TAX COURT OPINION

Case: Vincent Charles Muscolino & Cynthia Lee Muscolino
Docket Number: 26790-12L
Judge: Buch
Opinion Type: bench
Filed: 02/03/2014
Pages: 13

UNITED STATES TAX COURT WASHINGTON, DC 20217 VINCENT CHARLES & CYNTHIA LEE MUSCOLINO, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 26790-12L. ) ) ) ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit with this order to both petitioners and respondent a copy of the pages of the transcript of the trial in this case that contain the oral findings of fact and opinion that was rendered at the trial session at Boston, Massachusetts. In accordance with the oral findings of fact and opinion, a decision will be entered for respondent. (Signed) Ronald L. Buch Judge Dated: Washington, D.C. February 3, 2014 SERVED FEB 0 5 2014 Capital Reporting Company 3 Bench Opinion by Judge Ronald L. Buch January 8, 2014 Vincent Charles & Cynthia Lee Muscolino v. Commissioner Docket No. 26790-12L THE COURT: The following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion may not be relied upon as precedent in any other case. This opinion is in conformity with Internal Revenue Code section 7459(b) and Rule 152(a) of the Tax Court Rules of Practice and Procedure. Any section references refer to the Internal Revenue Code or the Treasury regulations in effect during the year at issue, and Rule references are to the Tax Court Rules of Practice and Procedure. Background The Muscolinos timely filed their Form 1040, U.S. Individual Income Tax Return, for the 2006 taxable year and received a refund. After examining the Muscolinos' 2006 return, the IRS determined a deficiency of $19,045 and issued a statutory notice of deficiency on August 17, 2009. The notices were 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 mailed to the Muscolinos, individually, at the 23 24 address they list as their current address on their petition. Additionally, respondent provided a 25 Substitute USPS Form 3877 certified mail list, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 complete with what appears to be a Postal Service postmark showing that the Notices were sent to 3 Mr. and Mrs. Muscolino at their current address. 4 5 6 7 8 9 10 11 12 13 14 Although the Muscolinos do not acknowledge receiving the statutory notice of deficiency, they also do not deny receiving it. The Muscolinos did not petition the Tax Court in response to the statutory notice of deficiency and the deficiency was assessed on December 21, 2009. The Muscolinos timely filed their Form 1040 for the 2010 taxable year and reported a balance due of $4,271. The Muscolinos did not pay the balance and on December 19, 2011, respondent issued Final Notices of Intent to Levy and Notice of Your Right to a 15 Hearing. The Muscolinos did not request a collection 16 17 due process hearing in response to the levy notice. In February 2012, the Muscolinos entered into a 18 partial payment installment agreement with respondent, 19 but eventually stopped making payments based on their 20 misreading of an IRS letter. In April 2012, 21 22 23 respondent sent the Muscolinos, individually, Notices of Federal Tax Lien Filing and Your Right to a Hearing Under Section 6320. In response to the notices, the 24 Muscolinos timely filed a Form 12153, Request for a 25 Collection Due Process or Equivalent Hearing. On the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 hearing request, the Muscolinos asked for lien 2 withdrawal on the basis that the lien jeopardized 3 4 5 their income and that they had been making their payments under the installment agreement. In August 2012, the Appeals Officer sent the 6 Muscolinos a letter scheduling a telephonic hearing 7 8 9 10 11 and informing them that in order for collection alternatives to be considered, she would need a completed Form 433-A, Collection Information Statement for Wage Earners or Self-Employed Individuals. In advance of the CDP hearing, the 12 Muscolinos' representative sent the Appeals Officer a 13 14 15 16 17 18 19 20 21 facsimile explaining that an unpaid lien is a disclosure event that may appear on certain reports and could affect Mr. Muscolino's employment as a registered financial services advisor. The hearing was held on September 11, 2012. During the hearing, the Muscolinos did not dispute the underlying liability except to say that they reserved their right to file for audit reconsideration and an offer in compromise based on doubt as to liability. The 22 Muscolinos also did not provide any additional 23 24 25 documentation or request additional time to provide documentation. The Appeals Officer issued a Notice of Determination Concerning Collection Actions under 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 Section 6320 and/or 6330 sustaining the lien because it is a condition of the partial payment installment agreement and none of the conditions warranting 4 withdrawal had been met. The greeting in the Notice 5 6 7 8 of Determination stated "Dear Mr. Martin," but the heading included the Muscolinos' names and current address. Based on the Notice of Determination, the 9 Muscolinos timely filed a petition. The petition did 10 11 12 not dispute the underlying liability, only the decision not to withdraw the lien. Respondent filed a Motion for Summary Judgment, to which the 13 Muscolinos filed an objection. The objection 14 15 16 17 included documents submitted to respondent before the Final Notice of Intent to Levy was issued. The only document dated after the hearing request was a document from the Taxpayer Advocate Service to the 18 Muscolinos stating that because their liability was 19 20 21 22 23 recently reduced, the Taxpayer Advocate Service could help the Muscolinos establish a Direct Debit Installment Agreement, which along with the reduced liability would allow the lien to be withdrawn. To date, however, the lien has not been withdrawn. 24 Analysis 25 I. Summary Judgment 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company I 7 1 2 3 4 5 6 7 8 9 10 11 12 The purpose of summary judgment is to avoid unnecessary and expensive trials through expediting the litigation. Florida Peach Corp v. Commissioner, 90 T.C. 678, 681 (1988). However, summary judgment is not a substitute for trial, and it should not be invoked in proceedings where there are disputed facts. Shiosaki v. Commissioner, 61 T.C. 861, 862 (1974). Summary judgment may be granted "if the pleadings, 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 13 material fact and that a decision may be rendered as 14 a matter of law." Rule 121(b), Tax Court Rules of 15 Practice and Procedure. The party moving for summary 16 17 18 19 20 21 22 judgment bears the burden of demonstrating that a genuine dispute does not exist as to any material fact. Sundstrand v. Commissioner, 98 T.C. 518, 520 (1992). Since the moving party bears this burden, any factual inferences will be treated in a manner that is most favorable to the non-moving party. Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985). 23 While the burden falls on the moving party, the non- 24 moving party "may not rest upon the mere allegations 25 or denials of such party's pleadings, but such 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 party's response must set forth specific facts showing that there is a genuine dispute for trial." Rule 121(d), Tax Court Rules of Practice and Procedure. II. CDP Overview The Secretary must notify a taxpayer in writing of his or her right to request a hearing upon the filing of a notice of lien or before the Secretary can levy against any property or right to property. Sec. 6320(a); Sec. 6330(a)(1). When appropriate, hearings under sections 6320 and 6330 are held together. Sec. 6320(b)(4). The hearings are often called collection due process, or CDP hearings. In a CDP hearing, a taxpayer may raise any issue relevant to an unpaid tax or a proposed levy, including appropriate spousal defenses, challenges to the appropriateness of collection actions, and offers of collection alternatives. Sec. 6330(c) (2) (A). In addition, a taxpayer may challenge the existence or amount of the underlying tax liability if the taxpayer did not receive a statutory notice of deficiency or did not otherwise have the opportunity to dispute the liability. Sec. 6330(c)(2)(B). While the term "underlying liability" is not defined in sections 6320 or 6330, we have previously interpreted 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 this term "to include any amounts owed by the taxpayer pursuant to the tax laws." Katz v. Commissioner, 115 T.C. 329, 339 (2000). The regulations under section 6330(c)(2)(B) state that receipt of the statutory notice of deficiency means receipt in time to petition the Tax Court for redetermination. Sec. 301.6330-1(e)(3), Q&A-E2, Proced. & Admin. Regs. Therefore, it is "clear that section 6330(c) (2) (B) contemplates actual receipt of the notice of deficiency by the taxpayer." Tatum v. Commissioner, T.C. Memo. 2003-115. If the taxpayer claims not to have received the statutory notice of deficiency, his assertion of non-receipt alone is not enough. The presumptions of official regularity and delivery will arise in favor of respondent where evidence is provided to show compliance with the Form 3877 mailing procedures. See Sego v. Commissioner, 114 T.C. 604, 610-611 (2000); Coleman v. Commissioner, 94 T.C. 82, 90-91 (1990). If these presumptions arise, the taxpayer 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 must rebut the presumptions or the Court may find 22 23 24 25 that the notice of deficiency was received and a challenge to the underlying liability is impermissible. Id. Clear evidence is necessary to rebut the presumptions and a taxpayer's testimony 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 standing alone is not sufficient. See Tokarski v. Commissioner, 87 T.C. 74, 77 (1986). Kamps v. Commissioner, T.C. Memo, 2011-287. Further, if a taxpayer petitions for review of a notice of determination, the Tax Court can only consider an issue that is properly raised in the CDP hearing. Sec. 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs; Sec. 301-6320-1(f) (2), Q&A-F3, Proced. & Admin. Regs. The issue is not properly raised if the taxpayer either does not request consideration or requests consideration but fails to provide evidence on the issue at the CDP hearing after being given a reasonable opportunity to do so. Id. As always, we must apply the appropriate standard of review. If the validity of the underlying liability is properly at issue, we will review the determination de novo. Sego v. Commissioner, 114 T.C. at 610; Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). In contrast, where the validity of the underlying liability is not properly at issue, we will review the determination for abuse of discretion. Id. An abuse of discretion will be found where the determination was arbitrary, capricious, or without sound basis in fact or law. 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 Giamelli v. Commissioner, 129 T.C. 107, 111 (2007). 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 11 1 Additionally, our review in CDP cases is generally 2 limited to the administrative record rule, which 3 mandates that "judicial review normally should be 4 5 6 7 8 9 10 11 12 13 14 15 16 limited to the information that was before the IRS when making the challenged rulings." Murphy v. Commissioner, 469 F.3d 27, 31 (1st. Cir. 2006), aff'g 125 T.C. 301 (2005). The U.S. Court of Appeals for the First Circuit follows the administrative record rule and because that is where an appeal of this case would lie, we follow its precedent. See Golson v. Commissioner, 54 T.C. 742 (1970), aff'd 445 F.2nd 985 (10th Cir. 1971). The Muscolinos may not challenge the underlying liability for their 2006 taxable year. Respondent provided the Form 3877 which gives rise to the presumption of official regularity and delivery. The 17 Muscolinos have not provided clear evidence to 18 19 20 21 22 23 24 25 overcome these presumptions. Instead, the Muscolinos have only made vague statements that neither confirm or deny that they received the statutory notice of deficiency. As a result, we find that the notice of deficiency was received and because the Muscolinos did not petition the Tax Court in response to that notice, they may not challenge the underlying liability at this time. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 1 2 3 4 5 6 7 8 9 The Muscolinos also may not challenge the liability for their 2010 taxable year because that liability was self-reported on the Muscolinos' Form 1040. Further, they did not properly raise the issue in their CDP hearing. Additionally, they did not raise the issue in their petition. See Rule 331(b)(4), Tax Court Rules of Practice and Procedure. Based on the foregoing, we will not consider the underlying liability for either year, but instead 10 will only consider whether the IRS abused its 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 discretion in not withdrawing the Notice of Federal Tax Lien. III. Withdrawal of Notice of Federal Tax Lien Upon demand for payment and failure to pay, the Federal Government obtains a lien against "all property and rights to property, whether real or personal" of any person liable for Federal Taxes. Sec. 6321. The lien arises automatically at the time of assessment and continues until the liability is satisfied or enforcement of the lien is barred by the statute of limitations. Sec. 6322. Many times, if the taxpayer fails to pay the liability, the IRS will file a Notice of Federal Tax Lien with the appropriate State office to validate the lien against any purchaser, owner of a security interest, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 13 1 mechanic's lienor, or judgment lien creditor. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 The presence of an installment agreement does not require the IRS to withdraw the Notice of Federal Tax Lien. In fact, the instructions accompanying the IRS' standard installment agreement form, Form 433-D, state that a federal tax lien may be filed. The section allowing the IRS to withdraw a Notice of Federal Tax Lien is permissive and we have held that the IRS' failure to withdraw a Notice of Federal Tax Lien after entering into an installment agreement is not an abuse of discretion. See Stinchcomb v. Commissioner, T.C. Memo. 2009-259; Crisan v. Commissioner, T.C. Memo 2007-67; Ramirez v. Commissioner, T.C. Memo. 2005-179; Stein v. Commissioner, T.C. Memo. 2004-124. The Muscolinos argue that the Notice of Federal Tax Lien could impair Mr. Muscolino's ability to earn a living. While the Muscolinos provided respondent 19 with reports that identify disclosure events, such as 20 21 22 23 24 25 liens, they have not provided evidence either during their CDP hearing or at their summary judgment hearing to show how having a disclosure event listed on one of these reports would actually affect potential earning. Further, as stated above, section 6323(j) is permissive and allows the IRS the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 14 1 2 3 discretion to decide whether to withdraw the Notice of Federal Tax Lien. It is also worth noting that even if the Notice of Federal Tax Lien were 4 withdrawn, a lien would still exist. The Notice of 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Federal Tax Lien simply gives the IRS priority over other creditors that it does not otherwise enjoy. Accordingly, in keeping with our prior precedents we do not find that the IRS abused its discretion in failing to withdraw the Notice of Federal Tax Lien. As a brief aside, we address the Muscolinos' argument about the improper name on the greeting included with the Notice of Determination. While this may show haste, it is without consequence because the notice bore the Muscolinos' correct names and addresses. IV. Conclusion Based on the foregoing, we find that the 19 Muscolinos are not entitled to challenge the 20 21 22 underlying liability for 2006 and 2010 and the IRS did not abuse its discretion in declining to withdraw the Notice of Federal Tax Lien. An appropriate order 23 will be forthcoming. 24 25 (Whereupon, at 9:28 a.m., the above- entitled matter was concluded.) 866.488.DEPO www.CapitalReportingCompany.com