TAX COURT OPINION

Case: Cecilia Freeman
Docket Number: 17114-15L
Judge: Goeke
Opinion Type: bench
Filed: 10/15/2018
Pages: 9

SD UNITED STATES TAX COURT WASHINGTON, DC 20217 CECILIA FREEMAN, ET AL., Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 17114-15 L, ) ) ) ) 5641-18 L. ORDER 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 trial in the above cases before Judge Joseph Robert Goeke at Los Angeles, California containing his oral findings of fact and opinion rendered at the trial session at which these cases were heard. In accordance with the oral findings of fact and opinion, a decision will be entered for respondent as to docket number 17114-15L, and a decision will be entered under Rule 155 as to docket number 5641-18L. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. October 15, 2018 SERVED Oct 16 2018 Bench Opinion by Judge Joseph Robert Goeke September 21, 2018 3 Cecilia Freeman v. Commissioner of Internal Revenue Docket No. 17114-15L, 5641-18L (Consolidated) 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 1 2 3 4 5 6 7 8 9 10 opinion is rendered pursuant to section 7459(b) of the 11 Internal Revenue Code and Rule 152 of the Tax Court Rules 12 of Practice and Procedure. Section references in the body 13 of this bench opinion are to the Internal Revenue Code as 14 15 it applies to the matter before us. There are two dockets before the Court in this 16 matter. These dockets came to trial in Los Angeles, 17 California on September 19th, 2018. Both these dockets 18 involved respondent's attempts to collect tax liabilities 19 pursuant to section 6330 the procedure set forth 20 21 22 23 24 therein. The liabilities in docket number 17114-15L which are the subject of respondent's attempts to collect by lien and levy are income taxes for the years 2003 through 2012. The outstanding balance of these liabilities as of 25 November 13th, 2015 was $217,075.83. A gribers em4ma2so opmeemeenemuut ==matmsm« The liabilities which are the subject of 4 respondent's collection activity in docket number 5641-18L are civil penalties associated with a trust fund recovery of employment taxes for tax periods ending from June 30th, 2008 through December 31st, 2012. In addition, in this docket there are income tax liabilities subject to collection for 2013 and 2014. The total outstanding balance of these liabilities as of June 25th, 2018 was $678,751.47. We will first discuss the income tax liabilities. We note that the petitioner resided in 1 2 3 4 5 6 7 8 9 10 11 12 California when both the petitioness were filed in these 13 14 15 dockets, and that there's no dispute that the Court has jurisdiction in these cases based upon our authority to review timely filed petitions after the issuance of 16 Notices of Determination by respondent's Administrative 17 Appeals Division after taxpayers seek review of the 18 underlying collection action, pursuant to section 6320 and 6330. 19 20 In both dockets, petitioner does not dispute the 21 underlying income tax liabilities, but with respect to the 22 23 income tax liabilities alleges that petitioner's ability to pay is not consistent with the position taken by the 24 Appeals Division in 1ssulng the Notices of Determination. 25 With respect to the income tax liabilities for which there 1 2 3 4 5 6 7 8 9 10 11 12 is no dispute as to the underlying liability, we review respondent's settlement officer's determination as reflected in the Notices of Determination for abuse of discretion. Giamelli v. Commissioner, 129 T. C. 107, 111 (2007). Petitioner has offered us no persuasive argument why the settlement officer's determination in both dockets with respect to the underlying income tax liabilities was an abuse of discretion. It's clear that the settlement officers properly reviewed the underlying assessments of the income tax liabilities and there's no question that the proper procedures were followed with respect to both the service of the Notice of Intent to Levy, and the 13 Notice of Federal Tax Lien. 14 15 It appears that with respect to the Federal Income Tax liability, the settlement officer properly 16 weighed the need to collect pending tax liabilities with 17 the hardship and inconvenience to the petitioner of 18 collecting these liabilities via lien and levy. 19 Petitioner's arguments that a different Offer In 20 Compromise should have been accepted by the settlement 21 officer are not persuasive given the petitioner's failure 22 23 24 to establish that her ability to pay did not exceed the amount she was willing to offer the settlement officer. The trial in this case consisted of the 25 stipulation of facts with attached exhibits, as well the 1 2 3 4 5 6 7 8 testimony of the petitioner, Dr. Freeman. Having determined that, respondent correctly sustained the collection activities with respect to the income tax liabilities in both dockets turn to respondent's attempt to collect the trust fund recovery penalty from the petitioner. The trust fund recovery penalty in question related to petitioner's employer. Petitioner has consistently 9 maintained that she did not owe the trust fund recovery 10 penalty as she was not a responsible officer of the 11 employer. There's no argument that the underlying 12 13 employment taxes have been paid or were not properly due and owing he subject of an analysis based upon the 14 responsible officer and trust fund recovery provisions. 15 Rather petitioner's argument is simply that she was not 16 17 responsible for financial matters, and that she did not cause or direct payments to be made for which the 18 underlying employment tax liabilities of the employees 19 were not satisfied. 20 21 22 We note that in her process of review before the settlement officer concerning the trust fund recovery liabilities in docket number 17114-15L, the petitioner was 23 not given the opportunity to press her arguments that she 24 was not a responsible of ficer. This was because the 1 2 3 4 5 6 7 8 9 liabilities, and based upon her signature on this agreement, and the subsequent assessment, the settlement officer did not believe petitioner should be given an opportunity to challenge the underlying liabilities. Section 6330 restricts matters which can be raised in the settlement hearing if the taxpayer had a prior opportunity to dispute the tax liability. Petitioner's waiving of the restrictions on assessment of the trust fund recovery penalty was in this instance deemed to be such a prior 10 opportunity; and therefore she was denied the opportunity 11 12 13 14 15 16 to pursue her arguments that she was not liable for the trust fund recovery penalty for employment taxes. Since petitioner is making an argument relative to the underlying tax liability, we review her arguments in this regard de novo. Goza v. Commissioner 114 T. C. 176, 181-82 (2000). Respondent does not dispute that the 17 petitioner stated in the CDP Hearing that she disputed the 18 19 20 21 amount owed. Respondent maintains that the petitioner did not properly raise the issue in the CDP Hearing. The Notice of Determination with respect to the trust fund recovery penalties reflects consideration of 22 petitioner's attempt to obtain an Offices In Compromise, 23 but determined that the trust fund recovery penalties were 24 precluded from consideration at the hearing because the 25 petitioner had a prior liability to raise the liability (973)442250ioperadenseerribertret|wwmasalbersagt 8 issue. And this was because of the signature by the petitioner on Form 2751 agreeing to the proposed assessment of the trust fund liability penalties on May 8th, 2015. Petitioner argued and testified at her trial before this court that she signed that waiver as a result of a misrepresentation by respondent's collection personnel, and that she continues to maintain that she was not liable for the trust fund recovery penalties on behalf of her employer's failure to timely pay employment tax liabilities. Petitioner's employer was Fred Jefferson 1 2 3 4 5 6 7 8 9 10 11 12 Memorial Home for Boys. And while she was the director of 13 14 15 16 that home for boys, which had the purpose of rescuing children from a homeless situation and providing them proper foster care, her testimony was clear that she did not have responsible authority within her employer's 17 operations for the payment of employment taxes, as well as 18 the wages to the employees. She referred to a contract 19 with an outside company, which took care of the payroll 20 for the Home for Boys. We believe that it was an abuse 21 of discretion for respondent's settlement officer to fail 22 23 to consider petitioner's arguments about the underlying liability. While we make no determination whether 24 petitioner is, in fact, liable for the 100 percent trust 25 fund penalty, and we acknowledge that she did, in fact, Snye®2250 opeatkmseerrhersantiwwmasatunmat 9 sign the automatic assessment; we think before the collection activity should have proceeded respondent should have treated petitioner as not being given an adequate opportunity to pursue the underlying trust fund liabilities in the hearing process and that the decision by the settlement officer to forgo consideration of the underlying liabilities was an abuse of discretion. W2th respect to the income tax liabilities, weie previously statea tnat 1t <;as not an abuse cf discret2 on 1 2 3 4 5 6 7 8 9 10 to relect the petitioner's offsrer In Compromise, because 11 it was not based apon the proper analysis of the 12 petitioner's financial situation. However, it was an 13 14 15 16 abuse of discretion not to consider petitioner's OfféWer In Compromise relative to the trust fund recovery penalty based upon ¢(cid:16)060wtas to liability. Based upon the record before us we sustain 17 respondent's collection actions with respect to 18 petitioner's personal income tax liabilities in both the 19 dockets before us, and we find no abuse of discretion in 20 21 22 the determinations made by the settlement officer relative to those liabilities. However, we determine that it was abuse of discretion not to consider the underlying 23 liability with respect to the trust fund recovery 24 penalties, and therefore we do not sustain the proposed 25 collection activities with respect to those penalties. cr bers ongoo2soiopam.....ramu.o...maemn« This determination will require that a Rule 155 computation is necessary in docket number 5641-18L. However, we will enter a decision for respondent in docket number 17114-15L. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 11:53 a.m., the above-entitled matter was concluded.) 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