TAX COURT OPINION

Case: Amos Larkins
Docket Number: 6145-13L
Judge: Goeke
Opinion Type: bench
Filed: 05/20/2014
Pages: 10

CWSoe¥L UNITED STATES TAX COURT WASHINGTON, DC 20217 AMOS LARKINS, Petitioner(s), v. ) ) ) ) ) Docket No. 6145-13 L. 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 petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at Miami, Florida, on May 1, 2014 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, an order and decision will be entered for respondent. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. May 20, 2014 SERVED MAY 2 1 2014 Capital Reporting Company Bench Opinion by Judge Joseph Robert Goeke 3 May 1, 2014 Amos Larkins v. Commissioner Docket No. 6145-13L 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 the authority provided by Rule 152 of the Tax Court Rules of Practice and Procedure and section 7459(b) of the Internal Revenue Code. Hereinafter, references are to the Tax Court Rules of Practice and Procedure in the case of Rule references and in the case of section references to the Internal Revenue Code, unless otherwise noted. The present case is before us based upon ouir authority to review respondent' s proposed collection action after the timely filing of a petition when respondent' s appeals office has determined to sustain the proposed collection action and issue a notice of determination. Sec. 6330(d). At the time the petition was filed in this 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 4 case the petitioner was a resident of the State of Florida. The tax which is the subject of the proposed collection action in the present case is a penalty asserted pursuant to section 6694 upon the petitioner as a return preparer. The penalties asserted are for tax returns filed for the years 2005 through 2008, all of which petitioner agrees were filed after May 25, 2007. The amounts are roughly $10,000 for 2005; $5,000 for 2006; $10,000 for 2007; and $15,000 for 2008. The case is presently before the Court based upon respondent's motion for summary judgment pursuant to Rule 121. Petitioner filed a response to this motion and petitioner testified at trial to supplement his response. The Court determined that the case was properly submitted for summary judgment and the trial on the merits was not held, as the facts which form the basis for respondent's motion are not in dispute. Respondent's motion contains numerous documents to support the motion including the declaration of the settlement officer assigned to review petitioner's collection due process case. The case began when respondent, through the examination 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 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 division, proposed income tax preparer penalties against the petitioner under section 6694(b), hereinafter referred to as the "penalties". The petitioner received a Form 8278 which proposed these penalties on February 8, 2010. Petitioner was offered a review by respondent's appeals division before the penalties were assessed. The petitioner exercised his right to such a review and was provided an appeals conference. From October, 2010 through November, 2011 the appeals office of the Internal Revenue Service reviewed petitioner's appeal of the penalties and considered various information submitted by the petitioner in support of his position that he should not be liable for the penalties. The appeals office prepared an appeals transmittal and case memo on January 5, 2012 which is an attachment to the declaration of the settlement officer who reviewed petitioner's collection due process case. The earlier appeals review demonstrates that appeals considered petitioner's argument that the information he used to prepare the returns was provided by the taxpayers and that he should not be subject to penalty if that information was incorrect. The appeals officer who originally reviewed the 866.488.DEPO www.CapitalReportingCompany.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 proposed assessment determined that petitioner's actions in relying upon this information was unreasonable and that petitioner had suggested to at least one taxpayer that her activities as a religious volunteer would justify a legitimate business expense. The return associated with the proposed penalties which was the subject of this discussion by the appeals officer claims various expenses associated with the alleged business activity of being a religious volunteer, and these expenses are obviously not specifically documented but rather rounded off estimates, which generated significant Schedule C deductions on the return. Another return which was apparently involved also in the determination of the penalties was attached as a copy to petitioner's memorandum in support of his opposition to this motion for summary judgment presently before the Court. That return also asserts significant Schedule C expenses based upon rounded estimates on behalf of the taxpayer who filed an income tax return asserting she was a teacher and reporting wages of $48,610 as a teacher. The Schedule C prepared by the petitioner asserts expenses associated with an alleged educational 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 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 service activity of the same taxpayer in excess of $33,000 and net expenses claimed on line 12 of the tax return of $31,615 to offset the wage income. Once again, the expenses were rounded amounts which were based upon a form signed by the taxpayer submitted to the petitioner as her return preparer, but not in any other way supported or substantiated. The Court notes these facts because petitioner maintains that the Court should consider the underlying liability in this case despite the fact that the liability was sustained in the prior appeals office hearing, which was provided to the petitioner. As stated, the settlement officer who reviewed petitioner's arguments against the penalties proposed by the examination division determined that the penalties should stand and on February, 2012 respondent assessed the penalties under section 6694, which have now become the underlying basis for the collection due process case before this Court. When petitioner failed to pay these assessed liabilities on August 2, 2012 respondent issued a final Notice of Intent to Levy and Notice of Your Right to a Hearing and the petitioner exercised his right to that hearing and requested a hearing in which his only challenge was to the underlying 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 liability. He did not propose collection alternatives or claim any other basis to challenge the proposed collection via levy. The settlement officer who considered the 5 petitioner's request for a hearing of a collection 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 action informed the petitioner that the underlying liability could not be considered because petitioner had previously had an appeals officer review that liability and sustain that liability. As he does in the present case, petitioner was not satisfied with this explanation and asserted that the liability should be considered in the collection due process case. Because the liability was determined by the collection settlement officer to not be a proper basis for review the settlement officer sent a notice of determination on February 8, 2013 sustaining the proposed collection action of the penalties via levy. This case presents several threshold legal questions. The first being whether we can consider the underlying liability for the reasons explained in our factual analysis we find no basis to find that the determination by the respondent's examination division or the prior appeals officer were unreasonable. However, we simply do not have 866.488.DEPO www.CapitalReportingCompany.com 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 Capital Reporting Company 9 jurisdiction to consider the underlying liability and make no holding relative to that liability because it is not properly raised in the collection due process case. Under section 6330 when the taxpayer has had a prior opportunity to dispute the underlying liability,the underlying liability may not be raised in the collection due process hearing before the appeals officer or in the subsequent review of that liability by this Court. Sec. 6330(c)(2)(B). Treas. Reg. sec. 301.6330-1(e)(3) Q&A-E2, provides that a conference with an appeals officer reviewing a proposed liability prior to assessment is in fact a prior opportunity for purposes of section 6330(c)(2)(B). Therefore, we believe that respondent's settlement officer's decision not to consider the underlying liability in the collection due process hearing because it had previously been sustained in a separate hearing held at the time the proposed penalties were originally determined was correct. We have considered whether we can consider the underlying liability based upon the circumstances of Perkins v. Commissioner, 129 U,4_. T.C. 58 (2007), 26- however, the facts of that case do not apply to the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 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 present situation because the assessment of the underlying liability was sustained by the first appeals officer analyzing the case prior to the collection due process case being initiated both in appeals and in this Court. Therefore, Perkins is simply not applicable. Rather, this case is controlled by Lewis v. Commissioner, 128 T.C. 4862 (2007), where a taxpayer had an opportunity and availed himself of that opportunity to dispute the underlying tax liability with the appeals office of the IRS before the collection due process case was initiated. Because there were no other issues offered before the settlement officer reviewing the collection due process case and before this Court other than the underlying liability, and because we cannot consider the underlying liability, this case is right for summary judgment as there is no dispute as to the circumstances of the case and there is no basis to challenge the settlement officer's determination to sustain the proposed collection action via levy of the penalties. We note that petitioner retains the right to claim via refund before the Internal Revenue Service and in subsequent refund litigation that the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 penalties were improperly determined, but we are foreclosed from considering his liability arguments at this stage of the proceeding. Although, as we stated previously, we see no basis to determine that respondent's liability analysis in the first instance was unreasonable. Given our determinations that summary judgment is appropriate and given our determinations that petitioner has provided no basis to challenge respondent' s motion for summary judgment, we will grant the motion for summary judgment and enter a decision for the respondent. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 11:35 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 25 866.488.DEPO www.CapitalReportingCompany.com