TAX COURT OPINION

Case: Roy G. Weatherup & Wendy G. Weatherup
Docket Number: 25370-17SL
Judge: Carluzzo
Opinion Type: bench
Filed: 12/27/2018
Pages: 10

JRN UNITED STATES TAX COURT WASHINGTON, DC 20217 ROY G. WEATHERUP & WENDY G. WEATHERUP, Petitioners, v. ) ) ) ) ) Docket No. 25370-17SL COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) 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 petitioners and to respondent a copy of the pages of the transcript of the trial in the above case before Chief Special Trial Judge Lewis R. Carluzzo at Los Angeles, California, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. 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. December 27, 2018 SERVED Dec 28 2018 Bench Opinion by Special Trial Judge Lewis R. Carluzzo 3 December 6, 2018 Roy G. Weatherup & Wendy G. Weatherup v. Commissioner of Internal Revenue Docket No. 25370-17SL 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). Section references made in this bench opinion are to the Internal Revenue Code of 1986, as amended, in effect for the relevant period, and Rule references are to the Tax Court Rules of Practice and 1 2 3 4 5 6 7 8 9 10 11 12 13 Procedure. This bench opinion is made pursuant to the 14 authorïty granted by section 7459(b) and Rule 152. The 15 decision to be entered in this case shall not be treated 16 as precedent for any other case, and except as provided in 17 Rule 152(c), this bench opinion shall not.be cited as 18 authority. 19 20 21 22 This section 6330(d) case is before the Court on respondent's motion for summary judgment, filed September 2018. Petitioners' objections to respondent's motion are embodied in their opposition, filed November 19, 2018, 23 A hearing was conducted on respondent's motion in Los 24 Angeles, California, on December 4, 2018. Ping Chang and 25 Christine A. Fukushima appeared on behalf of respondent (973)4002250|operatiertseesaibers.net|wvew.escribersiiet 4 and argued in support of the motion. Petitioners appeared, unrepresented (although Roy Weatherup is an attorney) and argued against it. Some of the undisputed facts .relied upon by respondent in support of the motion are recited in the following portions of this bench opinion. The income tax liability reported on petitioners' joint 2012 Federal income tax return was not fully paid with that return, although petitioners have 1 2 3 4 5 6 7 8 9 10 made substantial payments towards that liability in the 11 12 13 14 15 years following the filing of that return. Because of circumstances generally described by petitioners as financial hardships, in December 2013, they made an offer- in-compromise with respect to their then outstanding 2012 income tax liability. See sec. 7122. By letter dated 16 July 16, 2015, respondent advised petitioners that their 17 offer-in-compromise had been reviewed and rejected 18 19 20 21 (rejection letter). See sec. 7122(f). The rejection letter also advised petitioners of the reasons for the rejection and their right to appeal the rejection to responde'nt Office of Appeals, which they apparently did, 22 but not successfully. The rejection letter plays a key 23 role in this proceeding, and the parties disagree over 24 whether the rejection letter is described in section 25 7122(f). , We'll focus on their disagreement on the point (973)406-2250loperations@escribersfiet|www.esenbers.net 5 1 2 3 4 5 6 7 8 9 10 11 later in this bench opinion. Petitióners continued to make payments towards their outstanding 2012 income tax liability while their offer-in-compromise was pending from the date it was made through the time they received the rejection letter. By letter dated June 5, 2017, respondent advised petitioners that the then balance of their 2012 income tax liability was subject to levy. See sec. 6330(a). The amount of the income tax liability referenced in that letter was computed as though petitioners' offer-in-compromise had not been accepted. That letter also advised petitioners 12 of their right to request an administrative hearing in 13 order to challenge respondent's proposed collection 14 action, which they did in a timely manner. See sec. 15 16 17 6330(b) and (c). Such administrative hearings are sometimes referred to as "due process" hearings, and for convenience, we'll use the same designation in this bench 18 opinion. 19 20 21 During the due process hearing petitioners took the position that their 2012 income tax liability had been fully paid because of the offer-in-compromise they 22 previously submitted. According to petitioners, the 23 24 25 rejection letter does not satisfy the provisions of section 7122(f), and because, as they see the matter, their offer-in-compromise was not otherwise rejected 973)406-2250|operationseescribersnetlwww.escriberuiet 1 within 24 months from the date it was submitted, 6 the offer 2 3 4 5 6 7 8 9 was deemed accepted. As petitioners view the matter, the rejection letter was only a preliminary rejection letter. More on that point later. At the hearing the Court questioned whether petitioners' position constituted a challenge to the existence or the amount of their underlying tax liability. Petitioners seem to think that it did. Respondent disagreed. According to respondent, an offer-in-comprise, 10 if accepted, does not result in an abatement of the tax to 11 which the offer relates. Neither party cited authority 12 13 for their respective positions, and we need not resolve the dispute between them on the point. As it turns out, 14 whether petitioners' position should or should not be 15 16 17 18 19 considered a challenge to the existence or the amount of the underlying liability is not consequential to the resolution of the motion here under consideration. Petitioners' approach to, and position taken in the due process hearing, however, does have consequences. 20 At the due process hearing, petitioners challenged only 21 22 23 24 respondent's rejection of the previously made offer-in- compromise. According to petitioners, that rejection failed to take into account their financial hardship at the time and was otherwise inequitable. That being so, as 25 they see it, the rejection of the previously made offer- (973) 406-2250 j operatioriseescribersaetj www;escribersaet in-compromise constitutes an abuse of discretion. petitioners elected to limit their challenge to respondent's actions in response to the previously 7 Because submitted offer-in-compromise, they did not submit a new offer-in-compromise during the collection due process hearing, although they were invited to do so by respondent's settlement officer. Furthermore, they did not propose any other collection alternative to the proposed levy. To the extent that they were challenging the existence or the amount of their underlying liability, their challenge rested upon their position that the rejection letter did not satisfy the provisions of section 1 2 3 4 5 6 7 8 9 10 11 12 13 7122(f), and we turn our attention to their position with 14 15 respect to that section. Section 7122(f) states: "DEEMED ACCEPTANCE OF 16 OFFER NOT REJECTED WITHIN CERTAIN PERIOD. - Any offer-in- 17 18 19 20 21 22 23 24 25 compromise submitted under this section shall be deemed to be accepted by the Secretary if such offer is not rejected by the Secretary before the date which is 24 months after the date of the submission of such offer. For purposes of the preceding sentence, any period during which any tax liability which is the subject of such offer-in-compromise is in dispute in any judicial proceeding shall not be taken into account in determining the expiration of the 24-month period." (973)406-2250[operations@escribers.net|wwwescribers.net According to petitioners, their offer-in- 8 compromise was "not rejected" by the rejection letter. According to petitioners, their offer could not have been rejected until the appeal of what they consider the "preliminary" rejection was completed, and that process did not occur within the 24 month period contemplated in section 7122(f). Respondent disagrees with petitioners with respect to their characterization of the rejection letter as a preliminary rejection, and so does the Court. The language used in the rejection letter is completely consistent with what is contemplated by the statute. Petitioners were advised that their offer-in- compromise was rejected, and that rejection, although subject to an administrative appeal, was unequivocal. The rejection letter advised them why their offer was rejected, and pursuant to section 7122(e), they were advised that the rejection could be administratively appealed. Their right to an administrative appeal of the rejection in no way suggests that their offer-in- compromise was not rejected. The rejection letter, sent to petitioner less than 24 months after their offer- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 in-compromise was submitted, operated to legally and 23 effectively deny, or reject their offer. That being so, 24 by the time their due process hearing took place, their 25 underlying liability remained as respondent's records had shown, that is, unaffected by their offer-in-compromise. Consequently, even if their challenge during the due 9 process hearing is considered a challenge to the existence or the amount of that liability, their challenge must fail. That leaves only a review of respondent's determination to proceed with collection by levy. Because petitioners did not submit a collection alternative, however, there is really nothing left to review. 1 2 3 4 5 6 7 8 9 10 Otherwise, respondent's motion shows that respondent's 11 12 13 settlement officer proceeded as required under section 6330, and petitioners do not suggest that he did not. Petitioners' expectation that the settlement 14 officer assigned to conduct the due process hearing should 15 have considered their previously made offer-in-compromise 16 was misplaced. The settlement officer is required to 17 18 19 20 21 consider only those matters raised during the due process hearing. See sec. 6330(c). The settlement officer could have considered petitioners' entitlement to a new offer- in-compromise based upon the circumstances then in existence, but petitioners elected not to submit one. The 22 settlement officer's failure or refusal to consider a 23 collection alterative not proposed by a taxpayer is hardly 24 25 an abuse of discretion. Furthermore, petitioners' claim that the ) ||bcdben (973)406-2250|operationseescrbersnetlwww.esalbersmet 10 administrative record considered by the settlement officer is incomplete is similarly lacking in merit. The item that they claim the settlement officer failed to take into account was not submitted by -them during the collection due process hearing, but submitted earlier to respondent in connection with a premature attempt to secure a section 6330 administrative hearing. (That attempt was made before petitioners received the requisite collection notice offering them the opportunity to request a due process hearing.) Lastly, we note that petitioners' claim that respondent's motion must be denied because material facts remain in dispute in this case has merit only if the rejection letter was not timely. Because we find that it 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 was, the factual disputes they identified at the hearing 16 are not relevant, and therefore not material. From the 17 material facts that are not in dispute in this case, as 18 outlined above, it follows that respondent is entitled to 19 decision as a matter of law. See Rule 121. That being 20 21 22 so, an appropriate order granting respondent's motion will be issued. In closing we note, as respondent did in the 23 notice of determination that invited petitioners to 24 initiate this case, they are entitled to submit a new 25 offer-in-compromise under section 7122 independent of $73)406-2250|operations@escribers.netlwwv,escribers,net their prior submission, and regardless of the resolution 11 of this case. To reflect the foregoing, decision will be entered for Respondent. This concludes the Court's bench opinion in this 1 2 3 4 5 matter. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (Whereupon, at 11:51 a.m., the above-entitled matter was concluded.) - cribers ania22solopení,me.manism.tim..ma>ersnet