TAX COURT OPINION

Case: John Burgess
Docket Number: 17488-09L
Judge: Kroupa
Opinion Type: bench
Filed: 04/30/2012
Pages: 15

UNITED STATES TAX COURT WASHINGTON, DC 20217 JOHN BURGESS, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ) Docket No. 17488-09L OR 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 to petitioner and to respondent a copy of the pages of the transcript of the proceedings in the above case before Judge Diane L. Kroupa at Las Vegas, Nevada on March 15, 2012, containing her oral findings of fact and opinion. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Diane L. Kroupa Judge Dated: Washington, D.C. April 30, 2012 SERVED MAY '' 3 20% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 18 19 20 21 22 23 24 25 BENCH OPINION BY JUDGE DIANE L . KROUPA JOHN BURGESS V. COMMISSIONER DOCKET NO.: 17488-09L MARCH 15, 2012 3 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 sÑall not be relied upon as precedent in any other case. This bench opinion is made pursuant to the authority granted by Section 7459(b) and Rule 152. All section references are to the Internal Revenue Code as amended and in effect for the years at issue as later defined, and all Rule references are to the Tax Court Rules of Practice and Procedure. This is a collection review case involving a Federal tax lien filing and proposed levy to collect Petitioner's unpaid Federal income tax liabilities for the taxable years 2003, 2004, and 2006 (the years at issue) . This collection review matter is before the Court on Respondent's Second Motion for Summary Judgment, filed. January 10, 2012. Petitioner filed an 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 objection. The Court scheduled Respondent's motion for a hearing in Las Vegas, Nevada. I Petitioner appeared Pro Se, and Wesley Wong appeared on behalf of Respondent . FINDINGS OF FACT The record establishes or the parties do not dispute the following facts. Petitioner resided in Nevada at the time the collection review petition was fi1ed. Petitioner failed to file Federal income tax returns for each of the years at issue, as he has done for other years . Respondent prepared substitutes for return for the years at issue based upon information regarding real property sales and unreported pension income . Respondent issued a statutory def iciency notice for each of the years at issue to Petitioner based upon the substitutes for return. Petitioner alleges he never received the deficiency notices. Petitioner did not contest the deficiencies, so Respondent thereafter assessed the tax liabilities. Petitioner failed to pay the tax assessments . Respondent sent Petitioner a Final Notice of Intent to Levy and Your Right to a Hearing, advising Petitioner that Respondent intended to levy 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 to collect the unpaid taxes for the years at issue, and informing Petitioner that he could receive a hearing. Respondent then sent Petitioner a Notice of Federal Tax Lien Filing and Your Right to a Hearing, advising Petitioner that a notice of Federal tax lien had been filed with respect to Petitioner's unpaid taxes for the years at issue, and informing Petitioner that he could receive a hearing. Petitioner timely requested a face-to-face hearing regarding each notice. Settlement Officer Freitag scheduled a face- to-face hearing with Petitioner for April 29, 2009, and asked Petitioner to reschedule if that time was inconvenient . SO Freitag's letter explained the hearing process, including the requirements to complete a Collection Information Statement, and be in compliance with income tax filings for consideration of a collection alternative. SO Freitag noted that Petitioner had not filed his income tax returns for taxable years 2005, 2007, and 2008. Petitioner responded, by letter, stating that he would not attend the face-to-face hearing. He now wanted a correspondence hearing, and he wanted to 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 contest the underlying tax. Petitioner requested copies of various documents, including the original documents used to prepare his substitutes for return. Petitioner took the position that Respondent must prove to him that he owed tax. SO Freitag responded by letter to Petitioner that he found that the legal and procedural requirements were met, including that Petitioner·did not file returns, was issued notices of deficiency for the years at issue, received the notices in time to petition the Tax Court, but did not do so, and was provided a CDP hearing. He noted that Petitioner did not propose any collection alternatives and attached Forms 4340 to his letter. A little while later, SO Freitag issued the Determination Notice sustaining the proposed levy and the lien filing for the years at issue. Petitioner timely filed a petition with this Court. Respondent moved for summary judgment and Petitioner objected. We held a hearing in November 2010 in Las Vegas, Nevada. Petitioner testified that he did not actually receive the notices of deficiency for 2003, 2004, and 2006. Petitioner also testified that he did not dispute receiving the military pension or the gross Heritage Reporting Corporation (202) 628-4888 1 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 sales prices for the three parcels of real property reported on the wage and income transcripts. As Petitioner agreed to provide Appeals with deductions and his cost basis in the properties sold, we remanded the case for a further administrative hearing. Respondent remanded the case, and the Settlement Officer requested that Petitioner provide income tax returns for the years at issue to report all income and deductions. The Settlement Officer scheduled the hearing for February 1, 2011. Petitioner replied by fax that he was unable to participate in the scheduled hearing and asked for additional time to gather the documents. The settlement Officer rescheduled the hearing for February 17, 2011. Petitioner failed to attend the rescheduled CDP hearing and provided none of the requested information. The Settlement Officer subsequently sent Petitioner a letter giving Petitioner a final opportunity to provide the requested documents and records. Petitioner again failed to do so within the specified time. At some point after the deadline, Respondent received a letter from Petitioner stating that Petitioner disagreed with the calculated capital Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 lo 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 8 gains income and that he wanted to settle the discrepancy before having a hearing. Petitioner again provided none of the requested information. The Settlement Officer issued a supplemental determination notice. Petitioner wants to contest his liability, claiming that he never received the deficiency notice for the years at issue, but raises no legal or factual controversy with the underlying liability. Petitioner also argues that the Respondent does not have authority to prepare substitutes for return and that we have no jurisdiction over him. As mentioned previously, Respondent filed a second summary judgment motion. Petitioner objected, attaching various documents espousing hackneyed, frivolous positions. The Court heard the parties' arguments. OPINION We are asked to decide whether to grant summary judgment. Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. See, e.g. FPL Group, Inc. v. Commissioner, 116 T.C. 73, 74 (2001).. A motion for summary judgment will be granted if the pleadings and other acceptable 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 materials show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law. See Rule 121(b); Elect. Arts, Inc. v. Commissioner, 118 T.C. 226, 238 (2002). The moving party has the burden of proving that no genuine issue of material fact exists, and that it is entitled to judgment as a matter of law. See, e.g., Rauenhorst v. Commissioner, 119 T.C. 157, 162, (2002). Respondent has met his burden. We focus our review on Respondent's position in the supplemental determination notice. See Kelby v. Commissioner, 130 T.C. 79, 86 (2008) (stating that when this Court remands a case to the IRS Appeals Office, the further hearing is a supplement to the original hearing, and we review the position taken in the last supplemental determination rather than in any prior determinations). We begin by addressing Petitioner's concerns raised at the hearing, namely our jurisdiction and Respondent's authority to prepare substitutes for return. The Tax Court is a court of limited jurisdiction, and we may exercise our jurisdiction only to the extent authorized by Congress. Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The Tax 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 Court's jurisdiction is contingent upon the issuance of a valid determination notice and the filing of a timely petition. Offiler v. Commissioner, 114 T.C. 492, 498 (2000). These requirements have been satisfied, and we have jurisdiction to hear Petitioner's case. Respondent also has authority to issue substitutes for return. The district director or other authorized Internal Revenue employee shall make a return from such information as he can obtain when a person fails to timely make a required return. Such substitute for return is prima facie good and sufficient for all legal purposes. Sec. 6020(b) (1) and (2); Sec. 301.6020-1(b), Proced. & Admin. Regs. Moreover, the Commissioner is not required to prepare returns to determine tax deficiencies against taxpayers who have not filed returns. See Lainq v. United States, 423 U.S. 161, 174 (1976) ; Roat v. Commissioner, 847 F.2d 1379, 1381 (9th Cir . 1988) ; Hartman v. Commissioner, 65 T . C . 542, 545-546 (1975) . In short, Petitioner's arguments are of no moment. We now explain briefly the collection procedures . A lien in favor of the United States is imposed on all property and property rights of a 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 2-0 21 22 23 24 25 11 taxpayer liable for taxes after a demand for the payment of the taxes has been made and the taxpayer fails to pay those taxes. Sec. 6321. The lien arises when the assessment is made. Sec. 6322. The Secretary generally must file a notice of Federal tax lien with the appropriate State.office for the lien to be valid against certain third parties. Sec. 6323. The Secretary is also required to send written notice to the taxpayer of the filing of a notice of lien, and of the taxpayer's right to an administrative hearing on the matter. Sec. 6320(a). 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). The person may request a hearing with the IRS Appeals Office. Sec, 6330(c) (2) (A). At the hearing a taxpayer may raise any relevant issue, including appropriate spousal defenses, challenges to the appropriateness of the collection action and possible collection alternatives. Sec. 6330(c) (2) (A). A taxpayer may contest the validity of the underlying tax liability only if the taxpayer did not receive a deficiency notice or otherwise have an opportunity to dispute the tax liability. See Sec. 6330 (c) (2) (B); Sego v. 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 Commissioner, 114 T.C. 604, 609 (2000). Following a hearing, the Appeals Office must issue a notice of determination regarding the validity of the filed Federal tax lien and levy. In making the determination the Appeals office is required to take into consideration: (1) verification presented by the Secretary that the requirements of applicable law and administrative procedure have been met, (2) relevant issues raised by the taxpayer, and (3) whether the proposed collection action appropriately balances the need for efficient collection of taxes with a taxpayer's concerns regarding the intrusiveness of the proposed collection action. Sec . 6330 (c) (3) . If the taxpayer disagrees with the Appeals Office's determination, the taxpayer may seek judicial review by appealing to this Court. Sec. 6330 (d) . Where the validity of the underlying tax liability is properly at issue, the Court reviews the determination regarding the underlying tax liability de novo. Sego v. Commissioner, 114 T.C. at 610; Goza v. Commissioner, 114 T.C. 176, 181-182 (2000) . Where as here, the validity of the underlying tax liability is not properly at issue, the Court reviews the determination of the Appeals Office for abuse of discretion, Sego v. Commissioner, 114 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 T.C. at 610; Goza v. Commissioner, 114 T.C. at 182. The record contains copies of the deficiency notices for the years at issue and proof of mailing. Each of the deficiency notices bears Petitioner's name and a street address in Pahrump, Nevada. We find that Respondent mailed the deficiency notices to Petitioner's last known mailing address. We also note that this Court remanded the case so that Petitioner would be provided a CDP hearing to contest the underlying liabilities, and he failed to attend that hearing. Because Petitioner failed to properly raise a challenge to the merits of the underlying tax liability at his scheduled CDP hearing, that issue cannot be considered by the Court. Giamelli v. Commissioner, 129 T.C. 107, 112-116 (2007); Delgado v. Commissioner, T.C. Memo. 2011-240. The merits are not properly raised if the taxpayer challenges the underlying tax liability, but fails to present the Appeals Office with any evidence with respect to that liability after being given reasonable opportunity to present such evidence. See Sec. 301.6320-1(f) (2), Q&A-F3, Proced. & Admin. Regs. Instead of providing tax information and raising meritorious claims, Petitioner tried to delay 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 14 the hearing by failing to provide information and proposing continued mail communication. He did not make any reasonable attempts to challenge the existence or amount of the underlying tax liabilities, or prepare his own tax returns for the years at issue. He did not challenge the appropriateness of Respondent's intended collection method, offer an alternative means of collection, or make any bona fide claim that collection was inappropriate. His conduct throughout these proceedings was designed to delay resolution of the 2003, 2004, and 2006 tax years, a behavior that is consistent with his continuing and conscious refusal to file Federal income tax returns. Petitioner simply failed to provide the Appeals Office with any evidence regarding the liability after being given ample opportunity to present such evidence. The purpose of the collection due process statutes, Sections 6320 and 6330, is to provide taxpayers with a forum to raise relevant issues with respect to proposed levy and lien notices. Burke v. Commissioner, 124 T.C. 189 (2005). Petitioner is not using the statutes for this purpose. Rather, Petitioner is using the statutes solely as a 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 15 mechanism to delay collection. We find that Petitioner instituted and maintained this proceeding solely for delay, and that he does not intend to properly prosecute the tax years at issue. Petitioner has given no bona fide basis for his objection to the collection action. We conclude that Respondent's determination to proceed with collection of the tax liabilities assessed against Petitioner for the years at issue was not an abuse of discretion. We caution Petitioner about Section 6673, which authorizes the Tax Court to require a taxpayer to pay to the United States a penalty up to $25,000 whenever it appears that proceedings have been instituted or maintained by the taxpayer primarily for delay, or that the taxpayer's position in such proceedings is frivolous or groundless. It is apparent from the entire record that Petitioner instituted or maintained this proceeding primarily, if not exclusively, for delay. Petitioner's tactics have consumed valuable Government resources. Although we do not impose a penalty against Petitioner at this time, we strongly caution Petitioner that he is at risk that the Court may 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 16 impose such a penalty if he continues his delay tactics. To reflect the foregoing, decision will be entered for Respondent, and an appropriate order will be issued sustaining Respondent's collection action set forth in the supplemental determination notice, upon which this case is based, regarding Petitioner's unpaid tax liabilities for 2003, 2004, and 2006. An order will also be issued granting Respondent ' s motion for summary judgment . This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 4:38 p.m., the bench opinion in the above-entitled matter was concluded.) // // // // // / // // // // // Heritage Reporting Corporation (202) 628-4888