TAX COURT OPINION

Case: Jackie D. Birdsell
Docket Number: 4823-07S
Judge: Colvin
Opinion Type: bench
Filed: 11/19/2008
Pages: 12

1.f ii/LUI W sfj , . UNITED STATES TAX COURT WASHINGTON , DC 2021 7 JACKIE D . BIRDSELL , Petitione r v . COMMISSIONER OF INTERNAL REVENUE , Respondent O R D E R ST ,',a . .~~ . T . I a:va(: Fr 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 petitioner and to respondent a copy of the pages of the transcript of the hearing of the above case before Special Trial Judge Robert N . Armen, Jr . at Kansas City, Missouri on November 5, 2008, containing his oral findings of fact and opinion rendered at the conclusion of the hearing . In accordance with the oral findings of fact and opinion, an appropriate Order and Order and Decision will be entered . (Signed) Robert N . Armen, Jr. Special Trial Judg e Dated : Washington, D .C . November 19, 2008 VED NOV 2 4 2008 3 1 Bench Opinion by Special Trial Judge Robert N . Armen Jr . 2 November 5, 200 8 3 Birdsell v . Commissioner Docket No . 4823-07 S 4 I . 5 THE COURT : The Court has decided to render 6 oral findings of fact and opinion in this case, and the 7 following represents the Court's oral findings of fac t 8 and opinion . The oral findings of fact and opinion shall 9 not be relied upon as precedent in any other case . 10 II . 11 This proceeding was heard as a Small Tax Case 12 pursuant to the provisions of section 7463(f)(2) of the 13 Internal Revenue Code of 1986, as amended, and Rules 170 14 through 175 of the Tax Court Rules of Practice and 15 Procedure . See and compare Rules 330 through 334 of the 16 Tax Court Rules of Practice and Procedure . 17 III . 18 This bench opinion is made pursuant to the 19 authority granted by section 7459(b) of the Interna l 20 Revenue Code of 1986, as amended, and Rule 152 of the Tax 21 Court Rules of Practice and Procedure . 22 Hereinafter in this bench opinion, al l 23 section numbers refer to the Internal Revenue Code of 24 1986, as amended, and all Rule numbers refer to the Tax 25 Court Rules of Practice and Procedure . Heritage Reporting Corporation (202) 628-4888 4 1 Iv . 2 Jackie D . Birdsell appeared on his own 3 behalf . Dennis R . Onnen appeared on behalf o f 4 respondent . 5 V . 6 By Notice dated June 2, 2008, and served o n 7 petitioner by certified mail on that same date , this case 8 was calendared for trial on November 3, 2008, in Kansa s 9 City, Missouri . However, on August 11, 2008, respondent 10 filed a Motion For Partial Summary Judgment, a copy of 11 which was served by respondent on petitioner by mail on 12 August 8, 2008 . (For the sake of convenience, we shall 13 hereinafter generally refer to this motion simply a s 14 respondent's motion . ) 15 In his motion, respondent moves, pursuant to 16 Rule 121, for a summary adjudication in his favor on all 17 issues presented in this collection review case involving 1.8 petitioner's outstanding liabilities for : (1) Federa l 19 employment taxes ("941 tax") for the third and fourth 20 quarters of 1996, the third quarter of 1997, the second 21 and third quarters of 1998, and the first and second 22 quarters of 1999 ; (2) Federal unemployment tax ("94 0 23 tax") for the calendar year 1999 ; and (3) a civil penalty 24 under section 6721 for intentional disregard of th e 25 filing requirement (or the correct information reporting Heritage Reporting Corporatio n (202) 628-4888 5 1 requirement) in respect of Forms W-2 for 1997 . 2 On September 18, 2008, petitioner filed an 3 Objection to respondent's motion . Thereafter, o n 4 September 30, 2008, respondent filed a Response . 5 Petitioner then followed with a Reply on October 21, 6 2008 . 7 Pursuant to notice provided by Order dated 8 October 8, 2008, respondent's motion was called fo r 9 hearing on November 3, 2008, in Kansas City, Missouri . 10 Petitioner and counsel for respondent appeared . The 11 following day, .November 4, 2008, this case was recalled 12 from the calendar for argument . Petitioner and counsel 13 for respondent again appeared and presented argument in 14 support of their respective positions . 15 VI . 16 The facts relevant to the disposition o f 17 respondent's motion may be briefly summarized as follows : 18 Petitioner resided in the State of Missouri 19 at the time that the petition was filed with the Court . 20 In or about September 2005, petitione r 21 submitted to respondent an offer in Compromise (Form 22 656) . The Offer in Compromise, which was submitted on 23 the basis of doubt as to collectibility, proposed that 24 respondent accept $50 in full satisfaction o f 25 petitioner's outstanding liabilities for : (1) Federal Heritage Reporting Corporatio n (202) 628-4888 6 1 employment taxes for the third and fourth quarters of 2 1996, the third quarter of 1997, the second and third 3 quarters of 1998, and the first and second quarters o f 4 1999 ; (2) Federal unemployment tax for the calendar year 5 1999 ; (3) a civil penalty under section 6721 for 1997 ; 6 and (4) Federal income taxes for 1994, 1997, 1998, 1999, 7 2001, and 2003 . As of January 25, 2006, all of thes e 8 liabilities exceeded $ 56,000 . 9 On January 25, 2006, respondent' s offer 10 specialist determined that petitioner had total ne t 11 equity in assets of $18,745, specifically including net 12 realizable equity in real estate of $14,705 . 13 Respondent's specialist proposed that petitioner increase 14 his offer to the $18,000 amount . This was not done . 15 Accordingly, on or about March 15, 2006, responden t 16 rejected petitioner's offer . There was no administrative 17 appeal of the rejection, although petitioner did (b y 18 letter dated May 8, 2006) ask the specialist to re- 19 evaluate the offer . (It would appear that the specialist 20 declined to do so . ) 21 On July 20, 2006, respondent sent petitioner 22 a Final Notice Of Intent To Levy And Notice Of Your Right 23 To A Hearing (final notice) . See sec . 6330(a) . Th e 24 final notice reflected petitioner's outstanding 25 liabilities for the aforementioned employment taxes, Heritage Reporting Corporatio n (202) 628-4888 7 1 unemployment tax, and civil penalty under section 6721 . 2 The final notice did not include petitioner's outstanding 3 liabilities for income taxes . 4 Petitioner timely submitted to respondent a 5 Form 12153, Request For A Collection Due Process Hearing, 6 expressing therein interest in an offer-in-compromise . 7 During the course of the administrativ e 8 hearing , there was communication between respondent's 9 settlement officer and petitioner's authorize d 10 representative with repeated references to an offer-in- 11 compromise . However, no new offer was ever submitted . 12 Rather, it appears that petitioner wished only to revive 13 his original $50 offer, which had previously bee n 14 rejected . 15 On February 7, 2007, respondent's Office of 16 Appeals sent petitioner a Notice of Determinatio n 17 Concerning Collection Action(s) Under Section 6320 and/or 18 6330 (notice of determination) sustaining the propose d 19 levy . The Attachment to the notice of determination 20 included the following statement : 21 " . . .the taxpayer has failed to provide Form 22 656 or an accompanying 433A . No offer amount or terms 23 were ever presented . Taxpayer has failed to provide an 24 OIC as requested . " 25 Petitioner appealed from the notice of Heritage Reporting Corporatio n (202) 628-4888 8 1 determination by timely filing a petition with thi s 2 Court . See sec . 6330(d) . In the petition, petitioner 3 continued to express interest in an offer-in-compromise 4 and indicated a willingness to negotiate over the matter . 5 VII . 6 Pending before us is respondent's Motion For 7 Partial Summary Judgment, filed August 11, 2008 . At the 8 time it was filed, there remained unresolved in this case 9 certain issues relating to petitioner's outstandin g 10 liabilities for income taxes for the taxable (calendar) 11 years 1994, 1997, 1998, 1999, 2001, and 2003 . Thos e 12 issues have'been resolved by our granting of respondent's 13 motion to dismiss for lack of jurisdiction and to strike . 14 Thus, respondent's Motion for Partial Summary Judgmen t 15 has become a motion for summary judgment and will be 16 regarded as such . 17 Summary judgment is intended to expedite 18 litigation and avoid unnecessary and expensive trials . 19 Fla . Peach Corp . v Commissioner , 90 T .C . 678, 681 (1988) . 20 Summary judgment may be granted where there is no genuine 21 issue of any material fact and a decision may be rendered 22 as a matter of law . Rule 121(a) and (b) ; see Sundstrand 23 Corp . v commissioner, 98 T .C . 518, 520 (1992) ; affd . 17 24 F .3d 965 (7th Cir . 1994) ; Zaentz v . Commissioner , 90 T .C . 25 753, 754 (1988) . Heritage Reporting Corporation (202) 628-4888 9 1 After reviewing the record, we conclude that 2 there are not genuine issues of material fact and tha t 3 respondent is entitled to judgment as a matter of law . 4 VIII . 5 Section 6330 generally provides that th e 6 Commissioner cannot proceed with collection by levy until 7 the person has been given notice and the opportunity for 8 an administrative review of the matter ( in the form of an 9 Appeals Office hearing) and, if dissatisfied, wit h 10 judicial review of the administrative determination . See 11 Davis v . Commissioner , 115 T .C . 35, 37 (2000) ; Goza v . 12 Commissioner , 114 T .C . 176, 179 (2000) . 13 Section 6330(c) prescribes the matters that a 14 person may raise at an Appeals Office hearing . In sum, 15 section 6330(c) provides that a person may raise, inter 16 alia, a collection alternative, specifically including an 17 offer-in-compromise . Section 6330(d) provides fo r 18 judicial review of the administrative determination . 19 At the hearing on respondent's motion , 20 petitioner made clear that the only issue he was pursuing 21 was that of a collection alternative, specifically, a n 22 offer-in-compromise . Petitioner candidly admitted that 23 there was never any second offer made ; rather, his only 24 offer was the one made in September 2005, whic h 25 respondent rejected in March of 2006 . Petitioner also Heritage Reporting Corporatio n (202) 628-4888 1 0 1 candidly admitted that his residence might have ne t 2 realizable value of $29,410 . When asked why, then, did 3 he only offer $50 to compromise all of his outstanding 4 liabilities, petitioner suggested that he regarded the 5 $50 amount as the starting point for what he though t 6 would be a process of negotiation between the parties 7 leading to an agreed offer-in-compromise . 8 IX . 9 In a case such as the present one where the 10 taxpayer expresses interest in a collection alternative 11 such as an offer-in-compromise, the Court reviews the 12 administrative determination of respondent's Office o f 13 14 15 16 Appeals for abuse of discretion . Lundsford v . Commissioner , 117 T .C . 183, 185 (2001) ; Sego v . Commissioner , 114 T .C . 604, 610 (2000) ; Goza v . Commissioner , 114 T .C . 176, 182 (2000) . A settlemen t 17 officer abuses his discretion if his determination is 18 exercised "arbitrarily, capriciously, or without sound 19 basis in fact ." Mailman v . Commissioner , 91 T .C . 1079, 20 1084 (1988) . 21 In the instant case, petitioner never 22 submitted an offer-in-compromise to respondent' s 23 settlement officer, instead relying on the September 2005 24 offer-in-compromise, which respondent had rejected before 25 the final notice of intent to levy was even issued . Heritage Reporting Corporation (202) 628-4888 I 1 1 1 Lacking a specific proposal to consider, the settlemen t 2 officer did not abuse his discretion in sustaining the 3 proposed levy . See Johnson v . Commissioner , T .C . Memo . 4 2004-73 . 5 But even if we were to proceed on the basi s 6 that petitioner's $50 offer was still before respondent's 7 settlement officer during the administrative stage o f 8 this case, we would not conclude that the settlemen t 9 officer abused his discretion . Indeed, one might regard 10 the $50 offer as problematic on its face, particularly in 11 light of petitioner's statement at the hearing that the 12 net realizable value of his residence was $29,410 . 13 In any event, we note that petitioner's $50 14 offer was never flatly rejected without consideration . 15 Rather, respondent's offer specialist analyze d 16 petitioner's assets and liabilities, arriving at total 17 net equity in assets of $18,745 . We are unable to say 18 that the specialist's analysis was arbitrary o r 19 capricious, particularly in light of petitioner' s 20 statement at the hearing regarding the net realizabl e 21 value of his residence and the fact that petitioner never 22 expressly modified his $50 offer in order to increase it . 23 In short, we are unable to credi t 24 petitioner's apparent impression that a clearly low-ball 25 offer suffices to initiate a negotiation process that can Heritage Reporting Corporatio n (202) 628-4888 1 only be concluded by the Commissioner ' s approval of an 1 2 2 offer-in-compromise . 3 X . 4 In the absence of a valid issue for review, 5 we conclude that respondent is entitled to judgment as a 6 matter of law sustaining the notice of determination . 7 Accordingly, we shall grant respondent's motion an d 8 thereby sustain the determination of the Appeals Office 9 permitting respondent to proceed with collection by levy . 10 XI . 11 In sum We shall (1) deem respondent' s 12 Motion For Partial Summary Judgment, filed August 11, 13 2008, to be a Motion For Summary Judgment ; (2) gran t 14 respondent's Motion For Summary Judgment ; and (3) decide 15 that respondent may proceed with collection with respect 16 to petitioner's outstanding liabilities for (a) Federal 17 employment taxes for the third and fourth quarters o f 18 1996, the third quarter of 1997, the second and third 19 quarters of 1998, and the first and second quarters of 20 1999 ; (b) Federal unemployment tax for the calendar year 21 1999 ; and (c) a civil penalty under section 6721 fo r 22 1997, as determined in the notice of determination dated 23- February 7, 2007, upon which notice this case is based . 24 XII . 25 This concludes the Court's oral findings o f Heritage Reporting Corporation (202) 628-4888 1 fact and opinion in this case . 2 (Whereupon , at 9 :00 a .m ., the bench opinion 3 in the above - entitled matter was concluded . ) 1 3 4 5 6 7 8 9 10 11 12 1 3 1 4 1 5 16 17 18 19 2 0 21 22 2 3 24 25 / / / / / / / / / / / / / / / / / / / / Heritage Reporting Corporation (202) 628-4888