TAX COURT OPINION

Case: Lynda J. DeLellis
Docket Number: 15612-10SL
Judge: Whalen
Opinion Type: bench
Filed: 01/09/2012
Pages: 13

UNITED STATES TAX COURT WASHINGTON, DC 20217 LYNDA J. DELELLIS, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) Docket No. 15612-10S L ) ) ) ) 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 transmit herewith to petitioner and to respondent a copy of the pages of transcript of Laurence J. Whalen at Winston-Salem, North Carolina, containing his oral 2011. the proceedings in the above case before Judge the findings of fact and opinion rendered on November 28, In accordance with the oral findings of fact and opinion, an appropriate order and decision will be entered. (Signed) Laurence J. Whalen Judge DATED: Washington, D.C. January 9, 2012 SERVED M 10 20E - 1 2 3 4 6 7 8 9 10 11 12 13 14 15 16 l'7 18 19 20 21 22 23 24 25 Bench Opinion by Senior Judge Laurence J. Whalen BENCH OPINION Lynda J. DeLillis November 28, 2011 (CASE NAME) (TRIAL DATE) 3 I. 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. II. This proceeding is a lien and levy action that· was brought pursuant to sections 6330(d) and 7463(f) (2) of the Internal Revenue Code of 1986, as amended, and Rules 170 through 175, and Rules 330 through 334 of the Tax Court Rules of Practice and Procedure. In this bench opinion all section numbers refer to the Internal Revenue Code, as amended, and all Rule numbers refer to the Tax Court Rules of Practice and Procedure. III. - This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. 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 IV. Ms . Linda J. DeLellis appeared on her own behalf . Ms. Elizabeth M. Bux, attorney at law, appeared on behalf of respondent. V. This case involves two Notices of Determination Concerning Collection Action(s) Under Section 6320 And/or 6330. Both notices were issued to petitioner on June 9, 2010. One Notice of Determination, covering petitioner's tax liability for 2004, approves a Notice of Federal Tax: Lien that was issued to petitioner pursuant to section 6320. The other Notice of Determination, covering petitioner' s tax; liability for 2008, approves both a Notice of Federal Tax Lien that was issued pursuan;t to section 6320, and a Final Notice of Intent to Levy and Notice of Your Right to a Hearing that was issued pursuant to section 6330. VI. Background: In response to the Notice of Federal Tax Lien that the Commissioner sent to petitioner for 2004 and 2008, and the Final Notice of Intent to Levy and Notice of Your Right to a Hearing that the Commissioner sent to petitioner for 200 , petitioner filed a Request for a Collection Due Process or Equivalent Hearing, on or about October 29, 2009, in 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 26 which she asked for withdrawal of the collection action for the following reason: [sic] I supplied all there was no reason to put lien which now hurts credit and employment opportunities. information asked for Subsequently, on ot about November 17, 2009, petitioner submitted a Form 433-A, Collection Information Statement for Wage Earners and Self- Employed Individuals, in which she stated that her monthly wages amounted to $7,482 and her total monthly living expenses were $6 831.57. It appears that the expenses listed on Form 433-A were incorrectly totaled. The correct total of the expenses claimed on petitioner's Form 433-A is $7,107.11 It appears that, in November or December of 2009, petitioner submitted an Offer in Compromise to respondent on Form 656. In a letter to petitioner dated December 5, 2009, a representative of the Commissioner asked petitioner to correct the Offer in Compromise by providing certain missing information and by substantiating certain items. On January 4, 2010, petitioner submitted an Amended/Revised Offer in Compromise to the Internal Revenue Service on Form 656 in which she offered to pay $2,500 to satisfy her income tax liabilities for 2004, 2006, and 2008, totaling approximately $35, 000 . Section VI of the Heritage Re orting Corporation (202) 628-4888 1 2 3 Form 656 calls for the taxpayer to set forth "special circumstances affectinglyour ability to fully pay the amount due". In that section, petitioner mentioned 4 , health issues, consisting of the migraine headaches 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that she has suffered with since childhood, and other medical problems, including a major seizure, depression, asthma and allergies. In that section, petitioner also mentioned the fact that she has worked in "IT jobs" which many companies are now outsourcing to India and Mexico. In section VII of the form, petitioner stated that she had an extension.of her employment contract for; 3 months, and she had been told that her position would be extended for another 3 months before she was laid off. By letter dated February 24, 2010, in connection with the consideration of petitioner's amended/revised offer, a representative of the Commissioner asked petitioner to supply information about the distributions that she had received from her retirement savings in 2006, 2007, and 2008 in the amounts of "$220,255, $52,247, and $20,000". The representative's letter also asked petitioner to provide statements from her retirement/inve:stment accounts, to substantiate her medical expenses, to document her claim of a serious medical condition, and 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 to provide substantiation of a home mortgage of $226,988. By letter dated Ma ch 30, 2010, a representative of the Commissioner wrote to advise petitioner that he had made "a preliminary decision" to reject! petitioner's amended/revised offer 1n comprom1se because he felt that petitioner's "future income" would be sufficient to allow petitioner to pay her liability in full in 14 monthly payments. The representative's letter advised petitioner that a final decision on her offer in compromise would be made "by Appeals in conjunction with the CDP case." We note that durins the years 2004 through and including 2010, petitioner earned substantial wages. During that period, her wages were $102,040, $106,940, $68,311, $82,328, $83,162, $59,137, and $109,377, respectively. Petitioner also received substantial distributions from her retirement account of $220,255 in 2006, $129,776 in 2007, and $20,000 in 2008. Enclosed in the representative's letter was a worksheet showing his computation of petitioner's monthly disposable income, $2,741.94, as of March of 2010. Set out below is a schedule comparing the representative's computation to petitioner's computation of her disposable income, after correcting Heritage Reporting Corporation (202) 628-4888 1 the mathmatical error, mentioned above. Total National Stand. Income Expenses (food, clothing, and misc.) Housing and utilities Transportation operating costs Taxes Health Care expenses Life insurance Health insurance Total Expenses Monthly disposable income Petitioner IRS Representative 7,482.00 7,800.00 1j558.75 . 517.00 2 159.15 358.15 2 424.08 225.75 105.69 275.54 7,107.11 374.89 1,215.00 439.00 2,442.87 60.00 106.51 277.68 5,058.06 2,741.94 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The representative also enclosed a worksheet showing that 14 monthly payments of $2, 741. 94 would pay petitioner's liability in full. In due course, a Settlement Officer was assigned petitioner's Request for a Collection Due Process .Hearing, and he wrote two letters to petitioner on April 16, 2010, one letter addressing the lien proposed for 2004, and one letter addressing the lien and levy proposed for 2008. In both letters, the Settlement Officer scheduled a telephone conference with petitioner on May 18, 2010. He also asked petitioner to upd te the financial information required on the Collection Information Statement, including bank and pay statements, and mortgage or rent statements, by submitting such information for the last three months. Clearly, there could have been 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 changes since November of 2009 when petitioner had submitted the Collection Information Statement on Form 433-A. The Settlement Officer also asked petitioner to provide "any and all i information you desire to be considered on your offe(cid:16)040." , Petitioner did not·respond to the Settlement Officer by the time of the scheduled conference. Accordingly, the Settlement Officer wrote two more letters to petitioner on May 18, 2010, in which he asked petitioner to contact him, and he gave petitioner additional time to submit the requested information. Petitioner did not respond to the second set of letters from the Settlement Officer and, thus, petitioner did not raise any issues for the Settlement Officer to consider. Specifically, petitioner did not present the Settlement Officer with any reason to reconsider the preliminary denial of her Offer in Compromise or to consider any other collection alternative. VII. The Notices of Determination at issue in this case are to be reviewed using the abuse of discretion standard of review. As to tax year 2004, petitioner had received a notice of deficiency, and she had 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 petitioned this Court fÅr redetermination oÈ the deficiency determined for that year. Thus, she was not eligible to challenge the existence or amount of the underlying tax liability with respect to 2004 in the CDP hearing, and she is not entitled to again seek such review in this Court. See sec. 6330 (c) (2) (B) . As to tax year 200j, petitioner did not receive a notice of deficiency, nor did she otherwise have an opportunity to dispute her underlying tax liability for that year. Thus, it appears that, if she had chosen to do so, petitioner could have disputed the merits of her underlying tax liability for 2008 at the CDP hearing. See Poindexter v. Commissioner, 122 T.C. 280, 284 (2004); Montgoinery v. Comm1ssloneri, 122 T.C. 1, 9 (2004). However, petitioner did not raise her underlying tax liability for that year as an issue either in her request for the CDP hearing or in her petition for review in this Court . Therefore, petitioner's underlying tax liability is not at issue in this case. See Poindexter v. Commissioner, supra; Lunsford v. Commissioner, 117 T.C. at 185-187; Davis v. Commissioner, 115 T.C. 35, 39 (2000) . Accordingly, as to both of the years in issue in this case, the determinations are to be reviewed for abuse of discretion. 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 26 27 28 29 30 31 32 33 34 35 36 37 38 11 We described the abuse of discretion standard of review in Robinette v. Commissioner, 123 T.C. 85, 93- 94 (2004), rev'd on other grounds, 439 F3d 455 (8t.h Cir. 2006), as follows: Under an abuse of discretion standard, interfere unless the "we do not Commissioner's determination is arbitrary, capricious, clearly unlawful, or without sound basis in fact or law." Commissioner, 122 'Î'. C. 32, 39 (2004) ; see also Woodral v. Commissioner, 112 T.C. 19, 23 (1999). Review for abuse of discretion includes "any relevant unpaid tax or the proposed levy", "challenges to the appropriateness of collec- tion actions" and "offers of collection alternatives" such as offers in compromise . Questions about collection action include whether it is proper for the Commissioner to proceed. with the collection action as determined in. the notice of determination, and whether the type and/or methodiof collection chosen by the Commissioner is appropriate. Swanson v. Commissioner, 121 T.C. 111, 119 (2003) collection reviewed for abuse of discretion) . (challenge to appropriateness of the appropriateness of the Sec . 6330 (c) (2) (A) . Ewing v. issue relating to the including See, e.g., In order for petitioner to prevail under the abuse of discretion standard, it is not enough for us to conclude that we would not have authorized collection; we must conclude that, in authorizing collection, the Appeals officer has exercised his discretion "'arbitrarily, capriciously, or without sound basis in fact'". Estate of Jung v. Commissioner, 101 T.C. 412, 449 (1993) (quoting 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 12 Mailman v. Commissioner, 91 T.C. 1079, 1084 (1988)). VII. Petitioner's testimony was tearful and'highly emotional. Among the pòints that she made during her testimony was the allegation that the Commissioner's representatives who considered her amended/revised offer in compromise were biased against her or did not have an open mind. She provided nothing to support that allegation, but she speculated that they did not like her because she had made so much money. She complained that they did not treat her with respect. She charged that the collection due process procedure was chaotic and there were too many representatives of the Commissioner who were involved in the process, rather than a single person such as a case worker. She said that the Commissioner's representatives were unable or unwilling to give her information about the abount of her tax liability for each of the years in issue, and were unwilling to help her submit a payment schedule or compromise. Petitioner complained that the tax liability for 2004 included interest. She also complained that the tax liability for 2004 included a penalty under: section 6651(a) (2), that had be n assessed before the notice of deficiency upon the filing of her return without 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 13 full payment. Petitioner made passing reference to the computation of her disposable income that was made in connection with the Com(cid:0)540issioner'sconsideration of her amended/revised offër in compromise. She said that the amount computed, $2,741.94, was incorrect and unrealistic in view of her circumstances, but she did not specifically address any aspect of the computation, nor did she explain why the computation was unrealistic for a yéar in which she.repörted wages of $109,377. Furthermore, petitioner did not explain why she did not participate in the Collection Due Process hearing or provide the Settlement Officer the information that he requested. During her testimony, petitioner did not address, in any meaningful way, the denial of her amended/rèvised offer in compromise, nor did she present any reason to conclude that the Settlement Officer was wrong to deny that offer. She discussed no other collection alternatives. She made general remarks that the use of liens and levy in this case was "crazy", but she did not present any specific issue to suggest that the use of the liens and levy in this case was inappropriate, in view of the disposition of her earnings and retirement assets during the years 2004 through 2010. 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 We have reviewed the record in this case in light of petitioner's testimony, and we find no reason to conclude that the action of the Settlement Officer was arbitrary, capricious, or without sound basis in fact 14 or law. VIII . For the foregoing reasons, we will sustain the Notice of Determination Concerning Collection Action(s) under Section 6320 And/or 6330 dated·June 9, 2010, that approved lien to collect petitioner's income tax liability for taxable year 2004, and we will sustain the Notice of Determination Concerning Collection Action(s) under Section 6320 And/or 6330 dated June 9, 2010, than approved lien and levy to collect petitioner's income tax liability for taxable year 2008. IX. THIS CONCLUDES THE COURT ' S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 4:25 p.m., the bench opinion in the above-entitled matter was concluded.) // // // // Heritage Reporting Corporation (202) 628-4888