TAX COURT OPINION

Case: Best Pools of Brevard, Inc.
Docket Number: 16211-09SL
Judge: Goeke
Opinion Type: bench
Filed: 04/06/2012
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 BEST POOLS OF BREVARD, INC., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ORDER Docket No. 16211-09SL. Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk ofthe Court shall transmit herewith to Petitioner and to respondent a copy ofthe pages of the transcript ofthe trial in the above case before Judge Joseph Robert Goeke at Tampa, Florida, on March 20, 2012, 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, an appropriate decision will be entered. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. April 6, 2012 galVED A 0 20 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 JOSEPH ROBERT GOEKE BEST POOLS OF BREVARD, INC. v COMMISSIONER DOCKET NO.: 16211-09SL DATE: March 20, 2012 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. The Oral Findings of Fact and Opinion shall not be relied upon as precedent in any other case. This case is before the Court pursuant to the provisions of section 7463 of the Internal Revenue Code in effect at the time the petition was filed. Pursuant to section 7463(c) the decision to be entered is not reviewable by any other court. This case is before the Court based upon our jurisdiction to review collection matters and determinations made by Internal Revenue Service settlement officers after requests for review. This case specifically involves whether or not Respondent's collection action in the context of a federal tax lien is reasonable and should be sustained. The case is before the Court, actually for a second time. In an earlier trial, held on June 6th, 2011, Respondent agreed to allow the case to be remanded after the Court made the following comments: 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 This is not the typical situation here. There's a third party involved who defrauded the taxpayer, and if that was it and the Government got nothing out of the third party then I guess we'd be back to square one. But that's not what happened. There was apparently some pool of money that the Government did tap into. None of that went to benefit the taxpayer. The Court further said: So my thought is, subject to educating me is to remand this and have somebody look at the information, figure out what happened to that escrow pool and why this company didn't get any piece of the pie; why none of that money was used to satisfy their liabilities. That's what Respondent agreed to do, and in fact, that's what the settlement officer did in the remand. The settlement officer prepared a very lengthy supplemental notice of determination. And in that notice of determination the settlement officer provided that various IRS collection people were contacted and their activities were followed. It's clear that Mr. Smith did in fact defraud the taxpayer, as the settlement officer specifically says. It's also clear that Mr. Smith himself directed the revenue officer as to where the funds would be used that he provided, and that the IRS 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 5 relied upon him extensively, even being aware that he had defrauded the taxpayers. Finally, there's an entry relative to a conversation that the representatives of the Petitioner had with the Internal Revenue Service on April the 16th, 2010. And in that conversation the collection personnel of the Internal Revenue Service indicated that the taxpayer was not subject to the acceptance of an effective tax administration offer in compromise, which the settlement officer in review of the situation recognizes is often accepted by the Internal Revenue Service in embezzlement cases where the liability occurred despite the prudent business practice of the taxpayer. The Service declined to entertain such an offer in the present case despite the fact that the Service admittedly accepted the direction of the swindler in this case, Mr. Smith, in directing the payment of funds. And, clearly, some of the clients of Mr. Smith, those that he directed would have their tax liabilities paid, had their tax liabilities satisfied while others did not. The taxpayer argues at length that the Service didn't direct the payments to be made on behalf of Best Pools of Brevard, Inc., simply because of an oversight by the revenue officer. This is not 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 clear in the record and it is not certain exactly why the funds provided by Mr. Smith were not used to pay Best Pools of Brevard. What is clear is that the settlement officer determined that Mr. Smith did in fact direct the revenue officer as to how to use these funds, and that the Service treated Mr. Smith's payments, as in quotes, "voluntary, " despite the fact that he had defrauded this taxpayer and many others. The settlement officer, after an extensive analysis of provisions of the Internal Revenue Manual, provides that: Based on the history that I reviewed and based on group manager Joy Jackson's statements, the voluntary payments provided by Mr. Smith were applied to DDM clients in final notice status or in potential levy status first. The settlement officer goes on to say: I was provided with no information that Mr. Smith ever specifically designated payment toward the Form 941 debt of Best Pools. Thus, implying that Mr. Smith controlled whether the taxpayer's liability should be satisfied. Whèds~fhe Court understands this is a difficult situation for the Internal Revenue Service the Court finds that the record in this case is unclear as to why specifically this taxpayer's liability was not credited. fmd ore of a concern is 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 7 why this taxpayer was not granted an opportunity for an effective tax administration offer in compromise which would have provided that the liability would have been satisfied because of the embezzlement circumstances of this case. The failure to consider such an offer in compromise, even though it is mentioned in the settlement officer's writeup, and the failure of the settlement officer to reject the actions of the collection division, when they were specifically done in accordance with the instructions of the embezzler in the case, causes this Court to find that the settlement officer has abused discretion and to.find that this collection action will not be sustained. In accord with this opinion an appropriate decision will be entered. And this ends the Court's Oral Findings of Fact and Opinion in this case. (Whereupon, at 1:00 p.m., the bench opinion in the above-entitled matter was concluded.) // // // // // Heritage Reporting Corporation (202) 628-4888