TAX COURT OPINION

Case: Clark Alan Cato
Docket Number: 4698-17SL
Judge: Nega
Opinion Type: bench
Filed: 11/30/2017
Pages: 12

RS UNITED STATES TAX COURT WASHINGTON, DC 20217 CLARK ALAN CATO, Petitioner, v. ) ) ) ) Docket No. 4698-17SL. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ORDER Pursuant to Rule 152(b) of the Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit to petitioner and to respondent a copy of the pages of the transcript of the proceedings in the above case before Judge Joseph W. Nega at Nashville, Tennessee, on October 5, 2017, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, decision will be for respondent. (Signed) Joseph W. Nega Judge Dated: Washington, D.C. November 30, 2017 SERVED Dec 01 2017 (cid:16)042 3 1 2 3 4 5 6 7 8 9 Bench Opinion by Judge Joseph W. Nega October 5, 2017 Clark Alan Cato v. Commissioner of Internal Revenue Docket No. 4698-17SL THE COURT: The Court has decided to render oral findings of fact and opinion in this case. The following represents the Court's oral findings of fact and opinion. This bench opinion is made pursuant to section 7459(b) land Rule 152. This case was a small tax case subject to the 10 provisions of section 7463 and Rules 170 through 174. 11 Pursuant to section 7463(b), the decision to be entered is 12 13 14 15 16 17 18 not reviewable by any other court, and this opinion shall not be treated as precedent for any other case. Unless otherwise indicated, all section references are to the Internal Revenue Code (Code) in effect for the year at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. Petitioner Clark Alan Cato appeared pro se. 19 William B. McClendon appeared on behalf of Respondent. 20 This case arises from a petition filed in 21 response to Respondent's Notice of Determination 22 Concerning Collection Action(s) Under Section 6320 and/or 23 24 25 6330, dated January 24, 2017 (notice of determination) that Respondent issued to Petitioner. The issues for decision are whether: (1) cribers (973)406-2250|operatioñs@escribers.net|www.escribers.net 4 Petitioner may increase the value of his noncash charitable contribution deduction as claimed on his amended tax return for tax year 2014; and (2) Respondent abused his discretion in declining Petitioner's request to be considered for a collection alternative. FINDINGS OF FACT This case was tried on October 5, 2017, in Nashville, Tennessee. Petitioner resided in Tennessee at the time he filed the petition. Petitioner timely filed his Form 1040, U.S. Individual Income Tax Return, for his tax year 2014 (return). In that return, as relevant here, Petitioner claimed a $7,173 deduction for a series of noncash charitable donations of baseball cards to Goodwill (Petitioner's claimed noncash charitable contribution), and reported a short-term capital loss of $165,443. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Ultimately, Petitioner reported a tax due of $40,666 and 18 withholding credit of $2,921, which left him with a tax 19 balance due of $37,745 for his tax year 2014 (unpaid 20 balance). Petitioner did not remit payment, and the 21 22 unpaid balance remains outstanding. On August 22, 2015, Respondent issued to 23 Petitioner a Final Notice of Intent to Levy and Your Right 24 to a Hearing (CDP Notice) informing Petitioner that 25 Respondent intended to collect by levy the unpaid balance, (973)406-2250|operations@escribersnet|www.escribers.net . 5 1 2 3 4 5 6 7 8 9 and that Petitioner could request a hearing with Respondent's Office of Appeals (Appeals Office). On September 21, 2015, Petitioner sent to the Respondent his Form 12153, Request for Collection Due Process Hearing or Equivalent Hearing. In that form, Petitioner requested to be considered for an offer in compromise as a collection alternative and averred that his unpaid balance resulted from his reliance on the advice of an Internal Revenue Service (IRS) employee at 10 his local service center. 11 12 On November 2, 2015, Petitioner filed a Form 1040X, Amended U.S. Individual Income Tax Return, for his 13 tax year 2014 (amended return). In that amended return, 14 Petitioner increased the value of deductions for his 15 16 noncash charitable contribution6 from $7,173 to $28,483, A claiming he underreported the value of the donated 17 baseball cards on his return. Petitioner also attached a A 18 19 letter to the amended return from a baseball card storeowner, John (Mr. Dumph , that stated 20 Petitioner had claimed only 15 to 20 percent of the fair 21 market value of the baseball cards Petitioner donated to 22 Goodwill. 23 24 25 In July 2016, Petitioner provided Respondent a Form 433-A, Collection Information Statement. In that form, Petitioner showed equity in the following assets in ) BM (973)406-2250|operations@escribers.net|www.escribers.net the following amounts: (1) Residence, $565,000; (2) 2008 Mercedes Benz, $15,000; (3) 1955 Bentley, $40,000; and (4) Cash/Loan Value Life Insurance, $75,000. Petitioner reported in that form that he had a monthly disposable 6 income of $749. On August 8, 2016, the Appeals Office's settlement officer, Carl McAdams (SO McAdams), sent Petitioner a letter to schedule a face-to-face CDP hearing for August 24, 2016. On August 10, 2016, Petitioner contacted SO McAdams stating that his unpaid balance resulted from his reliance on the advice of an IRS employee with respect to the deductibility of his short- term capital losses. On August 24, 2016, SO McAdams and the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Petitioner participated in the scheduled CDP hearing. | 16 17 There, again, Petitioner argued that he was not responsible for his unpaid balance because he had received 18 and relied on erroneous information from an IRS employee. 19 During that hearing, Petitioner also presented additional 20 receipts to SO McAdams in an attempt to substantiate the 21 22 increase to his charitable contribution deduction as claimed in his amended return. At the conclusion of the 23 hearing, SO McAdams informed Petitioner that review of his 24 underlying liability issue would be assigned to another 25 officer for consideration for the claims made in the cribers (973)406-2250|operations@escribersmet|www.escribers.net 7 1 2 3 4 5 6 7 8 9 10 11 amended return. Thereafter, Petitioner orally offered to pay $5,000 to resolve the matter; however, SO McAdams informed Petitioner that he must complete and file a Form 656, Offer in Compromise (Form 656), for such a collection alternative to be considered. On September 23, 2016, Petitioner contacted SO McAdams to request an update on his case. SO McAdams informed Petitioner that the underlying liability portion of his case was under further review, and that he would receive a date and time for that conference in the future. On October 31, 2016, Appeals Officer Anthony 12 Reynolds (AO Reynolds) held a conference with Petitioner 13 with, respect to the amended return and original return 14 15 assessment. AO Reynolds did not allow the additional amounts for the baseball cards and advised Petitioner that 16 Petitioner's original 2014 return was proper. 17 On November 21, 2016, Petitioner contacted SO 18 McAdams stating that he should be allowed the increased 19 deduction that he claimed in his amended return. SO 20 McAdams advised Petitioner that AO Reynolds had denied 21 that deduction due to lack of substantiation, and instead 22 offered Petitioner an installment agreement. In response, 23 Petitioner rejected that installment agreement and 24 25 requested that his case be closed. On January 24, 2017, Settlement Officer McAdams cribers (973)406-2250|operations@escribers.net|www.escribers.net 1 2 3 4 5 6 7 8 9 issued to Petitioner the notice of determination. On ' February 27, 2017, Petitioner filed his petition with this Court. OPINION Section 6331(a) authorizes the Secretary to levy against property and property rights when a taxpayer liable for taxes fails to pay those taxes within ten days after a notice and demand for payment. Section 6331(d) requires the Secretary to send to the taxpayer written 10 notice of the Secretary's intent to levy, and section 11 6330(a) requires the Secretary to send the taxpayer 12 written notice of the taxpayer's right to request a 13 14 15 section 6330 CDP hearing before a levy is made. If a CDP hearing is requested, the hearing is conducted by Respondent's Appeals Office. The Appeals 16 officer or employee conducting the hearing must verify 17 that the requirements of any applicable law or 18 administrative procedure have been met. Sec. 6330(b)(1) 19 and (c) (1); Murphy v. Commissioner, 125 T.C. 301, 307 20 21 22 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006). At the hearing, the taxpayer may raise any relevant issue relating to the collection of the unpaid tax. Sec. 23 6330(c)(2) (A). The taxpayer may not, however, raise the 24 25 existence or amount of the underlying liability if the taxpayer otherwise had an opportunity to dispute such (973)406-2250|operations@escribersnet jwww.escribers.net 9 liability. Sec. 6330(c)(2) (B). Our review of the Appeals Office's determination is limited to issues that Petitioner properly raised at the CDP hearing, with the exception that we must review whether the Appeals Office verified that the requirements of any applicable law or administrative procedure have been met. See Hoyle v. Commissioner, 131 T.C. 197, 202- 203 (2008); sec. 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs. I. Petitioner's Underlying Liability We recognize that Petitioner has not had an 1 2 3 4 5 6 7 8 9 10 11 12 opportunity to dispute the underlying liability and have 13 14 15 allowed him to do so here. Montgomery v. Commissioner, 122 T.C. 1 (2004). The aspect of Petitioner's underlying liability that he wishes to dispute is the value of his 16 deduction for his noncash charitable contribution. 17 18 Deductions are a matter of legislative grace; the taxpayer bears the burden of proving entitlement to 19 deductions allowed by the Code and of substantiating his 20 claimed deductions by keeping and producing records 21 sufficient to enable the Commissioner to determine the 22 correct tax liability. Sec. 6001; INDOPCO, Inc. v. 23 Commissioner, 503 U.S. 79, 84 (1992). 24 25 A. Noncash Charitable Contribution Deduction Generally, section 170(a) allows a deduction for (973)406-2250|operations@escribersnet|www.escribers.net 10 1 2 3 most charitable contributions made during a taxable year. A taxpayer claiming a deduction under section 170(a) must satisfy certain statutory or regulatory requirements. 4 With respect to noncash charitable contributions that 5 6 7 8 9 10 11 12 exceed, in the aggregate, $5,000, taxpayers must attach to his or her return a completed appraisal summary that describes the property in detail and establishes the fair market value of the property at the time of the contribution. See sec. 1.170A-13(b)(2)(ii) and (c) (2), Income Tax Regs. Petitioner contends that he is entitled to a deduction under section 170(a) with respect to his claimed 13 noncash charitable contribution. In support of his 14 position, Petitioner relies on his testimony and certain 15 documents, including a letter from Mr. and 16 Goodwill donation receipts. 17 With respect to Petitioner's testimony, we found 18 his testimony to be in certain material respects 19 uncorroborated and inadequate to meet his burden of proof. 20 We shall not rely on Petitioner's testimony to establish 21 his position that' he is entitled to a deduction under 22 23 section 170(a) with respect to his claimed. noncash charitable contribution. See, e.g., Tokarski v. 24 Commissioner, 87 T.C. 74, 77 (1986). With respect to 25 Petitioner's documentary evidence, we find that those i cribers (973)406-2250|operations@escribersmet|www.escribers.net 1 documents are far from constituting the appraisal 2 materials as contemplated by sec. 1.170A-13(b)(2)(ii) and 11 3 4 5 6 7 8 9 (c)(2), Income Tax Regs. On the record before us, we find that Petitioner has failed to carry his burden of establishing that he is entitled to an increase in the value of his charitable contribution deduction for tax year 2014. B. Petitioner's Reliance Argument Neither the IRS' publications nor its employees 10 are authoritative sources of Federal tax law. Besaw v. I t. Memo. 11 Commissioner, 2015-233, 2015 WL 9785991, at *4; Miller v. A 12 Commissioner, 114 T.C. 184, at 195 (2000) ("The 13 authoritative sources of Federal tax law are the statutes, 14 15 16 17 18 19 20 21 22 23 regulations, and judicial decisions ***"). See also Hodel v. Commissioner, T.C. Memo. 1996-348, slip op. at 21. Petitioner contends that he should be absolved from all liability for his tax year 2014 because he received and relied on erroneous information from an IRS employee. There is no precedent to allow Petitioner's reliance argument to absolve him of his duly computed tax liability. We note Petitioner's unpaid balance arises from his failure to remit payment, to pay the balance as he reported due on his original return. Accordingly, we 24 find this contention to be without merit. 25 II. Abuse of Discretion cribers (d73)406-2250|operations@escribers.net|www.escribers.net The remaining issues for decision are reviewed 12 under the abuse of discretion standard. An abuse of discretion is shown only if the action of the Appeals 1 2 3 4 Office was arbitrary, capricious, or without sound basis 5 6 7 8 9 in fact or law. See Giamelli v. Commissioner, 129 T.C. 107, 111 (2007). Petitioner has not advanced any argument or set forth any specific facts that would allow us to conclude that the Appeals Office erred in its determination. He 10 does not argue that the SO did not conduct a fair hearing 11 12 13 14 or did not follow proper administrative procedures. An offer-in-compromise is based on a taxpayer's ability to pay the outstanding liabilities and taxpayers are expected to provide all relevant information requested by the 15 Appeals Office to show his or her ability to pay. See 16 sec. 7122(d); sec. 301.6330-1(e)(1), Proced. & Admin. 17 Regs. Moreover, an offer-in-compromise must be submitted 18 19 on a special form prescribed by the Secretary. Bergdale v. Commissioner, T.C. Memo. 2014-152, at *11. 20 Petitioner's failure to provide a completed Form 656 21 impaired the SO's ability to effectively evaluate 22 Petitioner's claims. We recognize that Petitioner was 23 offered an installment agreement as a collection 24 alternative based on his Form 433-A, but Petitioner 25 declined to accept that installment agreement. The SO's ) cribers (973)406-2250|operations@escribersmet|www.escribers.net determination to uphold the notice of intent to levy was not an abuse of discretion under these circumstances. Id. 13 at *11-*12. On the record before us, we conclude that the Appeals Office did not abuse its discretion in denying Petitioner's verbal offer-in-compromise. III. Conclusion Accordingly, a decision will be entered for Respondent. This concludes the Court's oral findings of 1 2 3 4 5 6 7 8 9 10 fact and opinion in this case. In reaching our holdings 11 herein, we have considered all arguments made by the 12 parties, and to the extent not mentioned above, find those 13 arguments to be moot, irrelevant, or without merit. 14 15 16 17 18 19 20 21 22 23 24 25 (Whereupon, the above-entitled matter was concluded.) cribers (973)406-2250loperations@escribers;net|www.escribers.net