TAX COURT OPINION

Case: Louis Fusaro
Docket Number: 3812-08L
Judge: Colvin
Opinion Type: bench
Filed: 03/25/2009
Pages: 13

~1 Vlis UNITED STATES TAX COURT WASHINGTON , D.C . 2021 7 LOUIS FUSARO, Petitioner , V . COMMISSIONER OF INTERNAL REVENUE, Respondent . Docket No . 3812-08 L O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice Procedure, it i s ORDERED that the Clerk of the Court shall transmit he to petitioner and to respondent a copy of the pages of th e transcript of the trial of the above case before Judge Diane L . Kroupa at Los Angeles, California on March 6, 2009, containing her oral findings .of fact and opinion rendered after .the hearing on respondent's motion . In accordance with the oral findings of fact and opinion, an order and decision will be entered for respondent . (Signed) Diane L . Kroupa Judge Dated : Washington, D .C . March 25, 2009 SERVED MAR 2 6 2009 3 1 Bench opinion by Judge Diane L . Kroupa March 6,, 2009 2 Fusaro v . Commissioner Docket No . 3812-08 L 3 The Court has decided to render oral findings of 4 fact and opinion in this case and the following represents 5 the Court's oral findings of fact and opinion . These oral 6 findings of fact and opinion shall not be relied upon a s 7 precedent in any other case . 8 This bench opinion is made pursuant to th e 9 authority granted by section 7459(b) and Rule 152 . All 10 section references are to the Internal Revenue Code as 11 amended and in effect for 1997, 1998 and 2002, the years a t 12 issue, and all Rule references are to the Tax Court Rules of 13 Practice and Procedure . 14 This is a collection review case involving th e 15 filing of a notice of Federal Tax Lien to collec t 16 Petitioner's unpaid liabilities for the taxable years a t 17 issue . This collection review matter is before the Court on 18 the parties' cross-motions for summary judgment . 19 Willard Horwich appeared on Petitioner's behalf, 20 and Cindy Park appeared on behalf of Respondent . 21 FINDINGS OF FAC T 22 The record establishes or the parties do not , 23 dispute the following : Petitioner resided in California at 24 the time he filed the collection review petition in this 25 case . Petitioner invested in a horse breeding tax shelte r Heritage Reporting Corporation (202) 628-4888 4 known as ClassicStar and claimed expenses for each of the years at issue . Respondent issued a Statutory Notice of Deficiency to Petitioner for the years at issue,-but failed to file a petition to contest the determinations . Petitioner failed .to pay the taxes due of approximatel y $144,000 for the three years at issue after the assessments were made . Respondent, therefore, issued to Petitioner a letter dated February 2, 2007, entitled "Notice of Federa l 9 Tax Lien Filing and Your Right to a Hearing," for th e 10 outstanding tax liabilities for the three years at issue . 11 (This notice shall be referred to as the "Lien Notice" . ) 12 In response to the'Lien Notice, Petitioner timely 13 requested a hearing . In his hearing request, Petitione r 14 stated that the liabilities arose from an alleged ta x 15 shelter program and that Petitioner wished to enter into an 16 installment agreement while litigation brought by the other 17 taxpayers regarding the tax shelter litigation was pending . 18 Petitioner, through his counsel, received a 19 telephone conference with Appeals Officer Irma Hernandez 20 (who shall be referred to as AO .Hernandez) . During th e 21 hearing, Petitioner's counsel admitted that Petitioner could 22 not raise the underlying liabilities because Petitione r 23 failed to file a timely petition . Petitioner's counsel 24 further stated that Petitioner was interested in payin g 25 nominal monthly payments of $50 to $100 of the approximate Heritage Reporting Corporatio n (202) 628-4888 5 1 $144,000 of unpaid liabilities while other taxpayer s 2 litigated the tax shelter program . AO Hernandez tol d 3 Petitioner's counsel, and Petitioner's, counsel agreed, to 4 send AO Hernandez a completed Form 433-A, Collectio n 5 Information Statement for Wage Earners and Self-Employed 6 Individuals, and other financial documentation . AO 7 Hernandez followed up their phone conference with a lette r 8 to Petitioner's counsel informing Petitioner to complete the 9 Form 433 and provide proof of household income and expenses . 10 The letter also informed Petitioner that, if he failed t o 11 provide the necessary financial information an d 12 documentation, AO Hernandez would be unable to consider any 13 collection alternatives, including Petitioner's propose d 14 installment arrangement . 15 Petitioner's counsel faxed . AO Hernandez an 16 unsigned Form 433 purportedly prepared by Petitioner' s 17 accountant . No attachments . were submitted although the Form 18 433 stated that attachments verifying the information given 19 by Petitioner were required to be submitted with the form . 20 AO Hernandez sent Petitioner's counsel a fax requesting the 21 required attachments . No attachments were forthcoming . 22 Petitioner's counsel was again advised that AO Hernandez 23 could not consider collection alternatives without the 24 information and documentation requested . 25 Petitioner's counsel left a voice mail message Heritage Reporting Corporatio n (202) 628-4888 6 1 with AO Hernandez acknowledging that she needed more 2 information from Petitioner, and informing her that he would 3 be on vacation for two weeks, but she should call his 4 secretary and leave a message of what information was 5 needed . AO Hernandez called Petitioner' s counsel' s 6 secretary and told her she needed the attachments . They 7 agreed that Petitioner's accountant would fax th e 8 attachments to AO Hernandez directly . Petitioner' s 9 accountant' s assistant contacted AO Hernandez and .stated .10 that the requested information would be provided . AO 11 Hernandez advised that she needed bank statements and proof 12 of Petitioner' s expenses . She also said she neede d 13 information regarding Petitioner's ability to pay expenses, 14 especially because Petitioner was unemployed at the time . 15 Petitioner's counsel returns from his vacation and 16 contacts AO Hernandez stating that he understood she ha d 17 spoken with Petitioner's accountant . AO Hernandez sent 18 another fax stating that neither Petitioner' s counsel nor 19 Petitioner's accountant provided any of the requeste d 20 information . 21 A month after the agreed upon deadline , 22 Petitioner's counsel sent a letter along with another 23 unsigned copy of Form 433, a summary of, checkin g 24 transactions for Devyn Productions, Inc . and bank statements 25 for Petitioner . There was no explanation how payments by Heritage Reporting Corporatio n (202) 628-4888 7 1 Devyn Productions should be treated as payments b y 2 Petitioner , if at all, or how it was responsive to AO 3 Hernandez ' s request for .financial information and 4 documentation of Petitioner ' s expenses . 5 A month later , AO Hernandez sent Petitioner's counsel a letter conveying the results of her analysis of Petitioner ' s income and expenses . AO Hernandez used national standards for expenses because Petitioner had no t . 9 substantiated the expenses shown on the unsigned Form 433 . 10 AO Hernandez explained she omitted most expenses because 11 Petitioner failed to file the necessary documentation . in 12 addition , she explained she omitted most of the expense s 13 because they had been made by a corporation , not Petitioner 14 himself . After reviewing information . in the administrative 15 file, she determined that Petitioner had the ability to make 16 monthly payments of $3,844 . She asked Petitioner ' s counsel 17 to review the information and return the installment 18 agreement signed if Petitioner agreed with the information . 19 She further advised Petitioner 's counsel that she would make 20 a final determination based upon information i n Respondent's 21 files if Petitioner did not respond within a week . 22 Petitioner ' s counsel timely responded but failed 23 to provide any of the requested documentation .. He stated 24 that he disagreed with her decision to use "the national 25 standard in lieu of housing, transportation , etc .," and he Heritage Reporting Corporation (202) 628-4888 8 1 disagreed with her decision to omit Court ordered payment s 2 from the analysis . Petitioner's counsel again contacted her 3 reiterating that he still disputed AO Hernandez's decisio n 4 to exclude transportation, health care and Court ordere d 5 payments, but counsel stated that Petitioner was interested 6 in increasing his monthly installments to $500until th e 7 pending tax shelter litigation was resolved . No 8 documentation of Petitioner's expenses were provided . 9 Petitioner's counsel later advised AO Hernandez 10 that Petitioner and his accountant conducted all o f 11 Petitioner's financial affairs through his wholly-owne d 12 corporation, Devyn Productions . Based on this information, 13 AO Hernandez determined that Petitioner had not disclosed 14 all of his financial information on the Form 433 submitted 15 two months earlier and further determined that a collectio n 16 alternative could not be considered . Without any 17 documentation of Petitioner's expenses, AO Hernande z 18 sustained the proposed collection action by lien in a Notice 19 of Determination Concerning Collection Action(s) unde r 20 Section 6320 and/or 6330, dated January 30, 2008 . 21 Petitioner timely filed a petition to contest the 22 proposed lien action to collect Petitioner's unpaid ta x 23 liabilities for the years at issue and asserting that AO 24 Hernandez abused her discretion-,in failing to ask mor e 25 questions about Devyn Productions . Petitioner also asserts Heritage Reporting Corporatio n (202) 628-4888 9 1 that AO Hernandez abused her discretion in-using th e 2 national standard expense amounts rather than the amounts 3 Petitioner admits were paid by Devyn Productions, not b y 4 Petitioner . These expenses total $17,000 a month, including 5 an $8,000 mortgage expense, a $1,000 BMW payment, a $1,00 0 alimony payment to Petitioner's ex-wife, Kathleen, a $2,200 7 child support payment, plus a $1,200 private school tuition payment for a child Petitioner had with a girlfriend, Kell y 9 Jo Tackett (for a total of approximately $204,000 annually) . 10 As stated previously, both parties filed cross .11 motions for summary judgment and filed objections to the 12 other party's motion . The Court heard oral arguments from 13 both parties on their cross motions . The administrative 14 record is Exhibit 1-R to the record . . 15 OPINION 16 We are asked to decide whether to grant summary 17 judgment . Summary judgment is intended to expedit e 18 litigation and avoid unnecessary and expensive trials . ,See, 19 e .g ., FPL Group . Inc . v . Commissioner , 116 T .C . 73, 7 4 20 (2001) .. A motion for~..summary judgment will be granted if 21 . the pleadings, answers to interrogatories, depositions, 22 admissions, and other acceptable materials, together with 23 the affidavits, .if any, show that there is no genuine issue 24 as to any material fact and that a decision may be-rendered 25 as a matter of law . See Rule 121(b) ; Elect . Arts . Inc . v . Heritage Reporting Corporation (202) 628-4888 1 0 1 Commissioner , 118 T .C . 226 , 238 (2002 ) . The moving party 2 has the burden of proving that no genuine issue of material 3 fact exists and that it is entitled to judgment as a matter 4 of law . See , e .g ., Rauenhorst v . Commissioner , 119 T .C . 5 157, 162 ( 2002 ) . The party opposing summary judgment must l 6 set forth specific facts that show that a genuine question 7 of material fact exists and may not rely merely o n 8 allegations or denials in the pleadings . Grant Creek Wate r 9 Works, Ltd . v . Commissioner , 91 T .C . 322, 325 (1988) . 10 We begin with the standard of review . Where the 11 validity of the underlying tax liability is properly a t 12 issue, the Court will review the matter on a de novo basis . 13 Sego v . Commissioner , 114 T .C . 604, 610 (2000) . Where, as 14 is the case here, the validity of the underlying tax 15 liability is not properly placed at issue, the Court will 16 review Respondent's determination for abuse of discretion . 17 Sego v . Commissioner , supra , Goza v . Commissioner , 114 T .C . 18 176, 181-182 (2000) . We must decide whether Responden t 19 exercised his discretion arbitrarily, capriciously, or 20 without sound basis in fact or law . See Woodral v . 21 Commissioner , 112 T .C . 19, 23 (1999) ; Fargo v . Commissioner , 22 T .C . Memo . 2004-13 . Based upon our examination of th e 23 entire record before us, we find that Respondent did not 24 abuse his discretion in determining .that the collection 25 action should proceed with respect to Petitioner's unpai d Heritage Reporting Corporation (202) 628-4888 1 1 1 liabilities'for the three years at issue . 2 We now discuss general collection proceedings . 3 Section 6321 imposes a lien in favor of the'United States on 4 all property and rights to property of a taxpayer whe n 5 demand. for payment of that person's liability for taxes has 6 been made and the person fails to pay those taxes . The lie n 7 arises when the assessment is made . Sec . 6322 . 8 Section 6320 provides that the Secretary shal l 9 furnish the taxpayer described in section 6321 with written 10 notice that a lien was filed . The person may then request 11 an administrative review . hearing to be conducted in a manner 12 consistent with the procedures set forth in sections 13 6330(c), (d), and (e) . Sec . 6320(c) . If the taxpaye r 14 requests a hearing, he or she may raise at that hearing any 15 relevant issues relating to the unpaid tax . Sec . 16 6330(c)(2) . Relevant issues include any appropriate spousa l 17 defenses, challenges to the appropriateness of collection, 18 and possible alternative means of collection such as an 19 installment agreement or an offer-in-compromise . Sec . 20 6330(c)(2)(A) . After the hearing, the Appeals officer is 21 required to make a determination that addresses issues the 22 taxpayer raised, verifies that all requirements o f 23 applicable law and administrative procedures have been met, 24 and balances the need for the efficient collection of taxes 25 with the legitimate concern of the person that an y Heritage Reporting Corporation (202) 628-4888 1 2 1 collection action be no. more intrusive than necessary . 2 Sec . 6330(c) (3) [C ) 3 Analysis . The record reflects that AO Hernandez 4 properly verified that all the legal and procedura l 5 requirements have been met . AO Hernandez confirmed, using a 6 transcript of Petitioner ' s accounts , that assessments were 7 properly made for each of the years at issue, tha t 8 appropriate and timely notices were sent regarding the 9 assessments , and that Petitioner was properly informed of 10 his rights with respect to the lien action . 11 The record also reflects that Petitioner did not 12 present any financial documentation for Respondent t o 13 evaluate any collection alternatives . Petitioner provided 1.4 an unsigned Form 433 but never provided the requeste d 15 documentation of Petitioner ' s actual expenses . Even now, 16 Petitioner ' s counsel admits that no documentation wa s 17 submitted to AO Hernandez as to Petitioner ' s actua l 18 expenses . We have frequently and consistently held that . an 19 officer does not abuse any discretion if the taxpayer fails 20 to submit the required and requested financial information . 21 22 Sapp v . Commissioner , T .C . Memo . 2006-104 ; Pricchiottino v . Commissioner , T .C . Memo. 2004-231 ; Newstat v . Commissioner , 23 T .C . Memo . 2004-208 . 24 AO Hernandez also considered the sole issue 25 Petitioner raised in his hearing request, which was to pay Heritage Reporting Corporatio n (202) 628-4888 1 3 1 the outstanding liabilities through an installmen t 2 arrangement . AO Hernandez informed Petitioner that she , 3 determined that Petitioner could pay $3,844 a month rathe r 4 than the .$50, $100 and later $500 monthly payment Petitione r offered to pay of the approximate $144,000 outstanding liability . Petitioner was told that he needed to provide a 7 completed Form 433 and to provide the .necessary financial documentation to Respondent in at least three separat e 9 letters and as many as twelve or thirteen phon e 10 conversations with either Petitioner's counsel, Petitioner's 11 accountant or assistants for either of them . Petitioner's 12 counsel summed it up during oral arguments that AO Hernandez 13 probably "got sick and tired" of requesting the information 14 regarding Petitioner's expenses . Petitioner's counsel also 15 argues that AO Hernandez abused her discretion given th e 16 large amount of liabilities outstanding . The Court knows of 17 no authority to provide .a different standard depending on 18 the amount of the"liabilities . Finally, the record reflects 19 that AO Hernandez properly balanced the need for efficient 20 collection of taxes with Petitioner's legitimate concer n 21 that any collection be no more intrusive than necessary . 22 Petitioner has not contested the underlying 23 liabilities, raised any spousal defenses, or otherwise 24 offered any acceptable collection alternatives . Se e 25 sec . 6330(c)(2) . Accordingly, these issues are now deemed Heritage Reporting Corporatio n (202) 628-4888 A f, r IF 14 1 conceded . Rule 331(b)(4) . 2 Petitioner has not presented any evidence o r 3 persuasive arguments to convince us that Respondent abuse d his discretion . We therefore .conclude that Respondent did not abuse his discretion in upholding Respondent's proposed lien action to collect from Petitioner outstanding ta x liabilities for the three years at issue . To reflect the foregoing, decision will be entere d 9 for Respondent and an appropriate order will be issued 10 sustaining the determinations set forth in the Notice of .11 Determination Concerning Collection Action(s) Under Section 12 6320 and/or 6330, dated January 30, 2008, upon which this 13 case is based, regarding the unpaid liabilities for th e 14 taxable years 1997, 1998 and 2002, upon'which this case is 15 based . The order will'also grant Respondent's motion for 16 summary judgment and deny Petitioner's motion for -summary 17 judgment . 18 This concludes the Court's oral findings of fact 19 - and opinion in this case . 20 (Whereupon, at 1 :14 p .m ., the bench opinion in the 21 above-entitled matter was concluded . ) 22 23 24 // 25 Heritage Reporting Corporation (202) 628-4888