TAX COURT OPINION

Case: Francilla Nazarrea Watson
Docket Number: 8990-10L
Judge: Kroupa
Opinion Type: bench
Filed: 06/27/2011
Pages: 10

UNITED STATES TAX COURT WASHINGTON, DC 20217 KVC FRANCILLA NAZARREA WATSON, Petitioner, v. ) Docket No. 8990-10 L COMMISSIONER OF INTERNAL REVENUE, Respondent. O R D E R Pursuant to Rule 152 (b) , Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall the pages of transmit the to petitioner and to respondent a copy of transcript of June 9, 2011, containing her oral rendered in this case. the above case before Judge Diane L. Kroupa on findings of fact and opinion In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Diane L. Kroupa Judge Dated: Washington, D.C. June 27, 2011 SERVED Jun 30 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 L. Kroupa June 9, 2011 Francilla Nazarrea Wat on V. Commissioner Docket No.: 8990-10L 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 findings of fact and opinion shall not be relied upon as precedent in any other case. This bench opinion is made pursuant to the authority granted in section 7459(b) and Rule 152. All section references are to the Internal Revenue Code as amended and in effect for the years at issue as later defined, and all Rule references are to the Tax Court Rules of Practice and Procedure. This is a collection review case involving the filing of a notice of Federal tax lien and a proposed levy to collect petitioner's unpaid liabilities for the taxable years 1994, 1995 and 2005 (collectively the years at issue). Petitioner appeared pro se. Cassidy Collins appears on behalf of espondent. FIbDINGS OF FACT The parties have filed a Stipulation of Facts and a Supplemental Stipulation of Facts, along 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 4 with accompanying exhibits. The facts are so found. Petitioner resided in alifornia when she filed the petition for collection review. Petitioner f iled to file timely a Federal income tax return for 1994 or 1995. Respondent prepared a substitute for return for the two years deciding that petitioner was a 60 percent partner in E.B. Construction partnership. Respondent issued a statutory deficiency notice for the two years based upon the substitutes for return. Respondent determined a $78,000 deficiency for 1994 and $104,000 deficiency for 1995 along with delinquent filing additions of approximately $19,000 for 1994 and $26,000 for 1995 (for a total of approximately $227,000). Petitioner failed to file a petition to contest the deficiencies or additions so respondent, thereafter assessed the tax liabilities for 1994 and 1995. For 2005, petitioner timely filed a return. She reported a $2,421 tax liability with a $392 payment due. She failed to pay, however, the payment due amount with the return for 2005. , Respondent sent collection notices when petitioner failed to pay any of the unpaid tax assessments. Respondcnt sent petitioner a Final Heritage Reporting Corporation (2h2) 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 5 Notice -- Notice of In:ent to Levy and Notice of Your Right to a Hearing advising petitioner that respondent intended to collect the unpaid taxes for 1994, 1995 and 2005, and informin petitioner that she could receive a hearing. Th levy notice was issued on June 3, 2009 and the lien was recorded on June 18, 2009 in Los Angeles Co nty, California. Petitioner timely filed a request for a hearing with Appeals. Petitioner raised no issues other than liability for the underlying liability, especially with respect to 1994 and 1995. These are the two years based upon the substitutes for return respondent prepared after summoning the partnership's bank records and determining petitioner had unreported income from the partnership. Petitioner did not indicate that she sought a collection agreement, an installment agreement or an offer in compromise. After the CDP hearing, respondent's counsel determined that petitioner never received the deficiency notice for 1994 or 1995 and was therefore entitled to dispute the underlying liabilities for those two years. Respondent issued petitioner a determination notice dated March 10, 2010 upholding the lien filing for 1994, 1995 and 2005. The following day, respondent issued petitioner another determination 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 6 notice concluding thati the proposed levy action was inappropriate because petitioner was placed on currently not collectible status. Settlement Officer Kelly performed the fiaancial analysis of petitioner's documentation and detecmined that petitioner's case should be put in "hardship" or "currently not collectible" until such time that petitioner has the ability to make payments on the taxes owed. He concluded that the liea was appropriate even given her hardship status because it properly balanced the need for efficient collection with petitioner's interest that any collection action be no more intrusive than necessary. Petitioner timely filed a petition with this Court. Petitioner continues to argue that she does not owe any tax from 1994 or 1995. In preparing this collection review matter for trial, the parties conducted an audit reconsideration for 1994 and 1995. Petitioner was able to establish to the examiner that there is no deficiency for 1995. In fact, petitioner was able to establish there is even a net operating loss for 1995 that petitioner could carry back to 1994. Not withstand, this NOL carry back, petitioner still has a $22,312 deficiency in Federal income tax due for 1994 plus a $5,578 late filing addition for Heritage R porting 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 7 1994. This amount is gubstantially less than the liability shown in the deficiency notice. With interest accruing from 1994, however, the total liability due from petitioner is $83,499.78 as reflected in Exhibit 3 -R. Petitioner continues to contest that she owes any tax for 1994 as the partnership was on the accrual basis, not on a cash basis and the partnersaip accounted for their construction contracts as a percentage of construction completed. Upon cross-examination, petitioner agrees with the total gross receipts respondent determined and the expenses respondent determined in the audit reconsideration reflected in Exhibit 30-R. Petitioner admits that respondent did not abuse any discretion in this collection review matter. OPINION Here, in this collection review matter, we review the underlying tax liability for 1994 and 1995 on a de novo basis. See Goza v. Commissioner, 114 T.C. 176, 182 (2000). The Court is pleased that respondent performed an audit reconsideration and determined a deficiency for 1994 only and no deficiency for 1995. Wee are satisfied that the deficiency amount set forth in Exhibit 31-R for 1994 is the- correct liability for that year. We also note Heritage Reporting Corporation (2O2) 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 8 that petitioner is pre:luded from disputing the underlying tax liabili y for 2005 because petitioner failed to properly raise the merits of the tax liability as an issue uring the CDP hearing. See Giamelli v. Commissioner, 129 T.C. 107, 114 (2007). As to the co lection determination, the Court will review resp ndent's determination for abuse of discretion. See Se o v. Commissioner, 114 T.C. 604, 610 (2000). This requires us to decide whether respondent exercised hlis discretion arbitrarily, capriciously, or without sound basis in fact or law. See Woodral v. Commissioner, 112 T.C. 19, 23 (1999). Based upon our examination of the entire record before us, we find that respondent did not abuse his discretion in determining to sustain the Federal tax lien filing and determining that petitioner was currently not collectible and in a hardship situation so that the levy was not appropriate to collect petitioner's unpaid liabilities for 1994, 1995 or 2005. We briefly provide an overview of collection proceedings. If any person liable for Federal tax liability neglects or refuses to make payment within ten days of notice and demand, the Commissioner is authorized to collect the tax by levy on that person's 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 9 property. See sec. 633(a). At least 30 days before enforcing collection by levy on the person's property, the Secretary is obliged to provide the person with a final notice of intent to levy, including notice of the administrative appeals available to the person. See sec. 6331(d). The person is entitled, upon request, to an administrative review hearing before Appeals. Sec. 6330(b) (1). If the taxpayer requests a hearing, he or she may raise at that hearing any relevant issues relating to the unpaid tax or the proposed levy. Sec. 6330(c) (2). Relevant issues include any appropriate spousal defenses, challenges to the appropriateness of collection, and possible alternative means of collection such as an installment agreement or an offer-in-compromise. Sec. 6330(c) (2) (A). After the hearing, the Appeals officer is required to make a determination that addresses 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 taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary. Sec. 6330(c) (3). The record reflects that the Settlement 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 10 Officer properly verified that all the legal and procedural requiremen a have been met. The record also reflects that the Settlement Officer properly balanced the need for àfficient collection of taxes with petitioner's legizimate concern that any collection be no more intrusive than necessary. Petitioner has nót raised any valid challenge to the appropriateness of collection, did not assert any spousal defenses, or otherwise offer any collection alterna:ives. See sec. 6330(c) (2). Accordingly, these issles are now deemed conceded. Rule 331(b) (4). Petitioner has not presented any evidence or persuasive arguments to convince us that respondent abused his discretion. We therefore conclude that respondent did not abu3e his discretion in sustaining the lien action and fiading the levy action inappropriate to colle t petitioner's outstanding tax liabilities for 1994, 995 and 2005. To reflect t e foregoing, decision will be entered for respondent and an appropriate order will be issued sustaining (I) the determinations set forth in the Notice of Deternination Concerning Collection Action(s) Under Section 6320 and/or 6330, dated March 10, 2010, regarding the lien action and (ii) the Heritage Reporting Corporation (2d2) 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 11 determinations set for:h in the Notice of Determination Concerning Cdllection Action (s) Under Section 6320 and/or 6330, dated March 11, 2010, regarding the levy action, upon which this case is based, regarding petit i.oner's unpaid tax liabilities for 1994, 1995 and 2005. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 10 : 27 a . m. , the bench opinion in the above-entitled natter was concluded.) // // // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888