TAX COURT OPINION

Case: Francis T. & Christine T. O'Brien
Docket Number: 20863-11L
Judge: Kroupa
Opinion Type: bench
Filed: 07/11/2012
Pages: 10

UNITED STATES TAX COURT WASHINGTO , D.C. 20217 FRANCIS T. O'BRIEN AND CHRISTINE T. O'BRIEN Petitioners, v. COMMISSIONER OF 1NTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ) ORDER Docket No. 20863-11L Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit to petitioners and to respondent a copy of the pages of the transcript of proceedings of this case before Judge Diane L. Kroupa in Honolulu, Hawaii on June 18, 2012, containing her oral findings of fact and opinion rendered at the trial session at which this case was calendared. In accordance with the oral findings of fact and opinion, an appropriate decision will be entered for respondent. (Signed) Diane L. Kroupa Judge Date: Washington, DC July 11, 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 Judge Diane L. Kroupa June 18, 2012 O'Brien v. Commissioner Docket No. 20863-11L 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. These oral findings of fact and opinion shall not be relied upon as precedent in any other case. This bench opinion is made pursuant to the authority granted by § 7459(b) and Rule 152. All section references are to the Internal Revenue Code as amended and in effect for 2007, and all rule references are to the Tax Court Rules of Practice and Procedure . This is a collection review case involving the proposed levy to collect Petitioners' unpaid federal income ax liabilities for 2007. Howard Chang appeared on Petitioners ' behalf, and Jonathan Ono appeared on behalf of Respondent. Findings of Fact. The record establishes or the parties do not dispute the following facts. Certain facts have been stipulated. The facts are so found. The stipulation of facts the parties filed, with accompanying exhibits, is incorporated by this 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 reference. Petitioners resided in Hawaii at the time they filed the collection review petition. Petitioners filed a joint federal income tax return for 2007, but failed to pay the tax shown on the return. The tax lÏability for 2007 arose because Petitioners were both self-employed individuals and failed to make sufficient estimated tax payments for 2007. Respondent assessed the unpaid tax liabilities. Petitioners failed to ay the assessed amounts, so Respondent issued Petitioners a Final Notice of Intent to Levy and Notice of Your Right to a Hearing for 2007. Petitioners timely requested a hearing. In their request, Petitioners indicated that they wanted to enter into an installment agreement with Respondent. Thereafter, Petitioners sent Respondent Form 433A, Collection Information Statements for Wage Earners and Self-Employed Individuals, for each spouse. The Forms 433A stated that Petitioners were unable to pay their tax liabilities due to recent financial setbacks and estimated that Petitioners' expenses would exceed their income. Respondent assigned a settlement officer to conduct Petitioners' he,aring. The settlement officer 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 held a telephonic hearing with Petitioners' counsel in November 2010. The sedtlement officer requested that Petitioners provide thèir 2008 and 2009 tax returns, along with additional documentation to support the submitted Forms 433A, hich Petitioners subsequently provided. The settlement officer reviewed Petitioners' Forms 433A in light of the financial information they provided and the guidelines published in the Internal Revenue Manual (IRM) for evaluating installment agreement requests. Based on this review, the settlement officer adjusted Petitioners' monthly income and expenses. The settlement officer determined the Petitioners' monthly income exceeded their expenses. The settlement officer sent Petitioners a proposed installment a reement for the unpaid tax liabilities based on the analysis of the financial information and supporting documentation Petitioners provided. The proposed installment agreement required that Petitioners fully pay their 2010 income tax liability, if any, and that they make their estimated tax payments for 2011. Subsequently, the settlement officer and Petitioners' counsel had a telephone conference. 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 parties discussed the proposed installment agreement and the manner in which the settlement officer determined Petitioners' disposable monthly income. The disposable monthly income amount was used to calculate ·the monthly payment amount for the proposed installment agreement. Petitioners' counsel disputed the settlement officer's calculation of certain expenses claimed on Forms 433A. The settlement officer informed Petitioners' counsel that certain financial documentation was needed to reconsider the disputed expenses. It was mutually agreed that if the necessary documentation for reconsidering the disputed expenses and the estimated tax payments were not received by July 28, 2011, that the settlement officer would proceed with issuing a determination notice. The settlement officer later called Pgtitioners' counsel and advised him that certain payments of estimated tax for 2011 were required by July 18, 2011, because they were already due. Petitioners failed to provide the requested documentation and make the required estimated tax [ payment. Consequently, the settlement officer concluded that no collection alternative was possible and issued the determination notice dated August 8, 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 2011, upon which this case is based. Petitioners filed a petition with this Court challenging the settlemënt officer's determination to sustain the proposed leyy action. Opinion: We are asked to decide whether the settlement officer abused her discretion in determining the proposed levy action was appropriate to collect Petitioners" unpaid tax liabilities for 2007. We begin with the standard of review. Where, as is the case here, the validity of the underlying tax liability is not pgoperly placed at issue, the Court will review Respondent's determination for.abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Coåmissioner, 114 T.C. 176, 181-182 (2000). We must decide whether Respondent exercised his discretion arbitrarily, capriciously or without sound basis in fact or law. See Weedrew v. DL Commissioner, 112 T.C. 19, 23 (1999); Fargo v. Commissioner,, T.C. Memo 2004-13. In making thïs determination, we do not conduct an independent review of what would be an acceptable collection alternative, nor do we substitute our judgment for that of the settlement officer. See Murphy v. Commissioner, 125 T.C. 301, 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 8 320 (2005). Based upon our examination of the entire record before us, we find that Respondent did not abuse his discretion in determining that the collection action should proceed with respect to Petitioners' unpaid liabilities for 2007. We briefly describe collection procedures by levy. No levy may be made on any person's property unless the Secretary has notified such person in writing of their right to a hearing before the levy is made. Sec. 6330(a). This person may request a hearing with the IRS Appeals Office and raise any relevant issues, including collection alternatives, at the hearing. Sec. 6330(c) (2) (A). After the hearing, the settlement officer is required to make a determination that addresses issues the taxpayer raised, verifies that all requirements of applicable law and administrative procedures have been met and balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary. Sec. 6330(c) (3) (C). The record reflects that the settlement officer properly verified that all the legal and procedural requirements had been met. The settlement officer confirmed, using a transcript of Petitioners' 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 . . accounts, that assessments were properly made for 2007, that appropriate and timely notices were sent regarding the assessments and that Petitioners were properly informed of their rights with respect to the levy action. The record also reflects that the settlement officer properly balanced the need for efficient collection ofi taxes with Petitioners' legitimate concern that[ any collection be no more intrusive than necessary. Finally, the settlement officer addressed the relevant issues (e.g., collection alternatives) raised by Petitioners. Petitioners requested an installment agreement for their unpaid tax liabilities for 2007. A settlement officer may enter into an installment agreement with a taxpayer as a collection alternative to satisfy tax liabilities when such agreement would facilitate full or partial collection of tax liability. Sec.'6159(a). Internal Revenue Service guidelines·require a taxpayer to be current with filing and payment requirements to qualifytfor an installment agreement. 2 Administration, Internal Revenue Manual (CCH), § 5.14.1.2(9) (e) at 17,504. The settlement officer notified Petitioners that they needed to make their estimated tax payments by July 18, 2011, to qualify 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 for an installment agreement. Petitioners failed to comply. The settlement officer, in reliance on the IRS guidelines, rejected Petitioners' installment agreement request. Reliance on a failure to pay current taxes in rejecting a collection alternative does not constitute an abuse of discretion. See 1 v. Commissioner, 135 T.C. 344, 351 (2010); Nelson v. Commissioner., T.C. Memo 2009-108. Accordingly, we find that the settlement officer did not abuse her discretion in denying Petitioner's installment agreement request. We note that even if we might have reached a different conclusion on the reasonableness of requiring the payment of the 2011 estimated taxes by July 18, 2011, we cannot say that there was an abuse of discretion by the settlement officer. We remind the parties that the Court does not substitute its judgment for that of the settlement officer in deciding whether there was any abuse of discretion. We are sympathetic to Petitioners' financial situation and understand that the economic downturn has substantially affected many Americans. Nevertheless, we must treat all taxpayers equally. Petitioners failed to m'ake the required tax payments 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 11 and therefore failed to establish that the settlement officer abused her discretion in sustaining the levy action. We therefore conclude that the settlement officer did not abuse her discretion in upholding Respondent's proposed levy action to collect from Petitioners outstanding tax liabilities for 2007. To reflect the foregoing, decision will be entered for Respondent ¡and an appropriate order will be issued sustaining the determinations'set forth in the determination notic:e dated August 8, 2011, upon which this case is based, regarding the unpaid liabilities for 2007. ! This concludes the Court ' s oral f indings of fact and opinion in thi's case. (Whereupon, at 10:30 a.m. the bench opinion in the above-entitled matter was concluded.) // // // // // // // // // Heritage Reporting Corporation (202) 628-4888