TAX COURT OPINION

Case: M. Thomas Waterer & Dawn M. Waterer
Docket Number: 28344-13L
Judge: Goeke
Opinion Type: bench
Filed: 01/05/2015
Pages: 14

UNITED STATES TAX COURT WASHINGTON, DC 20217 M. THOMAS WATERER & DAWN M. WATERER, Petitioner(s), v. KVC ) ) ) ) ) ) Docket No. 28344-13 L. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ORDER 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 petitioners and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at Seattle, Washington on December 19, 2014, 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 order and decision will be entered for respondent. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. January 5, 2015 SERVED Jan 07 2015 Capital Reporting Company 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Bench Opinion by Judge Joseph Robert Goeke December 19, 2014 M. Thomas Waterer & Dawn M. Waterer v. Commissioner Docket No. 28344-13L The Court has 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. This Opinion is rendered pursuant to Internal Revenue Code section 7459(b) and Tax Court Rule of Practice and Procedure 152. Hereinafter, section references are to the Internal Revenue Code and Rule references are to the Tax Court Rules of Practice and Procedure. The Court has jurisdiction over the present case based upon section Ô330(d). This is a collection case in which the IRS seeks to collect from the Petitioners, Thomas and Dawn 19 Waterer, by lien and levy. The liabilities which are 20 21 22 23 24 25 the subject of the IRS collection activity are income tax assessments for 2005 and 2007. The case comes before the Court today based upon Respondent's Motion for Summary Judgment under Rule 121. Rule 121(b) provides in part that a decision shall thereafter be rendered if the pleadings, 866.488.DEPO www.CapitaIReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits or declarations, if any, show that there is no genuine dispute as to any material fact and that a decision may be rendered as a matter of law. Rule 121(d) also provides in part, when a Motion for Summary Judgment is made and supported as provided in this Rule, an adverse party may not rest upon the mere allegations or denials of such party's pleadings, but such party's response by affidavits or declarations or otherwise provided in this Rule shall set forth specific facts showing that there is a genuine dispute for trial. The Respondent's Motion for Summary Judgment sets forth in paragraph 37 that "the facts of this case establish that Speciel Bgan-t Edwards did not abuse his discretion in permitting the collection action to proceed for Petitioners' tax liability for tax years 2005 and 2007. Accordingly, the Motion for Summary Judgment should be granted in Respondent's favor." Petitioners' reply to Respondent's Motion alleges as follows. The only real issues for this 24 Court to consider relate solely to Petitioners' two 25 tax years which ended December 31, 2005 and 2007, 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 5 1 2 respectively. The Court is then requested to consider whether Respondent and Settlement Officer, 3 Mr. Eric Edwards, abused discretion by denying 4 Petitioners' reconsideration of certain decisions 5 6 7 8 9 adverse to Petitioners and by denying them reasonable and adequate time to respond to Officer Edwards' request in 2013 for which Petitioners had asked, as further described herein. The relevant facts are not in dispute, rather, 10 the parties disagree upon whether the Settlement 11 Officer abused discretion in not providing Petitioner 12 13 14 the time Petitioner sought to respond to request for information from the Settlement Officer. The relevant facts are set forth in Respondent's 15 Motion and in the declaration of the Settlement 16 Officer attached to Respondent's Motion. 17 18 19 20 21 We begin by noting that the Petitioners resided in Washington at the time they filed their petition in this case. Respondent's Motion has an attachment Forms 4340, Certificates of Assessments, Payments and Other 22 Specified Matters for the years in issue, and also 23 24 25 for years subsequent to the years in issue in which Respondent demonstrates that the Petitioners are delinquent with their current tax liabilities. 866.488.DEPO www.CapitaIReportingCompany.com Capital Reporting Company 6 1 2 3 For 2005, Petitioners timely filed a federal income tax return jointly. Respondent audited that return and determined that there was a deficiency. A 4 Notice of Deficiency was issued, and Petitioners 5 6 7 8 9 10 11 12 13 filed a petition challenging the Notice of Deficiency in the United States Tax Court. In July 2010, a stipulated decision was entered by the Court determining that there was a deficiency in income tax for 2005. For 2007, the Petitioners also filed a federal income tax return, in which they reported a refund of over $15,000. After the issuance of the refund, the Internal Revenue Service determined that the 14 Petitioners had made a mathematical error on the 2007 15 16 17 18 19 income tax return. After computing the effect of the mathematical error, the Internal Revenue Service determined that there was a tax liability for 2007 of $1,092, and issued to the Petitioners a Notice of Mathematical 20 Error. Petitioners did not seek an abatement of that 21 22 23 24 assessment that flowed from the mathematical error determination. On February 14, 2013, the IRS issued by certified mail a final Notice of Intent to Levy and 25 Notice of Your Right to a Hearing to the Petitioners 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 6 7 8 9 for both of the years in question. On February 26, 2013, the IRS issued a Notice of Federal Tax Lien Filing and your right to a hearing for the years 2005 and 2007. On March 15, 2013, the IRS received Petitioners' Form 12153, request for a Collection Due Process or equivalent hearing. The IRS determined that both the levy and lien were timely appealed as both years and both the levy and lien were challenged in 10 Petitioners ' Form 12153. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Petitioners' challenge also indicated that one of the Petitioners was seeking innocent spouse relief; however, no Form 8857, Request for Innocent Spouse Relief, was attached to Petitioners' Form 12153. Special Settlement Officer Edwards was assigned to conduct Petitioners' hearing on May 22, 2013. He had no prior involvement in Petitioners ' income tax liabilities. on May 23, 2013, the Settlement Officer mailed to each of the Petitioners a letter scheduling a telephone hearing for July 9, 2013 at 1:00 p.m. At the time the Settlement Officer sent the letter scheduling the hearing, Petitioners were represented by a Power of Attorney, Mr. David Grossman. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 Mr. Grossman was also copied on the letter scheduling 2 the hearing. The Settlement Officer informed the 3 Petitioners in his letter that if they preferred a 4 face-to-face conference, one should be requested 5 within 14 days from the date the letter was sent. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 The letter from the Settlement Officer also advised the Petitioners what matters were properly the subject of discussion at the hearing. But he informed the Petitioners that they could not challenge the income tax liability for 2005 because that liability had previously been petitioned before the United States Tax Court, and by statute, was not properly the subject of a collection hearing pursuant to section 6330. The letter also requested that the Petitioners provide a Form 433-A, Collection Information Statement, with accompanying financial documentation evidencing income and expenses. The letter also noted that the Petitioners had not filed federal income tax returns for the years 2008 through 2012. And that in order for the 22 Petitioners to be considered for a collection 23 24 25 alternative, they must be current on all their federal income tax return filings. On May 31st, the Settlement Officer received a 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 3 letter from the Power of Attorney, Mr. Grossman, stating that he would not represent the Petitioners in the hearing. He also advised the Settlement 4 Officer that the Settlement Officer could directly 5 6 7 8 9 correspond with the Petitioners regarding the hearing. On July 9, 2013, the day of the.scheduled hearing, the Settlement Officer received a faxed letter from Mr. Waterer requesting a 30- to 60-day 10 extension. On July 9th, the Settlement Offi.cer 11 mailed to the Petitioners a letter granting a 14-day 12 13 14 extension to provide the requested documents. The Settlement Officer determined that a 30- to 60-day extension was not appropriate because the 15 Petitioners had not provided the information 16 17 18 19 20 21 22 23 24 requested in a timely fashion, that they were late in responding to his original letter, and that they were not current regarding their federal income tax filing requirements. On July 22, 2013, the day before the rescheduled hearing, Mr. Waterer left a voicemail message with the Settlement Officer requesting an additional extension. The Settlement Officer telephoned the 25 Petitioners and left a voicemail stating that the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 3 deadline would be extended until July 23, 2013. On .July 23, 2013, the Settlement Officer received a letter with attached documents from 4 Mr. Waterer. In his letter, Mr. Waterer stated he 5 6 7 8 9 and his spouse were unemployed and had four children under the age of 16. Mr. Waterer claimed that they were in dire financial straits. He attached.to the letter various documents relating to Social Security benefits received, state 10 insurance coverage, and utility repayment plans. 11 Mr. Waterer also indicated he was challenging the tax 12 13 14 15 16 liabilities for 2005 and 2007, despite the statements in the Settlement Officer's original letter that 2005 could not be challenged. On July 24, 2013, the Settlement Officer mailed a letter to the Petitioners in response to 17 Mr. Waterer's letter of the previous day. The 18 19 20 21 22 Settlement Officer explained the tax liability for 2005 could not be raised, and also explained that the assessment for 2007 was due to'the IRS determination of a mathematical error, and he stated he, the Settlement Officer, had requested a copy of the 23 Notice of Mathematical Error and hoped to provide it 24 25 to the Petitioners upon receipt. Finally, the Settlement Officer enclosed another 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 11 1 2 3 4 copy of Form 433-A and requested that the Petitioners return the completed form to him by August 2, 2013. He stated that without the Form 433-A, he would be unable to determine a collection alternative for the 5 Petitioners. I 6 7 8 9 10 11 12 On August 6, 2013, the Settlement Officer received a faxed letter from Mr. Waterer stating that he was unable to provide the completed Form 43.3-A because he had not received the letter from the settlement Officer until July 29, 2013, and did not have the opportunity to review the form. On or about September 8, 2013, Mr. Waterer 13 mailed the settlement Officer documents and 14 15 correspondence from the State of Washington Department of Labor and Industries, in which 16 Mr. Waterer was appealing that Department's decision 17 18 19 20 to hold him personally liable for state corporate tax debts. On October 18, 2013, the Settlement Officer reviewed the Petitioners' file. He noted that the 21 Petitioners had failed to provide a completed Form 22 23 24 25 433-A and the requested supporting documentation. He also noted that the Petitioners had failed to provide any documents that challenged the underlying liability for 2007 in support of their claim for 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 1 2 3 4 innocent spouse relief, or related to unfiled federal income tax returns for years subsequent to 2007. On October 29, 2013, the Settlement Officer issued Notices of Determination to each of the 5 Waterers. 6 7 8 9 On December 4, 2013, the Petitioners timely sought review of the Notices of Determination before this Court. In their petition before this Court, the 10 Waterers claim that they were not allowed an 11 12 13 14 15 16 opportunity to challenge the underlying tax liability, and that the Settlement Officer abused his discretion when he did not reconsider collection alternatives and did not provide them with sufficient time to respond to the document request. For the reasons stated in the Settlement 17 Officer's original letter to the Petitioners, the 18 19 20 2005 year is not subject to challenge as to the underlying liability. Section 6330(2)(b). Because a taxpayer is not entitled to file a 21 petition to challenge a mathematical error assessment 22 pursuant to section 6213(b)(2) (A), such an assessment 23 may be challenged in a hearing pursuant to section 6330. 24 25 However, a taxpayer is precluded from disputing 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 13 1 2 3 4 5 6 7 8 9 the underlying tax liability in a judicial review of the Hearing Officer's actions if the taxpayer failed to raise or provide sufficient information for the Settlement Officer to consider the merits of the underlying tax liability during the collection hearing process. Giamelli v. Commissioner, 129 T.C. 107(2007). In this present case, the taxpayers failed to provide information which would have allowed the Settlement 10 Officer to properly consider the 2007 liability. 11 Petitioners' only challenge to the Settlement 12 Officer's determination is that they were not 13 14 15 provided sufficient time. They seem to presume in their reply to Respondent's Motion for Summary Judgment that it was the burden of the Settlement 16 Officer to prove the merits of the 2007 tax 17 18 19 20 21 22 23 24 25 liability. Petitioners' position in this regard is simply not in conformity with the law. See Treas. Reg. § 301.6330-1(f)(2) Q&A-F3. Given the fact that the Petitioners failed to produce evidence to challenge the assessment for 2007 CLn hat they were not entitled to challenge the underlying liability for 2005, we reviewed the actions of the Settlement Officer for abuse of discretion. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1A 1 2 3 4 5 6 7 8 9 Abuse of discretion is defined as "a plain error discretion exercise to an end not justified by the evidence, a judgment that is clearly against the logic and effect of the facts as are found." Wayne v. ASARCO, 114 F.3d 986, 988 (9th Circuit 1997). There's a series of cases in the Tax Court which hold that there's no abuse of discretion where taxpayers fail to submit requested information timely. 10 Petitioners' arguments .that the Settlement 11 officer abused its discretion for not providing them 12 13 14 adequate time are simply not consistent with the facts which are not in dispute. The Settlement officer provided several extensions in considering 15 Petitioners' failure to provide even the most basic 16 17 18 19 20 21 22 23 24 25 requested information in a timely manner and their failure to maintain current filings of their federal income taxes, we believe the Petitioners' arguments that the Settlement Officer improperly failed to extend the time for them to provide information are not merited. This Court has previously held that there is not a fixed amount of time that a Settlement Officer must provide to the taxpayers in a collection hearing process under section 6330. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 15 1 2 3 4 5 6 7 On the undisputed facts of this case, we determined that the Settlement Officer provided a reasonable amount of time to the Petitioners in that there was no abuse of discretion on the sole basis the Petitioners challenge the Motion for Summary Judgment. Given our determination, we conclude that 8 Respondent's Motion for Summary Judgment should be 9 granted, and that a decision should be entered in this case holding Respondent's proposed collectio action by lien and levy against the Petitioners for the years 2005 and 2007. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 9:27 a.m., the above- entitled matter was concluded.) 10 11 12 13 14 15 16. 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com