TAX COURT OPINION

Case: David A. Thomas
Docket Number: 7709-15SL
Judge: Gerber
Opinion Type: bench
Filed: 01/28/2016
Pages: 9

UNITED STATES TAX COURT WASHINGTON, DC 20217 JAMES A. CERKS, ET AL., Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 26067-14SL, 7709-15SL. ) ) ) ) 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 cases before Judge Joseph Robert Goeke at Houston, Texas on January 14, 2016, containing his oral findings of fact and opinion rendered at the trial session at which these cases were heard. In accordance with the oral findings of fact and opinion, a decision in these cases will be entered for respondent. (Signed) Joel Gerber Judge Dated: Washington, D.C. January 28, 2016 SERVED JAN 29 2016 Capital Reporting Company 3 1 2 3 4 5 6 7 8 Bench Opinion by Judge Joseph Robert Goeke Docket Nos. 26067-14SL & 7709-15SL James A. Cerks, et al. v. Commissioner January 14, 2016 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 9 Opinion shall not be relied upon as precedent in any 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 other case. This case was heard pursuant to the provisions of section 7463 in effect when the petition was filed. Pursuant to section 7463(b), the decision to be entered is not reviewable by any other court. Let me first note that the present docket was consolid.ated with David A. Thomas, Docket Number 7709-15SL for purposes of trial and opinion pursuant to Rule 141(a) of the Tax Court Rules of Practice and Procedure. Rule references hereinafter are to the Tax Court Rules of Practice and Procedure. We note that this opinion applies to both dockets. The section references hereinbefore are to the Internal Revenue Code and any other section references hereinafter are to the Internal Revenue Code. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 The Petitioners in these consolidated cases were both residents of Texas when their petitions were filed. The Petitioners were both subject of assessments under section 6672 for employment tax liabilities of Nopal International Resources, LP, hereinafter referred to as Nopal. Two other individuals were also subject to similar 100 percent penalty assessments under section 6672 for the same employment tax liability of Nopal. For the four quarters of 2008, initially the total unpaid employment tax liability was $44,471.66. This liability was reduced by various credits and payments made by the four individuals involved. Based upon the nature of the joint and several liability for the 100 percent penalty, credits or payments by any of the four individuals were reflected as credits to all four of the individuals with respect to the liability. That aspect of this case is what leads to the controversy which was tried, as a portion of the outstanding liability was originally subject to a credit upen an income tax module of one of from the four individuals involved, Mr. Sutherland. After the Internal Revenue Service originally associated a credit from Mr. Sutherland's 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 5 1 2 3 4 5 6 7 income tax return with the outstanding 100 percent penalty of the two Petitioners and the other two individuals for which the 100 percent penalty was asserted, including Mr. Sutherland, a subsequent audit of Mr. Sutherland's income tax return found that the credit was not appropriate, and based upon the appeals officer's notice of determination against 8 Mr. Cerks, a liability of $3,294.20 plus interest 9 after August 4, 2014, remains unpaid, due to the 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 reversal of this credit of Mr. Sutherland, which was originally associated with the liabilities of all four of the responsible officers of Nopal. This is, as stated previously, the basis for the current dispute, as all other portions of the initial employment tax liability have been satisfied by various payments and credits of the four individuals involved. The two Petitioners in the present case assert that it is unfair and unreasonable to reverse the credit from Mr. Sutherland's income taxes, which would have finalized the resolution of this case, because they have a right to finality, and they originally were under the impression that the entire liability would be satisfied. We have analyzed whether Respondent's 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 6 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 actions in the present case are in accordance with authorized law. Section 6331 authorizes the Internal Revenue Service to levy upon property and property rights of a taxpayer liable for tax, if the taxpayer fails to pay the tax within ten days after notice and demand for payment. There's no dispute that that circumstance exists relative to the two Petitioners in the present case, except that Petitioners maintain that because of the credit from Mr. Sutherland, there should not be deemed to be any outstanding liability. Section 6630(a) provides that no levy may be made unless the Internal Revenue Service notifies the taxpayer of the taxpayer's right to a hearing. Here a hearing was timely requested and was held for both of the Petitioners by an impartial settlement officer pursuant to section 6330(b)(3). The settlement officer's mandate is to verify that the requirements of applicable law have been met, and to consider the defenses raised by the taxpayers, and to finally determine that the collection action balances the need for efficient collection of taxes with the taxpayer's legitimate concerns regarding the intrusiveness of the IRS collection action. Section 6330(c). 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 As stated, this matter boils down to 2 whether it is appropriate for the IRS to reverse the 3 4 5 credits that were given to all four of the parties that were subject to the 100 percent penalty, including the two Petitioners, because Mr. 6 Sutherland's income tax credit was ultimately 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 determined to be incorrect. An incorrect assessment is not void. When a Court is faced with an incorrect but otherwise valid assessment, the proper course is not to void the assessment but to determine what, if anything, the taxpayer owes the Government. See Helvering v. Taylor, 293 U.S. 507 (1935). As long as the assessment has any foundation, the assessment would not be void. Burns v. United States, 974 F.2d 1063, 1066 (Ninth Circuit, 1992). In the present matter, there's no question that the original assessment was warranted. That's not disputed. There's no question that the assessment was timely made, and there's no argument that the statute of limitations bars the assessment. The Petitioners did allude to the fact that their liabilities were abated, and the abatement was reversed. However, Respondent's records reflect that the assessment was reduced by a credit, and the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 credit was subsequently reversed. Regardless, we believe that the above-cited authority supports Respondent's determination that the liability as reflected in the notice of determination issued to 5 Petitioner Cerks remains, and that liability is what 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 we will authorize as collectible via levy in the amount of $3,294.20, plus interest which accrues after August 4, 2014. No other liability is warranted, based upon the record of this case and the parties' stipulation of facts and the representations of counsel for Respondent and the Petitioners. We do believe that it is appropriate for Respondent to be allowed to collect that liability, and that it is not a violation of the taxpayer bill of rights to so authorize such collection, because the ultimate liability was not final. There's a ten-year statute of limitations for the collection of valid assessments, as provided by section 6502, and that statute of limitations would remain in place relative to Respondent's levy in the present case, and these circumstances are just as noted by the Supreme Court all the way back in 1935, in that Respondent made an attempt to reduce the liability to reflect the appropriate credits, 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 which Respondent is required to do pursuant to section 6404. Nevertheless, the fact that Respondent is required to abate excessive amounts implies that the valid portion of an assessment will stand. In the present situation, a credit was provided, as it was reflected on the return of Mr. Sutherland. When Mr. Sutherland was audited, it was determined that credit was inappropriate, and the credit was reversed against all four of the participating responsible officers of Nopal. We find no error in Respondent's determination to do that. We find the settlement officer's review of the administrative records to be correct. While it is inconvenient and inconsistent 16 with the understanding of the Petitioners, which was 17 18 19 20 21 22 based upon a legitimate analysis of where the credit stood at one point in time, we do not find error in Respondent's determination, and we do not think it is inequitable to hold the two Petitioners liable for the remaining liability, which we previously stated. It is not inequitable, because the 23 Petitioners were responsible officers for a liability 24 25 which was unpaid. They do benefit from credits obtained from the other responsible officers 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 There's no attempt to claim or collect the liability 2 more than once, and therefore, we sustain 3 Respondent's proposed collection action, and a decision will be entered for Respondent. This concludes the Court's Oral Findings of Fact and Opinion in this case. (Whereupon, at 12:22 p.m., the above- entitled matter was concluded.) 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