TAX COURT OPINION

Case: Sherra Sterling Branch
Docket Number: 15428-11SL
Judge: Carluzzo
Opinion Type: bench
Filed: 06/14/2012
Pages: 10

SEC UNITED STATES TAX COURT 20217 WASHINGTON, D . C. SHERRA STERLING BRANCH, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ) Docket No. 15428-11S 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 transcript of Trial Judge Lewis R. Carluzzo at Houston, Texas, on May 17, 2012, containing his oral the conclusion of trial. the above case before Special fact and opinion rendered at the pages of the the trial of findings of In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Lewis R. Carluzzo Special Trial Judge Dated: Washington, D.C. June 14, 2012 SERVED Jun 15 2012 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 Special Trial Judge Lewis R. Carluzzo Branch v. Commissioner Docket No. 15428-11SL May 17, 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 (bench opinion). Unless otherwise noted, section references contained in this bench opinion are to the Internal Revenue Code of 1986, as amended, in effect for the relevant period. Rule references are to the Tax Court Rules of Practice and Procedure. : This section 6330(d) proceeding is a Small Tax Case subject to the provisions of section 7463 and Rules:170 through 175. This bench opinion? is made pursuant to the authority granted by section 7459(b) and Rule 152. Pursuant to section 7463 (b), the decision entered in this case shall not be treated as precedent for any other case, and except as provided in Rule 152(c), this bench opinion shall not be cited as authority. Sherra Sterling Branch appeared as a self-represented litigant. Susan K. Greene appeared on behalf of respondent. In a Notice of Determination Concerning 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 Collection Action(s) Under Section 6320 and/or 6330, dated June 3, 2011 (notice), respondent determined that a levy is an appropriate collection action with respect to certain Federal tax liabilities referenced in the notice (underlying liabilities). We first must consider whether petitioner may challenge the existence or the amount of the underlying liabilities in this proceeding. According to respondent, she may not. If respondent is correct, it will be unnecessary to address petitioner's claim that she should not be held liable for those liabilities. Some of the facts have been stipulated and are so found. Petitioner resided in Texas at the time the petition was filed. Petitioner's recently:deceased ex-husband (petitioner's former spouse) was a dentist who conducted his dental practice through Branch General Dentistry, P.C. (Dentistry). Dentistry reported but failed to pay certain Federal tax liabilities shown on its quarterly Federal employment tax returns for the second, third, and fourth quarters of 2008, which are the periods in dispute in this proceeding. At the time, petitioner was an officer of Dentistry, and both she and her former spouse had signatory authority over the business checking account used for Dentistry's 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 payroll for its five employees. Although petitioner was an officer of Dentistry and performed certain administrative services for the company, she was not always compensated for doing so. As a result of her position and involvement with Dentistry and because of Dentistry's then outstanding Federal employment tax liabilities for the above-referenced periods, by letter dated March 4, 2009 (commonly referred to as a Letter 1153), respondent advised petitioner of the operation of section 6672, which provides for what is sometimes referred to as the responsible person penalty, and further notified her that respondent proposed "to assess a penalty against [her] as a person required to collect, account for, and pay over" Federal taxes withheld from Dentistry's employees. The Letter 1153 went on to advise petitioner of her right "to appeal or protest this action". Petitioner's response to the Letter 1153 came in the form of a letter dated April 16, 2009, prepared by her then power of attorney (POA letter). According to the POA letter, petitioner disputed that she "should be deemed a person responsible" for Dentistry's unpaid Federal tax liabilities for the periods here in dispute, which position she has 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 maintained at all times relevant here. By letter dated April 7, 2010, petitioner was advised that respondent's Appeals Office rejected her dispute. More likely than not the rejection resulted from the failure of petitioner, or the failure of her then power of attorney, to follow through on the points made in the POA letter. The underlying liabilities were assessed in due course shortly after the April 7, 2010, letter was sent to petitioner. In a letter dated August 23, 2010, petitioner was advised of respondent's intention to levy (proposed collection action) in order to collect the underlying liabilities. That letter also advised petitioner- of her right to request an administrative hearing in: order to challenge respondent's proposed collection; action, which she did. In her request for an administrative hearing petitioner: (1) disputed the proposed collection action; (2) disputed the filing of a Notice of Federal Tax Lien (NFTL); and (3) requested innocent spouse relief. Petitioner now understands that her challenge to the NFTL was not and need not be considered simply because respondent has not filed an NFTL with respect to the underlying liabilities. She further understands that she is not entitled to innocent - 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 spouse relief, see section 6015, for the type of Federal taxes involved here. That being so, we focus our attention on petitioner's challenge to the proposed collection action. We note from the outset that petitioner does not challenge the appropriateness of the proposed collection action, and she is not looking for a collection alternative to it. See section 6330(c) (2) (A) (I) and (ii). According to petitioner, she should not be held liable for the underlying liabilities because she is not a responsible person within the meaning of section 6672. In support of her position, petitioner points out that in order to support his gambling addiction, her former spouse improperly withdrew funds from the checking account used by Dentistry for payroll purposes. She further points out that she had no control over his actions in this regard. She considers that she fulfilled, as best she could under the circumstances, her obligations to pay over Federal taxes withheld from Dentistry's employees. As petitioner views the matter, her former spouse, or at least now the estate of her former spouse, should be responsible for payment of the underlying liabilities. Although respondent's Pretrial Memorandum Heritage Reporting Corporation (202) 628-4888 (cid:16)042 8 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 provides support for treating petitioner as a responsible person for Dentistry's employment tax liabilities, at trial little focus was devoted to her status as such. Instead, respondent takes the position that as a matter of procedure, petitioner may not challenge the existence or the amount of the underlying liabilities in this section 6330 proceeding because (1) she did not properly present the issue during the administrative hearing, see Giamelli v. Commissioner, 129 T.C. 107 (2007), and (2) she had a prior opportunity to dispute the underlying liabilities. See sec. 6330 (c) (2) (B). According to respondent, that prior opportunity came in the form of her unsuccessful protest to the Letter 1153 and the consideration given to that protest by respondent's Appeals Office. For the following reasons, we agree with respondent's second point, which makes it unnecessary to consider respondent's first point. Section 301.6330-1(e) (3), Q&A-E2, Proced. & Admin. Regs., provides in relevant part that if a taxpayer had the opportunity to appeal a Federal tax assessment, or a proposed Federal tax assessment, to respondent's Appeals Office, prior to commencing a section 6330 proceeding, then that taxpayer had a prior opportunity to challenge the existence or the 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 9 amount of the tax within the meaning of section 6330 (c) (2) (B) and may not do so in the section 6330 proceeding. In Lewis v. Commissioner, 128 T.C. 48 (2007), we upheld the validity of the above-cited regulation and held that a taxpayer could not again challenge a section 6651(a) liability in a section 6330 proceeding because that taxpayer previously disputed that liability in a conference with respondent's Appeals Office. Similarly, in McClure v. Commissioner, T.C. Memo. 2008-136, we held that a taxpayer who unsuccessfully disputed section 6672 liabilities in a conference with respondent',s Appeals Office following the issuance of a Letter 1153 to him could not challenge the existence or the amóunt of those liabilities in a section 6330 proceeding. That is what happened here. Petitioner's claim that she should not be treated as Dentistry's responsible person within the meaning of section 6672 and therefore should not be liable for the tax assessed against her pursuant to that section was considered by respondent's Appeals Office before she requested relief under section 6330. For that reason she was not entitled to challenge the existence or the amount of the underlying liabilities at the section 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 6330 administrative hearing, and she is not entitled to do so here. That being so, little else need be said. Because petitioner is not entitled to challenge the existence or the amount of the underlying liabilities in this case, we need not address the merits of her claim that she should not be treated as Dentistry's responsible person under section 6672. Furthermore, she is not seeking a collection alternative to the proposed collection action, so we need not consider whether she is entitled to one. Otherwise petitioner does not suggest that respondent has failed to proceed as required under section 6330. The decision entered in this case will allow collection to proceed as determined in the notice. That decision will end this Court's involvement in the matter, but as noted at trial, the resolution of this case will not necessarily extinguish petitioner's opportunity to challenge the underlying liabilities through Federal refund procedures. See sections 6511, 7522. To reflect the foregoing, decision will be entered for respondent. This concludes the Court's oral findings of fact and opinion in this case. Heritage Reporting Corporation (202) 628-4888 , 11 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 (Whereupon,. at 10:42 a.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // // // // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888