TAX COURT OPINION

Case: Charles M. Haden, Jr. & Shelley W. Haden
Docket Number: 18974-12L
Judge: Goeke
Opinion Type: bench
Filed: 07/08/2015
Pages: 11

SYM UNITED STATES TAX COURT WASHINGTON, DC 20217 CHARLES M. HADEN, JR. & SHELLEY W. HADEN, ET AL., Petitioner(s), v. ) ) ) ) ) Docket No. 18974-12 L, 991-14 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 cases before Judge Joseph Robert Goeke at Houston, Texas on June 26, 2015, containing his oral findings of fact and opinion rendered at the trial session at which these cases were heard. In accordance with the oral findings of fact and opinion, appropriate decisions will be entered. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. July 8, 2015 SERVED Jul 10 2015 Capital Reporting Company 3 1 2 Bench Opinion by Judge Joseph Robert Goeke June 26, 2015 3 Charles M. Haden, Jr. & Shelley W. Haden v. 4 5 6 7 8 9 10 11 12 13 14 15 Commissioner Docket Numbers 18974-12L & 991-14L 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 the authority provided by Internal Revenue Code section 7459(b) and Tax Court Rule of Practice and Procedure 152. Hereinafter rule references are to the Tax 16 Court Rules of Practice and Procedure, and section 17 18 19 20 21 22 references are to the Internal Revenue Code. We have jurisdiction over the present dockets based upon section 6330(d). The two dockets have been consolidated under Rule 141(a). The evidence in this case consists of stipulations, exhibits, and testimony of the 23 Petitioners, Petitioners' representative at the time 24 25 of the hearings before the settlement officers, and the settlement officers of the Internal Revenue 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 7 8 9 10 11 Service. Respondent objected to the additional testimony, asserting that the Court should rely simply upon the administrative record in the case. However, the Court determined that the administrative record was insufficient to fully describe the circumstances of the interaction between Petitioners' representative and the settlement officers. The administrative record relative to Docket Number 18974-12 begins with Respondent's assessment of federal income tax for the year 2002 in 12 April 2011. Respondent assessed tax in the amount of 13 14 15 16 17 18 19 20 21 22 23 24 $4,320,391; additions to tax under section 6662 in the amount of $299,381.60; additions to tax pursuant to section 6651(a)(1) in the amount of $1,037,767.50 and interest. On October 10, 2011, Respondent assessed federal income taxes for the year 2009 as follows: tax in the amount of $63,035; additions to tax under section 6654 in the amount of $224.85; under section 6651(a)(1) in the amount of $14,182.87; and an addition to tax under section 6651(a)(2) in the amount of $5,673.15 and interest. Petitioners failed to fully pay these 25 amounts. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 The parties have stipulated that at the time the petitions were filed in the two dockets before the Court, the Petitioners were residents of the state of Texas. Respondent sent Petitioners a form letter 1058A, Final Notice, Notice of Intent to Levy, and 7 Notice of Your Right to a Hearing, dated August 10, 8 9 10 11 12 13 14 15 2011, relative to the 2002 federal income tax liabilities. Respondent also sent Petitioners a form letter 3172, Notice of Federal Tax Lien Filing, and Your Right to a Hearing, under section 6320, dated August 23, 2011, regarding the 2002 federal income tax liabilities. Petitioners submitted two Forms 12153, 16 Request for a Collection Due Process or Equivalent 17 Hearing, each dated September 2, 2011, in response to 18 19 the form letters Respondent had sent regarding 2002. Respondent sent similar letters to the 20 Petitioners in October 2011 regarding 2009. 21 Petitioners submitted a Form 12153 dated November 17, 22 23 24 25 2011, in response to the form letter 3172 issued for 2009. And Petitioners' collection due process cases for 2002 and 2009 were assigned to Settlement 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 Officer Hadzega. The settlement officer sent a 2 3 letter to the Petitioners in November 2011 and subsequently arranged a face-to-face meeting with 4 Petitioners' representative, which was held in 5 6 7 February 2012. Prior to the meeting with Petitioners' representative, Mr. Connelly, in February 2012, 8 Petitioners' representative submitted Forms 433-A and 9 433-B on behalf of Petitioners. 10 11 12 Based upon the testimony of the settlement officer and Mr. Connelly, a dialog then began between the settlement officer and Mr. Connelly relative to 13 Petitioners' liabilities for 2002 and 2009. 14 15 16 17 It was clear, based upon the testimony and the written records stipulated by the parties, that the equity in Petitioners' home was a key issue in the negotiations between the settlement officer and 18 Mr. Connelly. 19 The settlement officer felt that 20 Petitioners had to someway generate cash relative to 21 22 23 24 25 the equity in their home to facilitate a resolution of their case. Petitioners did not submit an offer in compromise or any other concrete written request to resolve the case but did engage in a dialog seeking 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 some basis to compromise their liabilities such that they could retain some of the equity in their home. This culminated in discussions, however brief, between the settlement officer and Mr. 5 Connelly in June of 2012, after which the settlement 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 officer abruptly issued a notice of determination sustaining Respondent's proposed collection actions for 2002 and 2009. The record is clear that the settlement officer was aware of Mr. Haden's Parkinson's disease at the time of his consideration of the case, in the first half of 2012. Regarding Docket Number 991-14, Petitioners filed a federal income tax return for the taxable year 2011 on March 2, 2013. On April 29, 2013, the Internal Revenue Service assessed tax and additions to tax relative to the unpaid tax liabilities reflected on Petitioners' joint 2011 federal income tax return. The amount of tax assessed was $30,771, and the additions to tax were approximately $6,600. Interest was also assessed. Petitioners failed to pay the tax liability for 2011 and, on May 14, 2013, the Internal Revenue Service sent Petitioners form letter 1058A, Final 25 Notice, Notice of Intent to Levy, and Notice of Your 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 Right to a Hearing. 2 3 Petitioners subsequently filed Form 21253, Request for a Collection Due Process or Equivalent 4 Hearing, dated May 20, 2013. On May 28, 2013, the 5 Internal Revenue Service sent to each of the 6 Petitioners a form letter 3172, Notice of Federal Tax 7 8 9 10 11 12 13 14 15 16 17 18 Lien Filing and Your Right to a Hearing under section 6320 for their Form 1040 income tax liabilities for 2011. On May 31, 2013, the Notice of Federal Tax Lien for Petitioners' Form 1040 tax liabilities was 2011 was recorded in the Harris County Clerk's Office in Houston, Texas. Petitioners filed a request for a hearing relative to the lien filing in July 2013. Petitioners' request for a hearing relative to both the lien and the levy for 2011 were assigned to Settlement Office White, who conducted a telephone conference with Petitioners' representative, Mr. 19 Connelly, on August 29, 2013. 20 21 22 23 24 25 Although the details of that conference aren't absolutely clear based upon the testimony, it is clear that Petitioners had taken no concrete steps to resolve the 2011 tax liability, primarily because their earlier liabilities had not been resolved, and the question about the equity in their home remained 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 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 outstanding. In December 2013, the Internal Revenue Service issued a notice of determination concerning the 2011 tax liabilities, sustaining the proposed collection action relative to 2011. Petitioners timely filed petitions before this Court relative to the tax liabilities in 2002 and 2009, which led to the case in Docket Number 18974-12 and relative to 2011, which led to the Docket Number in 991-14. Some of the key points relative to the discussions between the Petitioners' representative and the settlement officers are that the settlement officers in both sets of cases sought to have the equity in Petitioners' home addressed. Petitioners took no concrete steps to address this equity, although Petitioners' representative did discuss alternatives with the settlement officers. Finally, at least in Docket Number 18974-12 and the administrative proceedings that preceded that docket, it is clear that the settlement officer was aware that Mr. Haden suffered from Parkinson's disease. The underlying liabilities for all the periods in question are not in dispute. The primary 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 question before the Court is whether the determination of the settlement officers should be sustained. In that regard we reference section 6330(c)(3)(C), which provides that the determination of the settlement officer shall take into consideration 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. We will first, in this regard, address the collection for the year 2011, referenced in Docket Number 991-14. There's absolutely no evidence that the settlement officer was provided with information such that it was an abuse of discretion for the settlement officer not to sustain the proposed collection action. There were no concrete alternatives provided to her, and the process of weighing the tax liability versus the intrusion on the taxpayers was such that it would not have caused an abuse of discretion by sustaining the collection action, based upon this Court's opinion. We next turn to this balancing as it 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.Capita1ReportingCompany.com Capital Reporting Company 11 relates to Docket Number 18974-12. First we note that the release of the federal income tax lien as it relates to 2002 and 2009 liabilities would have left the Respondent unprotected relative to large tax liabilities. Petitioners sought compromise of those liabilities but provided no concrete basis on which that compromise would have protected Respondent ' s interest in the equity in Petitioners' home. However, we also note that a levy for the full amount of the tax liabilities and additions to tax would have left the Petitioners without any resources at a time when Mr. Haden was very ill. We also note that there was confusion as to the last conversation between the settlement officer and Petitioners' representative regarding the 2002 and 2009 liabilities in June of 2012. The settlement officer seemed confused about whether the Petitioners were seeking to obtain a loan on their property or needed more time to put the home for sale. The testimony is not consistent upon this, and the settlement officer himself admitted that his statement in the notice of determination was incorrect regarding the basis on which he decided to issue the notice of determination in June of 2012. 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.Capita1ReportingCompany.com Capital Reporting Company 12 Given these circumstances, we sustain the settlement officer's determination regarding Docket Number 18974-12, felative to the underlying federal tax lien as a balancing of Respondent's interest to protect collection action and Petitioners' personal interest would cause us to find that it was reasonable to sustain the lien. However, for the reasons we alluded to, we believe sustaining the levy, under the circumstances present in June 2012, was an abuse of discretion, and we find that Respondent's collection action via levy in Docket Number 18974-12 is not sustained. Decisions will be entered which reflect these determinations. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 2:20 p.m., the above- entitled matter was concluded.) 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.Capita1ReportingCompany.com