TAX COURT OPINION

Case: Robert Catalanotto
Docket Number: 1020-14L
Judge: Gustafson
Opinion Type: bench
Filed: 03/18/2015
Pages: 8

CLC UNITED STATES TAX COURT WASHINGTON, DC 20217 ROBERTCATALANOTTO, Petitioner, v. ) ) ) ) Docket No. 1020-14 L. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ORDER Pursuant to the opinion of the Court as set forth in the transcript of the proceedings at Washington, D.C., on March 4, 2015, 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 in the above case before the undersigned judge at Washington, D.C., containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, an appropriate order and decision will be entered. (Signed) David Gustafson Judge Dated: Washington, D.C. March 18, 2015 SERVED Mar 18 2015 Capital Reporting Company 3 1 Bench Opinion by Judge David Gustafson 2 March 4, 2015 3 Robert Catalanotto v. Commissioner 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Docket No. 1020-14L THE COURT: The Court has decided to render in this case the following as its oral Findings of Fact and Opinion, which shall not be relied on as precedent in any other case. This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code, and Rule 152 of the Tax Court Rules of Practice and Procedure. This "collection due process" ("CDP") case is an appeal by petitioner Robert Catalanotto pursuant to 26 U.S.C. section 6330(d), asking this Court to review the determination by the Office of Appeals of the Internal Revenue Service ("IRS") to sustain a notice of proposed levy to collect Mr. Catalanotto's unpaid income tax for the years 2006 and 2007. Respondent (the Commissioner) moved for summary judgment, and a hearing on that motion was held March 2, 2015. Thomas J. O'Rourke represented Mr. 22 Catalanotto at the hearing, and John D. Ellis 23 24 25 represented the Commissioner. As to the year 2006, we will dismiss the petition as moot; and as to the year 2007, we will grant the Commissioner's motion. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company BACKGROUND There is no dispute as to the following 4 facts: Assessments and levy notice Mr. Catalanotto failed to timely file federal income tax returns for the year 2006 and 2007. The IRS prepared substitutes for returns for him pursuant to section 6020(b) of the Internal Revenue Code (26 1 2 3 4 5 6 7 8 9 U.S.C.) and prepared corresponding notices of 10 deficiency, which it issued to Mr. Catalanotto on 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 January 5, 2009 (for 2006), and April 25, 2011 (for 2007). Mr. Catalanotto received the notices of deficiency, but he did not file suit in this Court disputing either of the deficiencies, and the IRS subsequently assessed them. When Mr. Catalanotto did not pay the assessments, the IRS issued to him a Letter 1058, "Notice of Intent to Levy and Your Right to Hearing", on April 29, 2013, proposing to collect by levy his unpaid liabilities for the 2006 and 2007 tax years. Tax returns and CDP request Mr. Catalanotto then took action. First, he belatedly prepared an income tax return for 2006 (dated May 15, 2013), which was filed with the IRS no later than May 28, 2013, and prepared an income tax 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 return for 2007 (dated May 24, 2013), which the IRS did not treat as filed, apparently because it was unsigned. (It appears that the return may have been subsequently signed but that it is not being processed because of the pendency of this CDP case.) Second, Mr. Catalanotto timely submitted to the IRS a Form 12153, "Request for a Collection Due Process ('CDP') Hearing". 2006 overpayment While IRS Appeals personnel commenced the CDP hearing process, other IRS personnel processed the untimely 2006 return, abated some of the tax previously assessed, and determined that the 2006 income tax had been overpaid in the amount of $23,086 (an overpayment that has not yet been refunded) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Consideration of 2007 17 18 19 20 21 22 23 24 25 During the CDP hearing, Mr. Catalanotto's main contention was that the IRS should process his 2007 return (as it did his 2006 return) and should abate a portion of the assessed liability. However, IRS Appeals treated this contention as a challenge to his underlying liability; and because Mr. Catalanotto had received a notice of deficiency for 2007 and had not taken that prior opportunity to file suit and dispute it, IRS Appeals deemed him ineligible to challenge 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 the underlying liability in his CDP hearing. On his Form 12153 requesting the CDP hearing, 3 Mr. Catalanotto had checked a box indicating he was 4 5 6 7 8 9 10 11 12 13 14 interested in an installment agreement; but during the CDP hearing, he did not ever propose a specific installment schedule, and he did not provide financial information about himself to justify an installment agreement. On December 19, 2013, IRS Appeals issued its "Notice of Determination" sustaining the levy notice. On January 17, 2014, Mr. Catalanotto filed his petition in this Court. Court proceedings Respondent moved for summary judgment, and Mr. 15 Catalanotto briefly opposed. The Court ordered that 16 17 18 the motion be heard on March 2, 2015. Because the Court believed the existing summary judgment record to be equivocal on the question whether Mr. 19 Catalanotto had ever received the April 2011 notice 20 21 of deficiency for tax year 2007, the Court took the unusual step of supplementing that record with Mr. 22 Catalanotto's testimony on this issue. Mr. 23 Catalanotto testified that (as the Commissioner had 24 25 asserted) he had received the notice of deficiency, and the Court concluded that the case could therefore 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 be resolved on undisputed facts. OPINION I. The mootness of 2006 Although there was an unpaid assessment for 2006 at the time the CDP hearing commenced and Appeals verified the liability, the assessment was thereafter abated in part, and the IRS determined that the 2006 liability was in fact overpaid. At the March 2, 2015, hearing, respondent's counsel indicated that no further collection will be attempted and that the petition is therefore moot. We therefore give no further consideration to 2006. II. Sustaining the determination as to 2007 A. Collection due process principles If a taxpayer fails to pay any Federal income tax liability after demand, and section 6331(a) authorizes the IRS to collect the tax by levy on the taxpayer's property. However, the IRS must first issue a final notice of intent to levy, and notify the taxpayer of the right to an administrative hearing before the Office of Appeals. Sec. 6320(a), 6330(a) and (b) (1). After receiving such a notice, the taxpayer may request an administrative hearing before IRS Appeals. Sec. 6330(a)(3)(B), (b)(1). At the CDP hearing, the appeals officer must 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 Capital Reporting Company make a determination whether the proposed collection action may proceed. In so doing, the appeals officer is required to do several things, two of which are at 8 issue here. B. Collection alternatives First, the appeals officer must consider any collection alternatives proposed by the taxpayer (see sec. 6330(c)(3) (B), citing sec. 6330(c)(2)). In considering Appeals' denial of a collection alternative (such as an installment agreement), the Court reviews the administrative determination for an abuse of discretion. See Sego v. Commissioner, 114 T.C. 604, 610 (2000). Mr. Catalanotto contends that IRS Appeals erred by not entering into an installment agreement with him. However, since he did not propose any terms or submit information to show his entitlement to such an agreement, Appeals did not abuse its discretion by failing to enter into such an agreement. See Busche v. Commissioner, T.C. Memo. 2011-285. C. Underlying liability Second, pursuant to section 6330(c)(2) (B), IRS Appeals must consider a taxpayer's challenge to his underlying tax liability, but only if he "did not receive any statutory notice of deficiency for such 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 Capital Reporting Company 9 1 2 tax liability or did not otherwise have an oppor¬tun¬ity to dispute such tax liability." Since 3 Mr. Catalanotto did receive a notice of deficiency, 4 5 6 7 8 9 10 11 12 he was not entitled to challenge the liability at his CDP hearing, and IRS Appeals did not err by declining to consider such a challenge. However, as the Court explained on March 2, 2015, Mr. Catalanotto is not precluded from seeking audit reconsideration by the IRS (although such reconsideration is not subject to judicial review). At least some of the reduction he seeks seems very plausible indeed. If audit reconsideration fails, 13 Mr. Catalanotto can pay the tax and sue for a refund. 14 15 16 17 18 19 20 21 22 23 24 25 CONCLUSION The petition will be dismissed as moot with respect to tax year 2006. As to 2007, IRS Appeals did not abuse its discretion when it declined to entertain Mr. Catalanotto's challenge to his underlying liability for 2007, and we will enter decision sustaining the determination of IRS Appeals to proceed with collection of that liability by levy. This concludes the Court's oral Findings of Fact and Opinion in this case. (Whereupon, at 2:40 p.m., the above- entitled matter was concluded.) 866.488.DEPO www.CapitalReportingCompany.com