TAX COURT OPINION

Case: Joseph W. Lowry
Docket Number: 5333-14L
Judge: Kerrigan
Opinion Type: bench
Filed: 06/15/2015
Pages: 9

UNITED STATES TAX COURT WASHINGTON, DC 20217 JOSEPH W. LOWRY, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. ) ) ) ) 5333-14 L. ORD 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 the pages of the transcript of the trial in the above case before Judge Kathleen Kerrigan at Denver, Colorado on June 2, 2015, containing her oral findings of fact and opinion rendered at the conclusion of the trial session at which this case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered for respondent. (Signed) Kathleen Kerrigan Judge Dated: Washington, D.C. June 15, 2015 SERVED Jun 18 2015 Capital Reporting Company 3 Bench Opinion by Judge Kathleen Kerrigan June 2, 2015 Joseph W. Lowry Docket No. 5333-14L THE COURT: The Court has decided to render in this case the following as its oral findings of fact and opinion, which shall not be relied upon as precedent in any other case. This Bench Opinion is made pursuant to the authority granted by Section 7459(b) of the Internal Revenue Code and Rule 152 of the Tax Court Rules of Practice and Procedure. Unless otherwise indicated, all section references are to the Internal Revenue Code in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure. By a Notice of Determination Concerning 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Collection Action(s) under Section 6320 and/or 6330 18 19 20 21 22 23 24 (notice of determination) dated February 14, 2014, respondent determined to proceed with a notice of federal tax lien (NFTL) to collect petitioner's unpaid trust recovery penalties (TFRPs) for the tax periods ending on March, June, September, and December, 2011. Trial of this case was conducted on June 1, 2015. Petitioner represented himself. 25 Matthew K. Henderson represented respondent. The 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 7 8 9 parties' stipulation of facts and attached exhibits were admitted into evidence. We find the following facts: FINDINGS OF FACT Petitioner resided in Colorado when he filed his petition. The liabilities at issue are TFRPs for the tax periods ending March, June, September, and December 2011, which were assessed on November 5, 10 2012. 11- Petitioner is one of two members of the 12 Ours, Not Yours, Wyoming Close Limited Liability 13 14 15 16 17 18 Company (Ours LLC). Petitioner and his wife purchased a home in Colorado in 2010 and transferred the home. to Ours LLC. In 2014, Ours LLC quitclaimed the home to petitioner's wife, and she sold the home. On March 5, 2013, respondent sent to petitioner a Letter 3172, Notice of Federal Tax Lien 19 Filing and Notice of Your Right to a Hearing. On 20 April 3, 2013, respondent received petitioner's Form 21 22 23 24 25 12153, Request for a Collection Due Process Hearing. On August 5, 2013, a settlement officer sent a letter to petitioner scheduling a phone hearing with petitioner's power of attorney on August 29, 2013. The letter also requested financial information. The 866.488.DEPO www.CapitalReportingCompany.com . Capital Reporting Company 5 1 2 3 4 5 6 7 8 9 10 11 12 hearing was changed to a face-to-face hearing, but that hearing was rescheduled. A phone hearing was held on September 26, 2013. During this hearing, the underlying liabilities were not challenged. During the hearing, petitioner proposed an offer in compromise (OIC). The settlement officer discussed the OIC, but she indicated that petitioner had the ability to pay the full amount of the liabilities. The settlement officer requested additional financial information. After review of the additional information, the settlement officer offered an installment agreement of $335 per month. 13 Petitioner contended that he could not afford these 14 15 16 17 18 19 20 21 22 23 24 25 payments. The settlement officer made the calculations based on the national standard for a three-person household. On February 14, 2014, the settlement officer sent to petitioner the notice of determination sustaining the NFTL. OPINION The Federal Government obtains a federal tax lien against the property and rights to property, whether real or personal, of a taxpayer with an outstanding tax liability whenever a demand for payment has been made and the taxpayer neglects or 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 refuses to pay. Sec. 6321; Iannone v. Commissioner, 122 T.C. 287, 293 (2004). Section 6320(a)(1) requires the Secretary to provide written notice to a taxpayer when the Secretary has filed an NFTL against the taxpayer's property and property rights. See also Sec. 6321. The Secretary must also notify the taxpayer of his or her right to a CDP hearing. Sec. 6320(a)(3). If the taxpayer requests a CDP hearing, the hearing is conducted by the Appeals Office. Sec. 6320(b)(1). At the hearing the taxpayer may raise any relevant issue relating to the unpaid tax or the NFTL. Secs. 6320(c), 6330(c)(2) (A). Once the settlement officer makes a determination, the taxpayer may appeal the determination to this Court. Secs. 6320(c), 6330(d)(1). Petitioner does not dispute the underlying liabilities. Where the validity of the underlying tax liability is not properly at issue, we review the determination for abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 182 (2000). A settlement officer has abused his or her discretion if the determination is arbitrary, capricious, or without sound basis in fact or law. Giamelli v. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 6 Commissioner, 129 T.C. 107, 111 (2007); Woodral v. Commissioner, 112 T.C. 19, 23 (1999). Section 6330(c)(3) requires the settlement officer to consider the following during a CDP hearing: (1) whether the requirements of any applicable law or administrative procedure have been 7 met; (2) any issues appropriately raised by the 8 9 10 11 12 13 14 15 16 17 taxpayer; and (3) whether the proposed collection action balances the need for the efficient collection of taxes with the legitimate .concern of the taxpayer that any collection action be no more intrusive than necessary. See also Lunsford v. Commissioner, 117 T.C. 183, 184 (2001). We note that the settlement officer properly based her determination on the factors specified by Section 6330(c)(3). Section 7122(a) authorizes compromise of a taxpayer's federal income tax liability in accordance 18 with guidelines to be adopted by the Treasury. The 19 grounds for compromise of a tax liability include 20 21 22 23 24 25 doubt as to the collectability and the promotion of effective tax administration. Sec. 301.7122-1(b)(2) and (3), Proced. & Admin. Regs. Doubt as to collectability, "exists in any case where the taxpayer's assets and income are less than the full amount of the liability." Id. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 Generally, under the Commissioner's administrative 8 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 guidelines, an offer to compromise based on doubt as to collectability will be acceptable only if it reflects the taxpayer's reasonable collection potential (RCP). See Internal Revenue Manual (IRM), pt. 5.8.1.1.3(3)(Mar. 16, 2010); see also Rev. Proc. 2003-71, Sec. 4.02(2), 2003-2 C.B. 517, 517 (stating that an offer will be considered acceptable if it reflects the taxpayer's RCP). Where the settlement officer has followed the Internal Revenue Service (IRS) guidelines to ascertain a taxpayer's RCP and has rejected the taxpayer's collection alternative on that basis, we generally have found no abuse of discretion. See McClanahan v. Commissioner, T.C. Memo 2008-161; Lemann v. Commissioner, T.C. Memo. 2006-37. Petitioner supplied information and explanations to the settlement officer and based on that information, the settlement officer determined that petitioner's RCP was greater than the amount of the outstanding liabilities. The record reflects that the settlement officer followed IRS guidelines to determine the petitioner's RCP and determine that the RCP exceeded petitioner's offer. A compromise may promote effective tax 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 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 administration when (1) collection in full would cause the taxpayer economic hardship, or (2) compelling public policy or equity considerations justify acceptance of the compromise. Speltz v. Commissioner, 124 T.C. 165, 172-174 (2005), aff'd, 454 F.3d 782 (8th Circ. 2006); Sec. 301.7122-1(b)(3), Proced. & Admin. Regs. Economic hardship may arise when, for instance, the taxpayer is incapable of earning a living because of a long-term medical problem, exhausts his or her monthly income caring for a dependent with no other means of support, or owns assets that are illiquid and cannot serve as collateral for a loan. Speltz v. Commissioner, 124 .T.C. at 173; Sec. 301.7122-1(c)(3)(i), Proced. & Admin. Regs. Petitioner did not identify any specific economic hardship, and the record does not support a finding of economic hardship. Petitioner contends that the property held by Ours LLC should not be counted. The settlement officer testified that she determined petitioner had enough assets to pay his liabilities without including the property. Petitioner contends that he had an outstanding loan, which should have impacted the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 3 4 5 6 7 8 9 10 11 12 13 amount that could be collected. The settlement officer testified she was not aware of any outstanding loan. We have held that "in our review for an abuse of discretion under Section 6330(d)(1) of respondent's determination, generally we consider only arguments, issues, and other matters that were raised at the collection hearing or otherwise brought to the attention of the Appeals Office". Magana v. Commissioner, 118 T.C. 488, 493 (2002). We find that the settlement officer did not abuse her discretion in rejecting petitioner's OIC, and decision will be entered for respondent. This concludes the Court's oral Findings of Fact and 14 Opinion in this case. 15 16 17 18 19 20 21 22 23 24 25 (Whereupon, at 11:38 a.m., the above- entitled matter was concluded.) 866.488.DEPO www.CapitalReportingCompany.com