TAX COURT OPINION

Case: Ronald D. Schivo & Carol Schivo
Docket Number: 21419-22L
Judge: Goeke
Opinion Type: bench
Filed: 03/14/2025
Pages: 15

United States Tax Court Washington, DC 20217 Ronald D. Schivo & Carol Schivo, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 21419-22L. ORDER Pursuant to Rule 152(b) of the Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioners and to the Commissioner a copy of the pages of the transcript of the trial in this case before Judge Joseph Robert Goeke at San Francisco, California containing his oral findings of fact and opinion rendered at 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) Joseph Robert Goeke Judge Served 03/14/25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Bench Opinion by Judge Joseph Robert Goeke 3 March 6, 2025 Ronald D. Schivo & Carol Schivo v. Commissioner of Internal Revenue Docket No. 21419-22L 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. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. This opinion is rendered pursuant to Rule 152 of the Tax Court Rules of Practice and Procedures and Internal Revenue Code section 7459(b). Hereinafter, section references are to the Internal Revenue Code in effect for the years before the Court affecting the collection action brought by the 16 Petitioners. 17 18 19 20 21 22 23 24 25 This case involves Petitioners' challenge to Respondent's proposed collection action via levy and related arguments made by the Petitioners regarding the underlying tax liens in question. The Petitioners owe Federal income taxes for the years 2005 and 2014 through 2017. These liabilities are significant and exceed $235,000 in tax and penalties alone. That amount does not include interest, which would have been accruable since the liabilities were first assessed. Petitioners do not 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 challenge the underlying tax liabilities. 4 Respondent's Trial Memorandum asserts that there are three issues before the Court relative to this case. Whether the Settlement officer abused discretion in verifying whether the Internal Revenue Service met applicable laws and procedural requirements with respect to the proposed collection action via levy, whether the Settlement officer abused discretion in holding a collection due process hearing with Petitioners via telephone, and whether the Settlement officer abused discretion in sustaining the proposed levy action. This case came to trial on March 3rd, 2025 in San Francisco, California. It resulted from a timely petition filed by the Petitioners challenging a Notice of Determination issued by the IRS Settlement officer for the tax liabilities previously described. Petitioners were residents of California at the time they filed their 18 petition. 19 20 21 22 23 24 25 The administrative record in this case was made a part of the trial record and was admitted into evidence without objection. The only other evidence in the record was the testimony of Mrs. Schivo regarding her meetings with the Settlement officer upon the remand of the case and two letters she sent to the Settlement officer. A Notice of Intent to Levy and Notice of Your Rights to a 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 Hearing was issued to the Petitioners on May 18th, 2021 5 for the four years in question. On June 14th, 2021 the IRS received Petitioners' timely mailed Form 12153, Request for a Collection Due Process Hearing. Petitioners, in that request, indicated they were challenging both the underlying Federal income tax lien as well as the Notice of Proposed Levy. An original hearing was held with a Settlement officer as a result of Petitioners' request on February 1st, 2022. Subsequently, it was determined that the Notice of Intent to Levy relied upon by the Settlement officer was incomplete and did not include the information about the years involved in the underlying liability. This led Respondent to seek a remand of the case in order that that might be corrected and the case was subsequently ordered to be remanded by the Court. The present case is before us after a Supplemental Notice of Determination, following that remand, which was issued on July 24th, 2024. The original Notice of Determination was issued on August 19th, 2022 and the case was remanded on April 2nd, 2024. Subsequent to the Court's order of remand, Settlement Officer Kevin Pernick was assigned to the matter. Settlement Officer Pernick sent a letter to Petitioners scheduling a phone conference and that hearing, via telephone, was held on 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 May 29th, 2024. 6 During that hearing, Mrs. Schivo discussed with Mr. Pernick an offer in compromise and in installment agreement. Settlement Officer Pernick indicated that an offer in compromise was not appropriate and proposed a partial two-year pay agreement which would be reviewed after two years as an alternative to the offer in compromise. At trial, Mrs. Schivo testified that she was very much opposed to this because she wanted finality and wanted to eliminate any further stress from the collection actions by the Internal Revenue Service. However, Mrs. Schivo's proposals and the position consistently taken by the Schivos throughout the collection due process procedures was to only partially pay the underlying tax liability. And Settlement Officer Pernick determined this was not acceptable, and therefore explained to Mrs. Schivo in the telephone hearing that an offer in compromise would not be accepted. Mrs. Schivo's two letters summarizing her concerns with Mr. Pernick's actions indicate that he spoke over her and repeated his position often and she felt he did not properly consider her position. While we understand Mrs. Schivo's frustration with the process, we note that it demonstrates an attitude that the Schivos considered this entire collection action as an 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 inconvenience rather than an obligation they had to pay 7 their Federal income taxes. And Mrs. Schivo's position in these letters in reply to Settlement Officer Pernick echo the attitude of the Schivos in their offer in compromise, which will be discussed herein. The standard of review in this case is quite clear. Because Petitioners have not contested their underlying tax liability, our review is limited to the administrative record and the Settlement officer's determination to sustain the levy. And we review that determination for abuse of discretion. Keller v. Commissioner, 568 F.3d 710, 718 (Ninth Cir. 2009), aff'g in part, T.C. Memo. 2006-166; Sego v. Commissioner, 114 T.C. 604, 610 (2000). Abuse of discretion exists when a determination is arbitrary, capricious, or without sound basis in fact or law. See Belair v. Commissioner, 157 T.C. 10, 17 (2021). Section 6330(a) provides that no levy may be made on any property or right to property of any person unless the Secretary has notified such person in writing of the right to a hearing before the levy is made. If a person requests a hearing, that hearing shall be held before an impartial officer or employee of the Internal Revenue Service. Section 6330(b)(1) and (3). At the hearing, the taxpayer may raise any 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 relevant issue, including appropriate spousal defenses, 8 challenges to the appropriateness of the collection action, and collection alternatives, including offers in compromise. Section 6630(c)(2)(A). A taxpayer may contest the amount of the tax liability under limited circumstances. Those circumstances do not apply in the present case and Petitioners have indicated they do not contest the underlying tax liability. The IRS has discretion to release a levy if it determines that a levy would cause economic hardship to a taxpayer due to the taxpayer's financial condition. Section 6343(a)(1)(D). Economic hardship is defined when a situation arises where the levy would cause the taxpayer to be unable to pay reasonable basic living expenses. Treasury Reg. section 301.6343-1(b)(4(i). In deciding whether the Settlement officer abused discretion, we consider whether the Settlement officer (1) properly verified that the requirements of the applicable law or administrative procedures have been met; (2) consider any relevant issues raised by the Petitioner; and (3) consider "whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of Petitioner that any collection action be no more intrusive than necessary." IRC section 6330(c)(3). For the reasons explained herein, 1 2 3 4 5 6 7 8 9 we conclude that the Settlement officer satisfied these 9 statutory requirements in the present case. As previously stated, the case was remanded because the initial position taken by Respondent in a Motion for Summary Judgment included an incomplete copy of the Notice of Levy. We note that that has been corrected in the revised administrative record issued after the remand and it is no longer an issue in the case, as Petitioners do not contest that the Notice of Levy 10 included a list of the tax years for which they owed 11 income tax. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The Petitioners did raise in their meetings with the two Settlement officers in question an offer in compromise. Section 7122(a) authorizes the IRS to compromise an outstanding tax liability, but it is up to the taxpayer to propose an offer in compromise. Reed v. Commissioner, 141 T.C. 248, 254 (2013), supplemented by T.C. Memo. 2014-41. The Court does not conduct an independent review of what would be an acceptable offer in compromise. See Murphy v. Commissioner, 125 T.C. at 320. If the Settlement officer follows all statutory and administrative guidelines and provides a reasonable balanced decision, the Court will not reweigh the equities. Link v. Commissioner, T.C. Memo. 2013-53. The extent of the Court's review for abuse of discretion to 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 determine whether a Settlement officer's decision to 10 reject an offer in compromise was arbitrary, capricious, or without sound basis in fact or law is described in Giamelli v. Commissioner, 129 T.C. 107, 111 (2007). In the present case, the Settlement officers reviewed the offer in compromise and determined that the Petitioners had equity in their home of over $1 million. The offer in compromise submitted by the Petitioners was only for a partial payment of their underlying tax liabilities and would have left outstanding liabilities of in excess of $100,000 at a minimum. Also pertinent to the review of the offer in compromise is the Settlement officer's determination that the Petitioners would not suffer any economic hardship by paying the full amount of the tax owed. See Treasury Reg. section 301.7122-1(b)(3). Because of the income of the Petitioners and the equity in their home, we find no basis to determine and abuse of discretion by the Settlement officer regarding the Settlement officer's determinations that the Petitioners offer in compromise should be rejected. It is noteworthy that the second Settlement officer involved did provide the Petitioners with an alternative to make monthly payments for a period of two years after which their liability would be reviewed to determine if economic circumstances required any additional payments. JRG 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 This proposal was for a partial payment 11 installment agreement over two years, which provided for a payment substantially less than the monthly payment proposed in Petitioners' offer in compromise. Nevertheless, Petitioners rejected this proposal for the reasons described by Mrs. Schivo in her testimony and in her letters to the Settlement officer. She indicated that she wanted finality, an end to the stress. Nevertheless, she failed to take into account that her proposal did not pay the complete tax liability and that it was reasonable for the Settlement officer to leave open the tax liability after the two-year partial payment agreement to determine the circumstances of Petitioners' economic situation at that time. Especially considering the equity Petitioners had in their home. While Mrs. Schivo sincerely was offended by the Settlement officer's attitude in their telephone hearing, we do not find any abuse of discretion and we believe Mrs. Schivo's complaint that the hearing was not in person was raised too late in order to allow the Settlement officer's scheduling to be altered. Nor did we find any prejudice to the Petitioners because of the nature of the telephonic hearing because the information discussed was straightforward and an alternative was proposed by the Settlement officer and the Petitioners had adequate time 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 to review that alternative proposal. 12 Nor do we find an abuse of discretion by the Settlement officer's determination that he could not withdraw the Notice of Federal Tax Lien. Under section 6323(j), the Internal Revenue Service has the discretion to withdraw a Federal tax lien when that will facilitate the payment of taxes and is in the best interest of the taxpayer and the Government. In the present case, Petitioners never offered to pay their entire tax liability and rather, they proposed the withdrawal of the Federal tax lien based upon anecdotal information about what they were told by the bank. They did not intend to pay the entire amount of their tax liability even if the Federal tax lien was withdrawn. We find this position by the Petitioners to be unreasonable and to be contrary to the provisions of 17 section 6323(j). 18 19 20 21 22 23 24 25 Accordingly, we find that it was not an abuse of discretion for the Settlement officer to decline to pursue the withdrawal of the Notice of Federal Tax Lien. And we also find that the alternative partial pay installment agreement demonstrates that the Settlement officer was willing to accept a solution that did not require the Petitioners to immediately borrow any funds on their equity in their home. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Section 6330(c)(3)(C) requires a balancing of 13 the need for efficient collection and the legitimate concerns of the Petitioner, as we described previously. The record shows that the Appeals office in the present case engaged in that balancing and proposed an alternative, which was, in many ways, quite generous to the Petitioners in an attempt to balance the Petitioners' position with the IRS's legitimate interest in collecting the underlying tax liability. Regarding the in-person meeting request by the Petitioners and their objection to the telephonic hearing, we note that Appeals Officer Pernick sent a letter scheduling a telephone conference and that Mrs. Schivo participated in the hearing without objecting to the telephonic scheduling. We also note that collection due process hearings are informal in nature and are not required to be face to face. Treasury Reg. section 301.6320-1(d)(2), Q and A-D6. And in fact, the Treasury Regulations hold that a telephonic conference satisfies statutory requirements. Treasury Reg. section 301.6320- 21 1(d)(2). 22 23 24 25 In the present case, we find that the conference that Mrs. Schivo held with Mr. Pernick did satisfy statutory requirements and despite Mrs. Schivo's concerns with the attitude of Mr. Pernick, we find that his actions 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 did meet statutory requirements. This court has 14 previously held that section 6330 does not require an in- person collection due process hearing. Katz v. Commissioner, 115 T.C. 329 (2000). Nor do we find that Mr. Pernick had prior involvement with the Petitioners that would violate the statutory requirements of an independent review and that his involvement merely involved a review of the administrative record which was reasonable under the circumstances. Petitioners also allege that they informally requested a penalty and interest abatement. However, the record of the appellate activity does not present any evidence that Petitioners provided a reasonable cause for this abatement and we find no abuse of discretion on the part of Appeals in that entertaining the abatement of the underlying penalties and interest. An issue also was raised about the IRS continuing to assess the 25 percent failure to pay penalty until the entire maximum amount of 25 percent was achieved. Under Treasury Regulation 301.6330-1(d)(2), taxpayers are only entitled to one CDP hearing for each type of tax in each year. According to Treas. Reg. section 301.6330-1(d)(2) Q and A-D1, the IRS can assess accrued penalties and interest after a CDP hearing, and the taxpayer is not entitled to another CDP hearing notJRG 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 regarding those accrued amounts. 15 The verification needed for the assessment of interest is not mandated as to any specific document to satisfy the requirements of section 6330(c)(1). See Craig v. Commissioner, 119 T.C. 252, 261-262 (2002). Appeals can verify underlying liability using transcripts. It is not required that Appeals uses certificate of assessment. Appeals may rely on computer transcript to satisfy the verification requirements. Walker v. Commissioner, T.C. Memo. 2018-22. Accordingly, we find no abuse of discretion regarding verification in the present case. Regarding penalties, the Court can review de novo the reasonable cause defense for penalties in a case like the current one. Casement v. Commissioner, T.C. Memo. 2024-68. However, Petitioners have raised no defense in the present case and they did not provide any evidence to establish a reasonable cause. Mrs. Schivo's letters refer to the unfortunate death of one of their children in 2017. However, that date is far removed from the current collection action and it is the last year for which they owe Federal income tax. While we are sympathetic to any parents losing children, we do not find this to be a defense to the underlying assessment of interest and penalties in this present case. Accordingly, we uphold the collection action via levy in the present case. In reaching our decision, we 16 have considered all arguments made by the Schivos and to the extent not mentioned, we conclude those arguments are moot, irrelevant, or without merit. This ends the Court's oral findings of fact and opinion in this case. (Whereupon, at 11:14 a.m., the above-entitled matter was concluded.) 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