TAX COURT OPINION

Case: Meldon S. Hollis
Docket Number: 5563-07L
Judge: Gustafson
Opinion Type: bench
Filed: 04/22/2011
Pages: 12

UNITED STATES TAX COURT WASHINGTON, DC 20217 MELDON S. HOLL1S, KVC Petitioner, v. ) Docket No. 5563-07 L. COMMISSIONER OF INTERNAL REVENUE, Respondent O R D E R 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 Gustafson at Baltimore, Maryland, on April 13, 2010, containing his oral of in the above case before Judge David fact and opinion rendered at the pages of the the conclusion the trial findings of the trial. In accordance with the oral findings of decision will be entered for the respondent. fact and opinion, (Signed) David Gustafson Judge Dated: Washington, D.C. April 22, 2011 SERVEDApr222011 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 3 Bench Opinion by Judge David Gustafson April 13, 2011 Meldon S. Hollis v. Commissioner Docket No. 5563-07L THE COURT: The Court has decided to render oral Findings of Fact and Opinion in this case. The following represents the Court's 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 of 1986, as amended, and Rule 152 of the Tax Court Rules of Practice and Procedure. This case is an appeal by petitioner Meldon S. Hollis, pursuant to 26 U.S.C. section 6330(d), asking this Court to review the IRS's determination to sustain a proposed levy to collect Petitioner's unpaid income tax for the six years 1991, 1992, 1993, 1995, 1996 and 1999. We review a supplemental determination issued by the Office of Appeals of the Internal Revenue Service (IRS) on December 8, 2010, after two remands by this Court. The liabilities at issue are the taxes that Mr. Hollis self-reported on his tax returns but did not pay, plus accrued penalties and interest. Originally Mr. Hollis contended that all 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 4 the liabilities were untimely assessed and that the Office of Appeals had abused its discretion by declining his proposal for an Offer-in-Compromise (OIC). However, at the commencement of trial on April 11, 2011, in Baltimore, Maryland, Mr. Hollis conceded that the liabilities for five of the years (all but 1996) were timely assessed, and he withdrew his contention about the OIC. The only issue in dispute at the time of trial was the timing of the filing of Mr. Hollis's 1996 return. He contended that it was filed in August 1997 (and that the October 2000 .assessment of the 1996 tax was therefore untimely); and the IRS contended that it did-not receive his return until August 2000 (and that the assessment was therefore timely). We hold for respondent and find that the 1996 return was not filed before August 2000. FINDINGS OF FACT The parties' stipulation of facts is incorporated herein by this reference. At the time he filed his petition in this Court, Mr. Hollis resided in Virginia. We further find the following facts: At a time we cannot determine, but no later than August 2000, Mr. Hollis signed a Form 1040 tax return for the year 1996 (Ex. 10-J), reporting a total 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 tax liability of $2,832. His signature on that return is dated "6/12/1996" -- an obviously incorrect date more than six months before that tax year had even ended. The IRS received that return in August 2000 and assessed the self-reported tax on October 16, 2000. On August 20, 1997 -- three years before the IRS received the 1996 return -- Mr. Hollis's representative submitted to the IRS an OIC proposing to compromise Mr. Hollis's income tax liabilities for 1990 through 1996 and trust fund penalty (under section 6672) for the period ended June 30, 1990. The IRS did not record the submission of that OIC in its records and does not have a copy of it in its records. We conclude that the IRS did not record or retain the submission, but instead returned it to Mr. Hollis's representative as not processable -- either because the OIC purported to propose the compromise of a liability (i.e., the 1996 tax) for which the return had not yet been filed or because it was submitted to compromise the liabilities of both Mr. Hollis (see Ex. 13-P) and a distinct entity (Hollis & Associates, P.A.,- see Ex. 12-J). Consistent with its procedures at that time, the IRS did not notify Mr. Hollis himself about its returning the OIC to his 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 6 representative. In September 2008 the IRS sent Mr. Hollis - two notices of intent to levy, addressing the six years at issue here, including 1996. Mr. Hollis timely filed with the IRS a request for a collection due process (CDP) hearing before the IRS's Office of Appeals. Throughout his CDP hearing, Mr. Hollis contended that the October 2000 assessment of his 1996 1 liability was untimely. In February 2007 Appeals issued a notice of determination sustaining the notices of levy. Mr. Hollis timely filed his petition in this Court on March 8, 2007. This Court remanded the case to Appeals; Appeals issued a supplemental notice of determination again sustaining the notices of levy; this Court remanded again; and Appeals issued a second supplemental notice of determination again sustaining the notices of levy. The sole ground on which Mr. Hollis still disputes that determination is the timeliness of the October 2000 assessment of the 1996 income tax. OPINION I. Collection Due Process principles If a taxpayer fails to pay any Federal income tax liability after notice and demand, section 6331(a) authorizes the IRS to collect the tax by levy 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 7 on the taxpayer's property. However, Congress has added to chapter 64 of the Code certain provisions (in subchapter C, Part I, and in subchapter D, part I) as "Due Process for Collections", and those provisions must be complied with before the IRS can proceed with a levy: 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. 6330(a) and (b) (1). At the CDP hearing, the appeals officer must make a determination whether the proposed collection action may proceed. The appeals officer is required to take into consideration several things: First, the Appeals Officer must verify that the requirements of any applicable law and administrative procedure have been met by IRS personnel (see sec. 6330(c) (3) (A)). The requirement in dispute here is the timely assessment of the liability for 1996, secs.. 6201(a) (1), 6501(a). We discuss below Mr. Hollis's contention that Appeals incorrectly verified the IRS's compliance with this requirement. Second, the Appeals Officer must consider any collection alternatives proposed by the taxpayer (see sec. 6330(c) (3) (B), citing sec. 6330(c) (2)), an 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 8 issue that Mr. Hollis has withdrawn from the case; and third, the Appeals Officer must determine "whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary" (see sec. 6330(c) (3)), an issue that Mr. Hollis has not distinctly raised. Pursuant to section 6330(c) (2) (]B) a taxpayer may challenge the underlying tax liability in a CDP hearing, but only if he "did not * * * have an opportunity to dispute such tax liability." Mr. Hollis had no prior opportunity to dispute the timeliness of the 1996 tax assessment, and respondent does not dispute that Mr. Hollis is eligible to challenge the liability on this basis. If, after the CDP hearing, the Office of Appeals then-issues a notice of determination to proceed with the proposed levy, the taxpayer may appeal that determination to this Court within 30 days, as Mr. Hollis has done, and we now "have jurisdiction with respect to such matter." Sec. 6330(d) (1). II. Burden of proof and standard of review As petitioner, Mr. Hollis bears the burden of proof. See Rule 142(a) (1). However, where the 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 9 burden of proof is otherwise on the taxpayer, it may shift to the IRS under section 7491(a) (1) if the taxpayer produces credible evidence with respect to any factual issue relevant to ascertaining the taxpayer's tax liability; and Mr. Hollis contends that he has satisfied the requirements of section 7491(a) to shift the burden of proof to the IRS with respect to the date of filing of the 1996 return. In fact, Mr. Hollis has not produced credible evidence with respect to that issue, as we show below. Section 7502(c) provides a means -- certified or registered mail -- for a taxpayer to establish confidently the mailing of a return, and Mr. Hollis did not use that means. In the absence of other credible evidence, he still has the burden of proof. Where the validity of the underlying tax liability is properly at issue in the appeal of a collection determination, the Tax Court reviews de novo the determination of the underlying tax liability. Sego v. Commissioner, 114 T.C. 604, 610 (2000). Insofar as issues other than the validity of the underlying tax liability are presented, the Court reviews the administrative determination for an abuse of discretion. Mr. Hollis's challenge to "verification" (i.e.,the timeliness of the assessment) 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 implicates the very existence of the underlying liability. We therefore assume that this issue requires a de novo determination based on the preponderance of the evidence, rather than a mere review for an abuse of discretion by Appeals. III. The timeliness of the 1996 tax assessment Section 6501(a) requires that tax be assessed within 3 years after the return was filed. The October 2000 assessment of the 1996 tax was therefore timely if (as the IRS asserts) it was filed in August 2000 but not if (as Mr. Hollis asserts) it was filed in August 1997. Mr. Hollis presents no direct evidence -- either documentary or testimonial -- to show an August 1997 filing. He does describe his representative's August 1997 submission of an OIC, and he presents various arguments why it is reasonable (he believes) to conclude that his representative would have included the 1996 return with that submission. However, Mr. Hollis does not claim actually to know that the representative did include the 1996 return with the OIC. He does not say that the preparer explicitly told him that the return was submitted with the OIC; and as to the hearsay he does describe, Mr. Hollis argues only that it is consistent with the 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 filing of the return in August 2007. No contemporaneous document asserts that the 1996 return was included with the OIC in August 1997; and he did not call his representative as a witness. There are additional irregularities that cloud the issue: The return is dated 6/12/1996, a manifestly impossible date that raises confusion. In filings he previously submitted in this case (filed September 10 and October 5, 2007, and June 29, 2009), Mr. Hollis three times asserted that the 1996 return was filed in 1996. The return claims to be self- prepared; but Mr. Hollis states that he lacked the software to prepare the return in its typed form; and yet the representative who he claims prepared and submitted the return (along with the OIC) did not sign it as preparer. Mr. Hollis attacks the IRS's assertion of an August 2000 filing of the 1996 return, an assertion supported by the IRS's transcript of his account, by pointing out several entries on that transcript that he cannot explain and finds unlikely (such as the filing and withdrawal, which he does not recall, of powers of attorney) and asserting that there was no occasion in August 2000 when he did submit the return. However, the other entries on the transcript that he 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 12 questions are not manifestly incorrect, and he does not actually insist that they are. There is no question that the IRS had received the return by no later than August 2000, and it was incumbent on Mr. Hollis to prove that the filing date was earlier. Mr. Hollis did not account for his representative's actions; and if he did hand a signed return to his representative in 1997, we do not know -- because the representative did not testify -- whether the representative may have submitted it three years later in 2000. In any event, when the IRS receives and records the filing of a return, it cannot be expected to be able to explain why the date of filing is plausible in the context of the other circumstances of the taxpayer's life. We do not conclude that Mr. Hollis is deliberately dishonest in his contentions about the filing date, but we find that his attempted reconstruction of the events of 1997 is not reliable. His tax affairs had been in disorder; he filed four personal returns late in November 1996; and he and his business were both substantially in arrears on their tax liabilities. The IRS's records are by no means infallible, but they are explicit on this point, and they are much more likely to be true than Mr. Hollis's 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 13 account based on surmise and inference. An appropriate decision will be issued, sustaining the IRS's determination to proceed with a levy to collect petitioner's tax liabilities for the six years at issue, including 1996. This concludes the Court's oral Findings of Fact- and Opinion in this case. (Whereupon, at 12:35 p.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888