TAX COURT OPINION

Case: Francis & Stephanie Brown
Docket Number: 13914-11SL
Judge: Laro
Opinion Type: bench
Filed: 07/24/2012
Pages: 14

UNITED STATES TAX COURT WASHINGTON, DC 20217 CZ FRANCIS & STEPHANIE BROWN, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 13914-11SL. ) ) ) ) ) ) ) ) ) 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 petitioners and to respondent a copy of the pages of the transcript of the trial of the above case before Judge David Laro at Los Angeles, California, on May 7, 2012, 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) David Laro Judge Dated. Washington, D.C. July 24, 2012 SERVED Jul 25 2012 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 Bench Opinion by Senior Judge David Laro Francis & Stephanie Brown Docket No. 13914-11SL May 7, 2012 THE COURT HAS DEClDED TO RENDER ORAL FINDINGS OF FACT AND OPINION IN THIS CASE, AND THE FOLLOWING ARE THE COURT'S ORAL FINDINGS OF FACT AND OPINION. .. This Bench Opinion is made pursuant se tion n 0 C 7459 (b) le 152 . Unless otherwise indicated, ection references are to the Internal Revenue Code, and Rule references are to the Tax Court Rules of Practice and Procedure . Petitioners refer to Francis and Stephanie Brown SO Aguirre refer to Settlement Officer Marie Aguirre IRS refers to nternal Revenue Service, and Appeals refers to the IRS Office of Appeals. Petitioners, while residing in California, p tioned the C t to rev w a oti of ßetermination oncerning o'ollection dctions ønder 6320 and/or 633 ated IVlay 12, 2011. Pending before the Court is ßespondent's motion for summary judgment filed March 8, 2012, to which Petitioners.responded on March 26, 2012. We will grant Respondent's motion. // // Heritage Reporting Corporation (202) 628-4888 BACKGROUND 4 In a notice of deficiency dated January 24, 2008, Respondent determine eficiencies in Petitioners' 2003 through 2005 ederal income taxes, § 6663 (a) fraud penalties for each of those years, and a § 6651(a) (1) addition to tax for 2003. Petitioners petitioned the Court in response to the notice of deficiency, and the Court docketed that case (deficiency case Doáket No. 12752-08) . The parties submitted to the Court a stipulated decision document with respect to the deficiency case, and the Court entered that decision on July 16, 2009. The parties agreed in . stípulated decision document t e were deficiencies in Petitioners' 2003 through 2005 e al income taxes total.ing $18,173, accuracy- related penalties under § 6662 (a) foi 2003 thr'ough 2005 totaling $3, 634 . 60 n addition to tax under § 6651(a) (1) of $414.50. for 200 and that Petitioners were not liable for § 6663 fraud penalties .for any year at issue. The parties stipulated "interest will be assessed as provided by law on the deficiencies, penalties and additions to tax d from Petitioner . " espondent assessed taxes re ated amounts fyA[m 2003 through 2005, and as of August 1, 2011, the unpaid liabilities 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 Heritage Reporting Corporation (202) 628-4888 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 for those years totaled $13,556.21. In October 2009, Petitioners filed with the IRS m 843, claim for refund and request for abatemen eeking abatement of $2,462 of interest traceable to the period January-1 through December 31, 2004. The record does not include a Form 843 for any other period. Petitioners indicated on the Form 843 they were .requesting interest abatement because, as they claimed, interest was assessed as a result of IRS error or delay, the penalty or addition to tax was result of erroneous written advice from the IRS and reasonable cause or the like excused the penalty or addition to tax. The area for " anation" on the Form 843 was blank. On December 20, 2010, Respondent issued to Petit'onèrs a lnal ice, 40 ice of fhtent to evy and ce of o Y g t to a earing notifying petitioners that Respondent intended to levy on their property or rights to property to collect $12,681.32 of unpaid ral income tax liabilities related to their 2003 through 2005 tax years. On or about January 4, 2011, Petitioners mailed to the IRS a letter stating their desire to meet with the IRS about their ap eal rights under, among ther hings, Form 121537fequest for a p/ ection ßu rocess or Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 .12 13 14 15 16 17 18 19 lvalent e ring. Respondent treated the letter as Petitioners' request for a collection due process hearing. Appeals assigned SO Aguirre to conduct Petitioners' CDP hearing, y étter dated March 21, 2011 SO Aguirre informed Petitioners that Appeals had received their CDP hearing request, and she acknowledged their interest abatement request. SO Aguirre stated that Appeals view of Petitioners' 2009 income information indicated they were able to pay the full amount owed or $13,015. Finally, SO Aguirre offered.Petitioners an installment payment of $300 per month. On April 18, 2011, Petitioners requested their CDP hearing be expedited. On the same dat SO Aguirre contacted Petitioners and held their CDP hearing by telephone. During the hearing, Petitioners disputed the penalties and interest, and they did not request a collection alternative to the proposed levy. 20 . Petitioners claimed that they were entitled to 21 22 23 24 25 interest abatement because, as they asserted, Respondent erred in issuing the notice of. deficiency to them on January 24, 2008, even though Respondent's revue agent knew Petitioners would be out of the country. On May 12, 2011, Respondent issued to Heritage Reporting Corporation (202) 628-4888 7 Petitioners a notice of determination sustaining Respondent's proposed levy to collect Petitioners' 2003 through 2005 assessed liabilities. As outlined in an attachment to the notice of determination, SO Aguirre noted that Petitioners had a prior opportunity to dispute their tax liability. SO Aguirre verified that all legal and procedural requirements for the collection action had been met. She determined that the proposed levy was appropriate after balancing the need for efficient collection of tax with Petitioners' concern that the collection action be no more intrusive than necessary. SO Aguirre denied Petitioners' request for abatement of interest because, as she determined, the CommissiorÉwas obliged to issue the ice of deficiency within a specifisd tim rame, and Petitioners' absence from the country did not exempt them from assessment. She denied Petitioners' penalty abatement request because, among other reasons, Petitioners late filed their 2003 return and did not provide reasonable cause to negate the accuracy- related penalty. While the notice of . determination cor--r-eet-lf-- states that the penalties arose under § 6662(h), we consider that error harmless. The reasonable cause 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 Heritage Reporting Corporation (202) 628-4888 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 defense is the s me for accuracy-related penalties Se cA on (a)(ß) o underV6662(4), and as explained below, Petitioners' were unable to challenge the underlying penalties in any event. 8 Summary judgment n& SSQc avoiding DISCUSSION romotes judicial economy by and expensive trials of phantom factual questions. Shiosaki v. Commissioner, 61 T.C. I) 861, 862 (1974). The Court may grant summary judgment upon all or any part of the legal issues in controversy where the record establishes th(t_there is no genuine issue of material fac and a decision may be rendered as a matter of law, Rule 121(a) and (b). While we view the facts and inferences drawn therefrom in the light most favorable to the non- moving party, see Naftel v. Commissioner, 85 T.C. 527, 529 (1985), the party opposing the motion may not merely rest upon the allegations and denials in that party's pleadings. Rather, the non moving part must set forth specific facts showing that t a genuine issue for trial,4Rule 121(d) Dahlstrom v. Commissioner, 85 T.C. 812, 820-821 (1985). Respondent supports tion with the pleadings, the administrative rec d and decl tions of SO Aguirre and ttorney C H. An, Ms. . Heritage Reporting Corporation (202) 628-4888 9 Petitioners' response fails to raise a genu' issue of material fact for trial. We conclude this case is ripe for summary judgment . The Commissioner authori zed c levy upon taxpayers ' property and rights to property where the taxpayers are liable for taxes but neglect or refuse to pay the liability within 10 days after notice and demand for payment. S_eg_ § 6331 (a) . The Commissioner may not proceed with collection by levy until the taxpayers have been given written notice and an opportunity for''hearing wi h an impartial ppeals officer. § eet § 463((a) and (b) Davis v. Commissioner, 115 T.C. 35f (2000 The taxpayers may raise at the hearing any relevant issue relating to the unpaid tax or proposed levy including spousal defenses, challen to the appropriateness of the collection action, wof er of collection alternatives. Sec. Lg330 (c) (2) (A) . After the hearing, Appeals issue4 a notice of determination s e decisions. ing forth its 'nding and 1.6 0-1(e) (3 rou . A-E8 -pr r -a-ntÊ__ n issuing the noti e determination, the 4pp als officer must J PJ .verify that the requirements of applicable law and administrative procedure have been met, consider 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 Heritage Reporting Corporation (202) 628-4888 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 the issues properly raised by the taxpayers, and _(#1 consider whether the proposed collection action balances the need for efficient collection of taxes with the taxpayer's concern that any collectionpcp on be no more intrusive than necessary. Judicial revie f Appeal termination is allowed 11ere, t taxpayers timely petition the Court . d) (1) . Taxpayers may not challenge the existence or amount of any underlying tax liability for which they did not receive a statutory notice of deficiency or otherwise have an opportunity to challenge the liability. Sg JEL, 330 09 000 ) (B)* ego v. Commissioner, 114. T.C. 604, We have interpreted the term "ùnderlying tax liability" to consist of any tax amounts owed by the taxpayers 'ncluding deficiencies, a tions to tax, penalties d statutory interest . Katz v. Commissioner, 115 T.C. 329, 338-339 ,J. C_opyvu g c<re r, -|~£ . phe«to. ¿µû -D i, i os T Respondent asserts, and we agree, 0) (cid:16)042 C 3 W, at7 (ad that Petitioners' underlying tax liabilities are not properly before the Court . Petitioners received notice of deficiency for the years at issue petitioned the Court in Heritage Reporting Corporation (202) 628-4888 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 11 response to that notice of deficiency, and the Court entered the parties ipulated decision. The stipulated decision, which is binding pursuant to Rule 91(e), relayed t e parties' agreement with respec o deficiencies Petitioners' 2003 through 2005 eral income taxes d related additions to tax, penalties and statutory interest. Even though Petitioners may disagree with their liability for the penalties and additions to tax they agreed to, they are precluded from qualifying, c enging or contradicting that stipulated ision. See Semen v. Commissioner, T.. C. Memo 2011--l-HÞ¡ 101 too T.C.M. (CCH) 1593, 1595¼ It follows that Petitioners' C underlying liabilities, including penalties they sought to challenge during their CDP hearing are not próperly before thÚ Court and we review Áppeal{s determination for abuse of discretion. Goza v. Commissioner, 114 T.C. 176, 181-182 (2000) . other relevant statutory provision is found in 4j t st on ederal income tax deficiencies, penalties and additions to tax generally accrues at the rate specified in § 6621 from the las ate prescribed for payment u til the date ¶ which the tax is paid. 6 1(a (_(e) . Pursuant to § 6404 (e) (1) , the Commissioner is authorized to abate Heritage Reporting Corporation (202) 628-4888 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 12 all .or any part of an assessment of interest attributable to an IRS employee officer's error or delay in performing a ministerial or managerial act. The term mlnisterial act means t;þp procedural or mechanical act that does not involve the exercise of judgment or discretion, and that occurs during the processing of a taxpayer's case after all prerequisites to the act, such as confer es and Sec. review by supervisors have taken plac . B(cid:16)254QA_ 3 01 . 64 0 4 - 2 (b) (2 ) Pro ce and A(cid:16)254keiirailes%e;triseReg s . The term managerial act i efined as an administrative act that occurs during the processing of a taxpayer's case involving the temporary or permanent loss of records or the exercise of judgment or discretion relating to the management of per o e This Court may order abatement of interest where the Commissioner abuses his discretion in failing to do e s so.Þ In order to prevail, Petitioners at demonstrate that the Commissioner exercised discretion arbitrarily, capriciously or without sound basis in fact or law. Petitioners assert that they were entitled to interest abatement on several grounds . First, Petitioners contend the Commissioner erred in issuing the notice of deficiency on January 24, 2008, because Heritage Reporting Corporation (202) 628-4888 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 they had advised the Commissioner's revenue agent 13 that they would be in Mexico during that time. According to Petitioners, they .are entitled to interest abatement because the Commissioner shoul not hav issued the notice of deficiency in their case until they returned from abroad. We disagree. S'ecWo The Senate report accompanyingk6404 states that delay.in the issuance of a statutory notice of deficiency after the IRS and the taxpayer have completed efforts to resolve the matter could be 2 3 p grounds for abatement of interest . DL 49 p_3 3 0 Contrary to Petitioners clai therefore, prompt issuance of their notice of SS Se deficiency is not grounds for abatement of interest. 0 " Second, Petitioners claim they incurred unnecessary lesal expense and delay às a result of alleged misinformation received from Appeals and Ms . An as to whether they had 90 or 150 da a to pe ' ion the Court in their deficiency case. WL corL not persuaded. A deci n in res ct of· the proper application of deral % tax law is not a 3e Jo , 9 managerial or ministerial act to which § 6404 applies. Petitioners do not assert, nor do we conclude, the misinformation was relayed delíb ately or with dilatory motive. 6mmlSSb 0 Heritage Reporting Corporation (202) 628-4888 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 Third, Petitioners claim ommissioner's revenue agent was inefficient. Specifically, they complain that. they were asked to wait 3.0 days to receive paperwork nd that they called the IRS National Taxpayer Advocate but were unable to speak with an individual . Even assuming, A Petitioners allege, that an excessive amount of time had elapsed during that time, mere passage of time does not establish error or delay by the Commissioner, Lee v. Commis sione r, 113 T . C . at 150 . Congre LÀer as clear that interest should be abat only _whg_fallure to so woul be wid erceiv as grossly unfair Petitioner stipulated will be assessed as pr ded by aw on the terest S g 2CS 0 deficiencies enaltiesgand additions to tax due from Petitioners. conclude that it is neither an abuse of discretion nor unfair to hold Petitioners accountable for the agreement they made in the deficiency case. .±_ We also resolve that Appeals complied O SO obligation to Petitioners under of ' h its ' re satisfied the first requirement o la33 o by fying IRS computer records to the requirements of applicable law and administrative procedure had been met with respect to Petitioners.A SO Aguirre concluded Heritage Reporting Corporation (202) 628-4888 003- s2 , 15 that the IRS' responsibility to apply the tax w fairly and efficiently outweighed Petitioner concern that the proposed collection action be no more intrusive than necessary. SO Aguirre did not consider Petitioners' eligibility for collection alternatives because Petitioners did not pursue such options. Finally, SO Aguirre considered Petitioners' interest abatement request but concluded. that abatement was not appropriate because the Commissioner issued the notice of deficiency within the parameters of the law. We hold that Appeals did not act arbitrarily, capriciously r without sound basis in fact or law in denying Petitioners' interest abatement request or in sustaining the proposed levy. We will therefore issue an rder 3: E cision granting Respondent motion for mmary judgment, > sustaining Appealf etermination and allowing Respondent to proceed with the collection action that is the subject of this proceeding. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 12:05 p.m., the bench opinion in 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 Heritage Reporting Corporation (202) 628-4888