TAX COURT OPINION

Case: Robert J. & Beth J. Goldman
Docket Number: 25068-10SL
Judge: Kroupa
Opinion Type: bench
Filed: 11/01/2011
Pages: 13

UNITED STATES TAX COURT WASHINGTON, D.C. 20217 ROBERT J. & BETH J. GOLDMAN, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Re spondent . ) ) ) ) ) ) ) ) O R D E R Docket No. 25068-10S L Pursuant to Rule 152 (b) , Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Cour t shall transmit to .petitioners and .to respondent a copy of transcript of Diane L. Kroupa at Phoenix, Arizona, or October 18, 2011, containing her oral the proceedings of fact a d opinion. findings of the pages of the the above case before Judge In accordance with the oral findings of fact and opinion, decision will be entered for responden (Signed) Diane L. Kroupa Judge Date: Washington, D.C. November 1, 2011 SERVED NOV - 8 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 3 Bench opinion By Judge Diane 1. Kroupa Robert J. & Beth J. Goldman . Commissioner Docket No.: 25068-10SL October 18, 2011 THE COURT: 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. THESE ORAL FINDENGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE. This proceeding was |heard as a small tax case pursuant to the provisiods of section 7463 and Rules 170 through 175. This ench opinion is made pursuant to the authority gra ted by section 7459(b) and Rule 152. All section references are to the Internal Revenue Code as amended and in effect for 2007 and all Rule references are to the Tax Court Rules of Practice and Procedure. This is a collecti review case involving the filing of a notice of Fe eral tax lien to collect petitioners' unpaid liabilities for 2007. This collection review matter is efore the Court on respondent's motion for summ y judgment that was scheduled for a hearing on O ober 17, 2011, in Phoenix, Arizona. Petitioners filed a response on Heritage Reporting Corporation (202) 62814888 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 October 3, 2011. Petitioners appearec pro se and Rachael Zepeda appeared on behalf of respondent at the hearing on the motion. FINDINGS OF FACT The record establis s or the parties do not dispute the following facts. Petitioners, wife and husband, resided in Arizona a the time they filed the collection review petition. Petitioners filed a joint Federal income tax return for 2007 showing $39,495 of tax due but failed to pay the tax due on the ret rn. Respondent assessed the unpaid tax liability. Petitioners do not dispute the amount of the underlying tax liability for 2007. Petitioners submitued to respondent an offer-in-compromise (OIC). titioners offered to pay a total of $8,000 in monthly nstallments of $333.33 to settle their 2007 income tax liability. Petitioners work in the mortgage business, and asserted that changes in the housing markets substantially impaired their ability to pay their 2007 tax liability. They explained they had been in the mortgage business for eight ears and their cash flow was reduced significantly in 2007. They also asserted they had to give back the property on which they had 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 intended to build their dream ome because they could no longer afford the paymenté and that they were 54 and 57 years old with no coll ge degrees. They anticipated, however, that the mortgage business would improve. They also returned their Hummer so they had no further expenses for that vehicle. Revenue Officer Carrillo completed an Income/Expenses Table and an Asset/Equity Table, and determined that petitioners d net equity in assets sufficient to pay their $45,6 2 income tax liability. As such he rejected petitionÖ s' OIC. He also noted that petitioners had no medical limitations preventing them from earning income. Respondent filed a Motice of Federal Tax Lien regarding petitioners' ùnpaid tax liability for 2007. Respondent issued to p titioners a letter entitled "Notice of Federal x Lien Filing" informing them of the lien and their r1 ht to a due process hearing before an employee of the Appeals office of the Internal Revenue Service IRS). Petitioners timely submitted Form 12153, Request for a Collection Due Process Hearing. In their request, petitioners asked that their prior OIC b considered and appealed Revenue Officer Carrillo's d cision to reject their OIC. Heritage Reportin 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 A face-to-face collebtion due process conference was held on August 18, 2010, with petitioner Mr. Goldman, his representative and Settlement Officer Baker. P itioners provided Settlement Officer Baker with additional financial information after the meeting. Settlement Officer Baker determined, based on the available information, that petitioners had approximately $5,000 of monthly income. He calculated that t2ey had approximately $4,000 of; monthly expenses, òansisting of the actual expenses claimed by petitione s for health care and life insurance, and the national and/or local standards for food, clothing nd miscellaneous expenses, housing and utiliti s and transportation expenses. He concluded that this left them approximately $1,000 available each month to pay their tax liability for 2007. Settlement Officer aker also looked at petitioners' assets. He considered the value of their Mercedes car and the value of funds in their retirement account after impcsition of tax and penalties for early withdraw 1. On the basis of their assets and income, Settlement Officer Baker determined that petitioners could fully pay their liability for 2007. He recommended that petitioners either Heritage Reportin Corporation (202) 628 888 liquidate their assets and pa the tax or enter into 7 an installment agreement. Petitioners informed Settlement Officer Baker that they would appeal is determination. Settlement Officer Baker sust ined the proposed collection action in a Notice of Determination concerning collection actions under Section 6320 and/or 6330 dated October 20, 2010. Petitioners timely filed a petition to contest the collection action. Petitioners alleged that due to their financial situation, the con tion of the home mortgage business, and that 2 J07 was their only IRS issue, that Settlement Officer Baker erred in rejecting their OIC. As mentioned previously, respondent filed a summary judgment motion and t de Court scheduled a hearing on respondent ' s motio1 at our Phoenix, Arizona trial session on October .17, i 2011. At the hearing, petitioners told us that they have been severely affected by national and local housing market changes, both in the value of their assets and in their ability 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 - to earn income . They claimed they have lost all of 23 24 25 their assets and investments nd are barely covering their living expenses. Petitioners essentially argued that Settlement Officer Baker abused his discretion in Heritage Reportin 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 using the national standard e ense amounts rather than petitioners' actual exp ses and obligations. OPINION We are asked to de e whether to grant summary judgment. The purpose of summary judgment is to expedite litigation and avoid costly, time consuming, and unne ces s ary t al s . each Corp. v. Commissioner, 90 T.C 678, 681 (1988) . Summary judgment may be gran d if the pleadings and other acceptable materials, ether 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 láw. Rule 121 (b) ; Sundstrand Corp. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994) . We now give a brief overview of collection actions by filing a lien. A ien in favor of the United States is imposed on a 1 property and rights to property of a taxpayer when d mand for payment of that person's liability for taxes as been made and the person fails to pay those ta s. Sec. 6321. The lien arises when the assessment is made. Sec. 6322. The Commissioner s1 111 furnish the taxpayer described in section 6321 wi written notice that a Heritage Reportinc 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 lien was filed. Sec. 6320. lue person may then request an administrative rev:.ew hearing to be conducted in a manner consistent with the procedures set forth in sections 6330 (c) (d), and (e). If the taxpayer requests a hearing, he or she may raise at that hearing any relevant issues relating to the unpaid tax or the lien. Sec 6330 (c) (2). Relevant issues include any appropriate spousal defenses, challenges to the appropriateness of collection, and offers of collection alternatives such as an installment agreement or an ffer-in-compromise. Sec. 6330 (c) (2) (A). After the hearing, the Appeals officer is required to make a determihation that addresses those issues the taxpayer raised, verifies that all requirements of applicable law and administrative procedures have been met, and balances the need for the efficient collection of t xes with the legitimate concern of the person that any collection action be no more intrusive than necessary. Sec. 6330 (c) (3). We now determine ths standard of review. Where, as is the case here, the validity of the underlying tax liability is bot properly placed at issue, the Court will review the Commissioner's determination for abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Heritage Reporting Corporation (202) 62814888 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 Commissioner, 114 T.C. 176, 181-182 (2000). We must decide whether respondent exèrcised his discretion arbitrarily, capriciously, or ithout sound basis in fact or law. See Woodral v. Commissioner, 112 T.C. 19, 23 (1999); Fargo v. Commissioner, T.C. Memo. 2004- 13. Based upon our examination of the entire record before us, we find that respondent did not abuse his discretion in determining thà the collection action should proceed with respect t petitioners' unpaid liabilities for 2007. The record reflects that Settlement Officer Baker properly verified that ll the legal and procedural requirements had been met. He confirmed, using a transcript of petitióners' accounts, that I assessments were properly ma e for 2007, that appropriate and timely notice were sent regarding the assessments, and that petitio ers were properly informed of their rights with respect to the lien action. Section 7122(a) authorizes a compromise of a taxpayer's Federal tax liability. An offer in compromise may be accepted where there is doubt as to liability or collectability or where it would promote effective tax administration Sec. 301.7122-1(b), Proced. & Admin. Regs. We repeat noting that in reviewing respondent's rejection of petitioners' OIC Heritage Reporting} Corporation (202) 628 4888 1 2 3 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 11 for an abuse of discretion, we do not conduct an independent review of what woùld have been an acceptable OIC or substitute ur judgment for that of the Appeals office. See McClahahan v. Commissioner, T.C. Memo. 2008-161; Lemann v. Commissioner, T.C. Memo. 2006-37; Fargo v. Commissioner, supra. Rather, we review only whether the appeals officer's refusal to accept the taxpayer's OIC as arbitrary, capricious, and without sound :basis in fact or law. See, e.g., McClanahan v. Comm ssioner, supra (citing Murphy v. Commissioner, 125 T.C. 301 (2005), affd. 469 F.3d 27 (1st Cir. 2006)); Fargo v. Commissioner, supra. Settlement Officer Baker determined that petitioners could pay for th r necessary living expenses and still make payménts to satisfy their tax liability. He determined thaE petitioners could pay more than the $8,000 they offered to satisfy their 2007 income tax liability, without incurring the economic hardship contemplated in the regulations implementing the OIC rules. See sec. 301.7122- 1(b) (3), Proced. & Admin. Regs. His findings and determinations were consistent with the prior conclusions of Revenue Offic r Carrillo, who also determined that petitioners could pay the liability in 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 full without incurring economic hardship that would be inequitable or unfair. Petitioners contest Settlement Officer Baker's assessment of their f1ture earnings capability. They tell us that they would have no savings for retirement and w uld be subject to taxes and penalties if their retir ent fund is liquidated to pay their obligations. Th y assert that their actual expenses exceed the na ional and/or local standards for food, clothing nd miscellaneous expenses, housing and utilities and transportation expenses. Petitioners have not, however, identified any special circumstances allowing us to find an abuse of discretion in respondent's adherence to his standard guidelines for deternining reasonable collection potential. See se . 301.7122-1(c) (3), Proced. & Admin. Regs.; Lema n v. Commissioner, supra. Generally, where an Appeals officer has followed respondent's guidelines to ascertain a taxpayer's reasonable collection potential and rejected the taxpayer's collection alternative on that basis, we have found no abuse of discretion. See Schulman v. Commissioner, T.C. Memo. 2002 129; see also Etkin v. Commissioner, T.C. Memo. 20057245; Schenkel v. Heritage Reportin 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 Commissioner, T.C. Memo. 2003 37. We are sympathetic tro petitioners' financial situation, and understand that the economic downturn has substantially affected homeowners and people who work in the mortgage industry. Nevertheless, we must treat all taxpayers equally. Petitioners have failed to demonstrate circumstances hat justify compromise even though a similarly situa ed taxpayer may have paid his liability in full. See sec. 301.7122- 1 (b) (3 ) (ii) , Proced . & Admin . Regs . We have reviewed the entire record and cannot Eind that Settlement Officer Baker's determination rejecting petitioners' OIC was an abuse of discretion. See Crisan v. Commissioner, T.C. Memo. 200 318. Finally, the record reflects that Settlement Officer Baker properly balanced the need for efficient collection of taxes with petitioners' legitimate concern that any collection be no more intrusive than necessary. Petitioners have no pr'esented any evidence or persuasive arguments to c itvince us that respondent abused his discretion. We t erefore conclude that respondent did not abuse his discretion in upholding respondent's proposed action to collect from petitioners outstanding tax iabilities for 2007. 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 14 Petitioners also have not raised any other challenges to the appropriateness of col ection and did not assert any spousal defenses. See sec. 6330(c) (2). Accordingly, these issues are now deemed conceded. Rule 331(b) (4). To reflect the foregoing, decision will be entered for respondent and an appropriate order will be issued sustaining the determinations set forth in the Determination Notice date:i October 20, 2010, upon which this case is based, regarding the unpaid liabilities for the taxable ear 2007. The order will also grant respondent's motion for summary judgment. THIS CONCLUDES THE OURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 1:48 p.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // // 1 Heritage Reporting Corporation (202) 628 4888