TAX COURT OPINION

Case: George Russell Reiff, Jr.
Docket Number: 27601-08L
Judge: Colvin
Opinion Type: bench
Filed: 11/09/2009
Pages: 13

UNITED STATES TAX COUR T WASHINGTON , DC 2021 7 GEORGE RUSSELL REIFF, JR . , Petitioner, v . ) Docket No . j27601-08L . COMMISSIONER OF INTERNAL REVENUE , Respondent . Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s 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 trial in the above case before Judge David Gustafson at Washington, D .C ., on October 15,2009,! containing his oral findings of fact and opinion rendered at the conclusion of the trial . In accordance with the oral findings of fact and opinion, decision will be entered for respondent . (Signed ) David Gustafson Judge Dated : Washington, D .C . November 9, 2009 $ER\ED NOV 16 2009 15 3 1 Bench Opinion by Judge David Gustafson October 15, 2009 2 George Russell Reiff, Jr . Docket No . 27601-08 L 3 The Court has decided to render oral findings o f 4 fact nd opinion in this case, and the following represent s 5 the Court's oral findings of fact and opinion . The oral 6 findings of fact and opinion shall not be relied on 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) of the Internal Revenue 10 Code of 1986, as amended, and Rule 152 of the Tax Cour t 11 Rules of Practice and Procedure . 12 By a notice of determination, dated October 10, 13 2008 (Ex . 15-J), the IRS gave notice to Petitioner George 14 Russell Reiff, Jr ., that the IRS's Office of Appeals ha d 15 sustained the determination to file a notice of federal tax 16 lien to collect his liability for income tax plus interest . 17 We will affirm that determination . 18 Trial of this case was conducted on,October 14, 19 2009, in Washington, D .C . The parties' Stipulation of 20 Facts, with Exhibits 1-J through 25-J, was admitted into 21 evidence, and Mr . Reiff gave his testimony and offered 22 Exhibit 26-P through 30-P, which were also admitted into 23 evidence . 2 4 25 FINDINGS OF FAC T Mr . Reiff resided in Virginia when he filed the Heritage Reporting Corporation (202) 628-4888 4 1 petition in the suit . (Stip . 1' . ) 2 In the 1990s, Mr . Reiff embezzled about $300,00 0 3 from the State Department . (Stip . 26 .) The record in this 4 case does not show (and we do not need to determine) wha t 5 amounts of the total were embezzled in which years . Mr . 6 Reiff pleaded guilty to related crimes and was sentenced t o 7 27 months in prison . He was ordered to pay $216,200 in 8 restitution ( Stip . 25), and he has made such payments o n 9 dates, in amounts, and in a total that the record does not 10 show and that we need not determine . 11 Mr . Reiff had filed joint tax returns with hi s 12 wife for the years 1993 through 1996 . The IRS examined 13 those returns and proposed adjustments related to the 14 embezzlement, allocating embezzlement income as follows : 1 5 1 6 17 $61,285 in 1993, $22,272 in 1994, and $108,730 in 1995 . 18 (These amounts do not total either the $300,000 that h e 19 embez~led nor the $216,200 for which he was ordered to make 20 restitution, but for purposes of this case, we do not need 21 to reconcile these amounts .) The IRS's calculations allowe d 22 a ded ction for restitution payments in 1996, creating a ne t 23 operating loss in that year, and allowed carryback of the 24 NOL to 1993 . As a result, the IRS's calculations reflected 25 zero balances due for 1992 and 1993, an overpayment o f Heritage Reporting Corporation (202) 628-4888 5 1 $1,916 for 1996, and a tax balance due of $29,269 for 1995, 2 the year at issue in this suit .' (Ex . 23-J, p . 1 ; Ex . 26-P, 3 p . 7 . ) 4 For the year 1995, Mr . Reiff's wife requeste d 5 innocent spouse relief under Section 6015, so that year was 6 handled separately . For the other years, the IRS prepared a 7 Form 4549-CG that reflected the adjustments described above 8 and presented it to Mr . and Mrs . Reiff for their concurrence 9 and signature . Immediately above the signature blocks on 10 Form 4549-CG is the following text : 11 Consent to Assessment and Collection -- I do not 12 wish to exercise my appeal rights within th e 13 Internal Revenue Service or to contest in United 14 States Tax Court the findings in this report . 15 Therefore, I give my consent to the immediat e 16 assessment and collection of any increase in tax 17 and penalties, and accept any decrease in tax and 18 penalties shown above, plus additional interest as 19 provided by law . It is understood that thi s 20 report is subject to acceptance by the District 21 Director . 22 Mr . and Mrs . Reiff signed the form for these three years o n 23 March 12, 1999 . (Ex . 26-P, p . 8 .) The Reiffs received a 24 letter ("Letter 987," Ex . 27-P), dated July 1, 1999, from the 25 District Director, stating, "We have accepted the report . " Heritage Reporting Corporation (202) 62 ;8-4888 6 1 The Form 4549-CG for 1995, which showed a balance 2 due for that year, had the identical text above th e 3 signature blocks . The Reiffs signed the 1995 form o n 4 November 9, 1999, about six months after the similar form 5 for the other three years . However, Mr . Reiff wrote the 6 phrase "SEE SUPPLEMENT ATTACHED" in the signature bloc k 7 above his signature . To the form, he attached a one-pag e 8 document that he had composed entitled "Supplement to Form 9 4549-CG for Tax year 1995 ." (Ex . 3-J, p . 3 .) It consists 10 of seven numbered paragraphs, an additional unnumbere d 11 paragraph, and Mr . Reiff's signature . The gist of the 12 document is that Mr . Reiff cannot afford to pay the 13 liabi ity reflected on the Form 4549-CG, and it ends with 14 the s~atement that he "therefore request[s] relief fro m 15 paying taxes, penalties, and/or interest as a result of this 16 audit ." Paragraph 5 of the document reads as follows : 17 While I do not quarrel with the numbers contained 18 in the 1995 audit, I have noted in previou s 19 correspondence certain possible USG/IRS procedural 20 irregularities regarding this matter . 21 The trial record does not include that "previou s 22 correspondence ." When Mr . Reiff explained those "procedural 23 irregularities" in his trial testimony, they included a n 24 alleged failure of the District Director to issue for 1995 a 25 Letter 987 accepting the adjustments on Form 4549-CG, as he Heritage Reporting Corporation (202) 628-4888 r9 7 1 had issued for the other three years (Ex . 27-P) . However, 2 such a letter would be issued only after the Form 4549-CG 3 has been signed, so such an irregularity could not have bee n 4 referred to in Mr . Reiff's supplement . Rather ; all suc h 5 irregularities would have occurred before the signing of the 6 Form 4549-CG ; but in spite of them, Mr . Reiff signed th e 7 form (and his supplement) . 8 Several months later, in August 2000, the IRS 9 assessed against Mr . Reiff, for 1995, the additional tax of 10 $29,629 that was reflected on the Form 4549-CG, plus over 11 $10,000 of interest (see Ex . 25-J, p . 2), and made notic e 12 and demand for payment thereof (see id . ; Ex . 3-J, p . 4) . As 13 the liability remained unpaid, the IRS, in June 2005 , 14 assessed over $13,000 in additional interest plus a $7,300 15 failure-to-pay addition to tax under Section 6651(a)(3) . 16 (Ex . 25-J, p . 2 . ) 17 On March 27, 2008, the IRS recorded a notice of 18 federal tax lien with respect to Mr . Reiff's 1995 liability 19 in the Circuit Court for Fairfax County, Virginia . (Stip . 20 2 ; Ex . 1-J .) Two days earlier,, on March 25, 2008, the IRS 21 had mailed to Mr . Reiff a "Notice of Federal Tax Lien Filing 22 and Your Right to a Hearing Under IRC 6320," enclosing a 23 Form 12153 to be used to request the hearing . (Ex . 2-J ; 24 Stip . 3 .) On April 14, 2008, Mr . Reiff timely : requested a 25 hearing by submitting the Form 12153 . (Ex . 3-J ; Stip . 4 .) Heritage Reporting Corporatio n (202) 628-4888 8 1 In the collection due process (CDP) hearing that 2 followed, Mr . Reiff made variou's contentions abou t 3 improprieties in the IRS audit process (Ex . 12-J, pp . 2-3), 4 apparently to argue that he did not owe the amount of tax 5 reflected on the Form 4549-CG . In response tothe IRS' s 6 request for Mr . Reiff's financial information to enable the 7 IRS t~ consider any collection alternatives he might propos e 8 (such as an offer-in-compromise, an installment agreement , 9 or a declaration that his account is not currently 10 collectible (Ex . 11-J, p . 2)), Mr . Reiff explicitl y 11 "decline [d] submission" of that ; information (Ex . 12-J, 12 p . 1), and in the course of the CDP hearing, he did not 13 propose any particular collection alternative . ' 14 On October 10, 2008, the IRS's Office of Appeals 15 issued its "Notice of Determination Concerning ; Collectio n 16 Action(s) under Section 6320 and/or 6330 ." (Ex . 15-J .) The 17 notice advised him that the filing of a noticeof federa l 18 tax lien was sustained by the Office of Appeals . Mr . Reiff 19 timely mailed his petition on November 6, and it was filed 20 by the Clerk on November 13, 2008 . 2 1 22 OPINIO N I . "Collection Due Process" Review . If a 23 taxpayer fails to pay any federal income tax liability after 24 notice and demand, Section 6321 . imposes a lien in favor of 25 the United States on all the property of the delinquen t Heritage Reporting Corporation (202) 628-4888 9 1 taxpayer, and Section 6323(f) authorizes the IRS to fil e 2 notice of that lien . However, Congress has added to Chapter 3 64 of the,Code certain provisions as "Due Process fo r 4 Collections," and those provisions must be complied with 5 after the IRS files a tax lien and before the IRS ca n 6 proceed with a levy : Within five business days after filing 7 a notice of tax lien, the IRS must provide written notice of 8 that filing to the taxpayer . Sec . 6320(a) . After receiving 9 such a notice, the taxpayer may request an administrativ e 10 hearing before the Office of Appeals . Sec . 6320(b)(1) . At 11 that CDP hearing, the taxpayer may generally raise relevant 12 issues relating to the unpaid tax, including offers o f 13 collection alternatives . Such collection alternatives may 14 include, among other things, an installment agreement or 15 offer-in-compromise . Sec . 6330(c)(2)(A) . The'appeal s 16 officer must make a determination whether or not the lien 17 should be released . The appeals officer is required by 18 Section 6330(c)(3) to take into consideration :, (1 ) 19 "verification from the Secretary that the requirements o f 20 any applicable law and administrative procedure have been 21 met" ; (2) relevant issues raised by the taxpayer ; and (3 ) 22 "whether any proposed collection action balances the nee d 23 for the efficient collection oftaxes with the legitimate 24 concern of the person that any collection action be no more 25 intrusive than necessary ." If the Office of Appeals the n Heritage Reporting Corporation (202) 628-4888 1 0 1 2 3 4 5 6 7 issue a notice of determination to uphold the lien, th e taxpayer may appeal the determination to this Court within 30 days (see Secs . 6320(c), 6330(d)(1), as Mr . Reiff has done . II . Application of CDP Principles to this Case A . Verification'under Section 6330(c)(1) . Mr . Raiff does not dispute that~the IRS verified that th e 8 requirements of applicable law and administrative procedure 9 have been met . His use of the phrase "requirements o f 10 applicable law and administrative procedure" during the CD P 11 process (see Ex . 12-J, p . 1) referred to audit'procedure, 12 not to the assessment of the tax and other prerequisites to 13 collection . The record shows no defect pertinent to Section 14 6330(c)(1) verification, and during cross-examination a t 15 trial, Mr . Reiff acknowledged that he did not contend that 1 6 1 7 1 8 1 9 2 0 2 1 2 2 2 3 2 4 25 there was any defect in the IRS's collection procedure i n this case . B . Underlying liability issues under Section 6330( 6 )(2)(B) . Mr . Reiff attempted, both in the CDP hearing and in this case, to dispute his underlying liability fo r 1995, either on the grounds that the embezzled income i n 1995 was in an amount different from what the IRS had calculated or on the grounds that defects in the IRS's audit undermined it conclusions . However, under Section 6330(c)(2)(B), a taxpayer may dispute liability in a CD P Heritage Reporting Corporation (202) 628-4888 1 1 1 proceeding only "if the person did not * * * have a n 2 opportunity to dispute such tax liability ." Mr . Reiff had 3 the opportunity to make such a dispute before the office o f 4 Appeals after his audit and, if'Appeals's decision at tha t 5 point was adverse, to press that dispute in a Tax Cour t 6 deficiency suit . He passed up that opportunity when h e 7 signed Form 4549-CG, stating, "I do not wish to exercise my 8 appeal rights within the Internal Revenue Service or t o 9 contest in the United States Tax Court the findings in this 10 report . Therefore, I give my consent to the immediat e 11 assessment and collection of any increase in tax * * * ." 12 See Aguirre v . Commissioner , 117 T .C . 324 (2001) . 13 The CDP provisions added to the Internal Revenue 14 Code in 1998 were not intended to supplant the Tax Court's 15 longstanding deficiency procedures . The deficiency suit 16 exists to give the taxpayer an opportunity to litigate his 17 incom tax liability before paying it (see Sections 6212- 18 6213) . Otherwise, he must fully pay the tax first and only 19 then litigate the liability in a refund suit . See Flora v . 20 United States , 362 U .S . 145 (1960) . i Section 6330(c) (2) (B ) 21 created the alternative possibility of prepayment litigation 22 only for the taxpayer who did not have the prio r 23 "opportunity" in the deficiency context . It does not give, 24 to the taxpayer facing an adverse audit determination, an 25 option to choose either the notice of deficiency route or Heritage Reporting Corporatio n (202) 628-4888 12 1 the later CDP route to the Tax Court . Rather, he gets only 2 one such opportunity . 3 Mr . Reiff argues that the "supplement" (Ex . 3-J, 4 p . 3) that he attached to his Form 4549-CG (Ex . 23-J, p . 2) 5 somehow vitiated the consent to!assessment that he indicated 6 by signing the signature block under the consent language . 7 We need not decide the effect of a supplement that retracts 8 or contradicts the statement of consent that appears on the 9 face of Form 4549-CG, since Mr .jReiff's supplement did no t 10 do so . On that supplement, he does complain about the IRS's 11 process and conclusion, but nowhere does he say anything to 12 put in doubt that he did consent to assessment . He had been 13 informed how to challenge a decision of the IRS audi t 14 personnel (see Ex . 26-P, p . 1),,but he chose not to do so . 15 The Code now requires us to respect that choice and decline 16 to en~ertain here his disputes about liability . 17 C . Collection issues . Where the underlying 18 liability is not at issue, we review the appeals officer' s 19 determinations regarding the collection action for an abuse 20 of discretion . Goza v . Commissioner , 114 T .C . .176 (2000) . 21 Accordingly, we review the IRS's determination for abuse of 22 discretion ; that is, whether the determination wa s 23 arbitrary, capricious, or without sound basis in fact or 24 law . See Murphy v . Commissioner , 125 T .C . 301, 320 (2005), 25 affd . 469 F .3d 27 (1st Cir . 2006) ; Sego v . Commissioner , 114 Heritage Reporting Corporation (202) 628-4888 13 1 T .C . 604, 610 (2000) . 2 From his testimony at trial, it is difficult 3 to determine precisely what nonliability-related complaints, 4 if any, Mr . Reiff still presses, about the CDP hearin g 5 process . During the CDP hearing, Mr . Reiff proposed no 6 collection alternative for the settlement officer t o 7 consider . Since he did not do so, it was not an abuse o f 8 discretion for the appeals officer to uphold a federal tax 9 lien rather than consider collection alternatives that Mr . 10 Reiff had not proposed . Kendricks v . Commissioner , 124 T .C . 11 69, 79 (2005) ; Cavazos v . Commissioner , T .C . Memo . 2008-257 . 12 Even if Mr . Reiff, had proposed a collectio n 13 alternative, he refused to provide the financial informatio n 14 about himself that the appeals officer would have needed in 15 order to evaluate such a proposal . It is ordinarily not an 16 abuse of discretion for an appeals officer to rejec t 17 collection alternatives and sustain the proposed collection 18 action on the basis of the taxpayer ' s failure to submi t 19 requested financial information ,. Prater v . Commissioner , 20 T .C . Memo . 2007-241 ; Chandler v . Commissioner , T .C . Memo . 21 2005-99 ; Roman v . Commissioner , T .C . Memo . 2004-20 . I n 22 doing so, the appeals officer simply follows the 23 requirements of Section 301 .6330-1(e)(1), Proced . & Admin . 24 Regs . (26 C .F .R .), and Rev . Proc . 2003-71, 2003-2 C .B . 517 . 25 D . Intrusiveness . Under Section 6330(c)(3), Heritage Reporting Corporatio n (202) 628-4888 1 4 1 the Office of Appeals is supposed to ensure that the 2 "proposed collection action balances the need for th e 3 efficient collection of taxes with the legitimate concern of 4 the person that any collection action be no more intrusiv e 5 than necessary ." The proposed collection action at issue 6 here is simply the filing of a notice of lien . : A levy -- 7 the forced collection of tax - is probably more likely to 8 be intrusive, but a lien simply gives the world notice o f 9 the government's claim and assures its place at the head of 10 the line against other creditors' claims against th e 11 taxpayer's assets . Mr . Reiff does not contend that th e 12 determination at issue failed to balance the need to collect 13 with his concerns about intrusiveness . 14 We find no abuse of discretion by the office o f 15 Appeals in its review of the notice of lien filed agains t 16 Mr : Reiff . 17 An appropriate order will be issued, sustaining 18 the IRS's determination to uphold the filing of the notic e 19 of tax lien . 20 This concludes the Court's oral findings of fact 21 and opinion in this case . 22 (Whereupon, at 9 :30 a .m ., the bench opinion in the 23 above entitled matter was concluded . ) 24 25 Heritage Reporting Corporation (202) 628-4888