 1 1 1 notice of determination to uphold the lien, th e 2 taxpayer may appeal the determination to this Cour t 3 within 30 days ( see secs . 6320(c), 6330(d)(1)), as Mr . 4 Leaks has done . Mr . Leaks has not disputed that the 5 IRS verified that the requirements of applicable law 6 and administrative procedure have been met . Th e attachment to the Notice of Determination (Ex . 9-J) includes a reasonably detailed statement recounting .9 that compliance . In addition, the record includes the 10 Leakses' consent to the assessment (Ex . 1-J), the 11 notices of the filing-of the liens (Exs . 2-J, 3-J), 12 and the notice of determination (Ex . 9-J) . 13 Mr . Leaks does not dispute his underlying 14 liability . (See Stip . ¶ 15 .) On the contrary, he 15 emphatically expresses a desire to pay hi s 16 liabilities . Where the underlying liability is not at 17 issue, we review the appeals officer's determinations 18 regarding the collection action for an abuse o f 19 discretion . Goza v . Commissioner , 114 T .C . 176 20 (2000) . Accordingly, we review the IRS' s 21 determinations for abuse of discretion ; that is , 22 whether the determinations were arbitrary, capricious, 23' or without sound basis in fact or law . See Murphy v . 24 Commissioner , 125 T .C . 301, 320 (2005), affd . 469 F .3d 25 27 (1st Cir . 2006) ; Sego v . Commissioner , 114 T .C . Heritage Reporting Corporation (202) 628-4888 1 2 1 604, 610 (2000) . 2 By the time of the trial of this case, Mr . 3 Leaks cited only two alleged errors by the Office of 4 Appeals in determining to sustain the filing of the 5 notices of tax liens against him : 6 1 . Retirement funds . Mr . Leaks contends that 7 the settlement officer erred in assuming that Mrs . 8 Leaks's retirement fund was available to satisfy his 9 liabilities . However, the liabilities are joint ; Mrs . 10 Leaks shares them . She signed the joint returns and 11 the consents for assessment of additional deficiencies 12 (Ex . 1-J) . Her request for innocent spouse relie f 13 from joint liability was denied, and she is therefore 14 liable for the amounts at issue . 15 Even if Mrs . Leaks's retirement funds had 16 not been technically proper to consider in tha t 17 -context, we cannot say that it would have been an 18 abuse-of discretion for the settlement officer to 19 consider it, since it was the Leakses' own filings 20 that led him to do so . Mrs . Leaks joined in and 21 signed the request for a CDP hearing (Ex . 4-J) and 22 participated in that hearing (Exs . 6-J, 7-J) . Sh e 23 -signed the Form 433-A that listed the retirement fund 24 (Ex . 8-J) . Mr . Leaks cannot now criticize th e 25 settlement officer for taking into account the Heritage Reporting Corporation (202) 628-4888 1 3 1 information that Mr . Leaks submitted . 2 2 . Collection alternative . Mr . Leaks contends 3 that the settlement officer erred in failing to make 4 an offer of a reasonable installment agreement . The 5 smallest monthly payment that the settlement officer 6 proposed was $1,500, and Mr . Leaks insists he canno t 7 afford that . However, Mr . Leaks's contention involves 8- several flaws : 9 First, Mr . Leaks's assessment of his ability 10 to pay does not take into account-his wife' s 11 retirement account . But for the reasons stated above, 12 the settlement officer did not abuse his discretion in 13 considering . the retirement fund . 14 Second, Mr . Leaks's Form 433-A appears to 15 show $3,000 per month as available for tax payments . 16 The settlement officer "re-did" the Leakses' figures 17 in their favor to produce an amount half that size . 18 The Leakses offered no evidence at trial to show why 19 he should have reasoned differently . 20 Third, much of Mr . Leaks's argument is based 21 on his current financial situation, which ha s 22 deteriorated somewhat since the office of Appeals 23 issued its determination in March 2008 . He did not 24 put on proof of his situation as it existed at the 25 time that Appeals could consider it . . Heritage Reporting Corporation (202) 628-4888 1 4 1 Fourth, Mr . Leaks presented no collectio n 2 alternative to the settlement officer . He criticized 3 and rejected the settlement officer's proposal, but he 4 made no counterproposal . He therefore failed t o 5 provide the settlement officer with the information 6 needed to consider an installment agreement . Se e 7 Taylor v . Commissioner , T .C . Memo . 2009-27 . Simply 8 put, the taxpayer did not propose any viabl e 9 collection alternative for the settlement officer to 10 consider, and it is not an abuse of discretion for an 11 appeals officer to uphold a Federal Tax lien and not 12 consider any collection alternatives when the taxpayer 13 has proposed none . Kendricks v . Commissioner , 12 4 14 T .C . 69,'79 (2005) ; Cavazos v . Commissioner , T .C . 15 Memo . 2008-257 . 16 An appropriate order will be issued , 17 sustaining the IRS's determination to uphold the 18 filing of the notice of tax lien . 19 This concludes the Court's oral Findings o f 20 Fact and opinion in this case . (Whereupon, at 10 :57 a .m ., the bench opinio n in the above-entitled matter was concluded . ) 2 1 2 2 2 3 2 4 25 Heritage Reporting Corporation (202) 628-4888