TAX COURT OPINION

Case: Richard Robinson
Docket Number: 19312-10L
Judge: Colvin
Opinion Type: bench
Filed: 03/14/2011
Pages: 12

UNITED STATES TAX COURT WASHINGTON, DC 20217 CLC RICHARD ROBINSON, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. Docket Nos. 15259-09 L 19312-10 L O R D E R Pursuant to Rule 152 (b) , Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall the pages of transmit the to petitioner and to respondent a copy of transcript of February 11, 2011, containing her oral opinion rendered in these cases. the above case before Judge Diane L. Kroupa on findings of fact and In accordance with the oral findings of fact and opinion, decisions will be entered for respondent. (Signed) Diane L. Kroupa Judge Dated: Washington, D.C. March 14, 2011 SERVEDMar142011 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 3 Bench Opinion by Judge Diane L. Kroupa Robinson v. Commissioner February 11, 2011 Docket Nos. 15259-09L, 19312-10L THE COURT: THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF FACT AND OPINION IN THESE CASES AND THE FOLLOWING REPRESENTS THE COURT'S ORAL FINDINGS OF FACT AND OPINION. THESE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. All section references are to the Internal Revenue Code as amended and in effect for 2006 and 2007, the years at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. This is a collection review case involving the filing of a notice of Federal tax levy to collect petitioner's unpaid tax liabilities for each year at issue. These consolidated cases are before the Court on respondent's Motion for Summary Judgment filed November 19, 2010. Gerard Levins appeared on petitioner's behalf, and John Mikalchus appeared on behalf of respondent. // 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 FINDINGS OF FACT 4 The record establishes or the parties do not dispute the following facts. Petitioner resided in Connecticut at the time he filed the collection review petitions. Petitioner is a founding member, guitarist and songwriter of The Black Crowes, a rock band that over has sold 20 million albums. Petitioner has been in the band since he was 15 with his brother Chris Robinson. The band has gone through tumultuous periods from time to time. Petitioner owes a total unpaid tax, plus accrued penalties and interest, of $893,000 as of June 2010. Respondent issued to petitioner a Final Notice of Intent to Levy and Notice of Your Right to a Hearing for the 2006 tax year in 2008. Petitioner timely requested a hearing. Petitioner's representative, Mr. Levins, participated in a telephone conference with Settlement Officer Frank Centrella (SO Centrella). Mr. Levins submitted an offer in compromise and an installment agreement as collection alternatives. Petitioner claimed that the levy would cause him great hardship and he could not pay. SO Centrella determined that respondent's levy was appropriate and rejected petitioner's offer in compromise. 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 5 Petitioner filed a petition with this Court challenging SO Centrella's determination. The Court found that SO Centrella failed to consider petitioner's proposed installment agreement as a collection alternative and remanded the case to respondent's Office of Appeals. Meanwhile, respondent sent petitioner a second Levy Notice for the 2007 tax year. Petitioner filed another hearing request. Settlement Officer Howard Smith (SO Smith) was assigned to both petitioner's hearing request for the 2007 tax year and the supplemental hearing request for the 2006 tax year. Mr. Levins and SO Smith held a series of hearings and discussions with respect to the levy notices, which included the unpaid balances from the 2001, 2002 and 2003 tax years. Mr. Levins proposed another offer in compromise and installment agreement. He argued that petitioner was not currently able to pay all his outstanding tax liabilities because of recent financial set backs. The Black Crowes concert ticket sales and record sales had steadily declined since 2005. Moreover, petitioner and his wife Emma Robinson had divorced and petitioner agreed in a Dissolution of Marriage Agreement that he would pay Emma up to 40 percent of his annual income. Mr. 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 6 Levins also submitted a Form 433 on behalf of petitioner that showed monthly earning of approximately $63,000 and monthly expenses of approximately $59,000. His month expenses included approximately $7500 on housing and utility and $16,200 on court ordered payments, including alimony, child support and private school tuition. Mr. Levins also sent a revised Form 433 several months later t.hat estimated that petitioner's expenses would exceed his income. He stated that petitioner's annual income would be reduced because the band would most likely stop touring after 2010. SO Smith considered petitioner's Form 433 and revised Form 433 in light of the IRS' published reasonable allowance for housing expenses for the county petitioner lived, which was $2,698, as well as the reasonableness of the court ordered payment amounts. After adjusting petitioner's income for reasonable living expenses, SO Smith determined that petitioner was capable of paying the full outstanding tax liabilities, penalties and interest with the limitation period. He rejected petitioner's collection alternatives. SO Smith issued petitioner a Notice of Determination for both years at issue. Petitioner filed a petition with this Court 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 7 asking that we reconsider petitioner's offered collection alternatives. As mentioned previously, respondent filed a Motion for Summary Judgment. The Court ordered petitioner to file a response or objection and scheduled a hearing on respondent's motion in Hartford, Connecticut on February 7, 2011. OPINION We are asked to decide whether to grant summary judgment. Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. See, e.g., FPL Group, Inc. v. Commissioner, 116 T.C. 73, 74 (2001). A motion for summary judgment will be granted if the pleadings and other acceptable materials show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law. See Rule 121(b): Electric Arts, Inc. v. Commissioner, 118 T.C. 226, 238 (2002). The moving party has the burden of proving that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. See, e.g., Rauenhorst v. Commissioner, 119 T.C. 157, 162 (2002), The party opposing summary judgment must set forth specific facts that show that a genuine question of material fact exists and may not rely 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 8 merely on allegations or denials in the pleadings, Casanova Co. v. Commission, 87 T.C. 214, 216-217 (1986). Where, as is the case here, the validity of the underlying tax liability is not properly placed at issue, the Court will review respondent's determination for abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). We must decide whether respondent exercised his discretion arbitrarily, capriciously, or without sound basis in fact or law. See Woodral v. Commissioner, 112 T.C. 19, 23 (1999); Fargo v. Commissioner, T.C. Memo. 2004- 13. In making this determination, we do not conduct an independent review of what would be an acceptable collection alternative, nor do we substitute our judgment for that of the settlement officer. See Murphy v. Commissioner, 125 T.C. 301, 320 (2005).. Based upon our examination of the entire record¢ before us, we find that respondent did not d abuse his discretion in determining that the collection action should proceed with respect to petitioner's unpaid liabilities for the years at issue. Respondent is therefore entitled to summary 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 9 judgment in his favor. We briefly describe collection procedures by levy. No levy may be made on any person's property unless the Secretary has notified such person in writing of their right to a hearing before the levy is made. Sec. 6330(a). The person may request a hearing with the IRS Appeals Office, and raise any relevant issues, including collection alternatives, at.the hearing. Sec. 6330(c) (2) (A). After the hearing, the Appeals officer is required to make a determination that addresses issues the taxpayer raised, verifies that all requirements of applicable law and administrative procedures have been met and balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary. Sec. 6330(c) (3) (C). The record reflects that SO Smith properly verified that all the legal and procedural requirements have been met. SO Smith confirmed, using a trangcript of petitioner's accounts, that assessments were properly made for each of the years at issue, that appropriate and timely notices were sent regarding the assessments and that petitioner was properly informed of his rights with respect to the Heritage Reporting Corporation (202) 628-4888 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 levy action SO Smith also addressed the collection alternatives that petitioner presented for a global resolution of,all he outstanding tax liabilities. Petitioner proposed various installment plans and - offers in compromise, that fluctuated with petitioner's changing financial situation. A- settlement officer may enter ,into an installment agreement with a taxpayer if such agreement would. facilitate full or partial collection of tax liability. Sec. 6159.(a) . For the settlement officer to enter into an installment agreement, the taxpayer must agreesto the maximum monthly payment based upon the taxpayer's ability to pay. Id. pe-i-at 5.14.2.1.1(7): at 17,524, (Sept.26, 2008) . --The taxpayer's ability to pay is determined by comparing monthly income to "allowable" expenses. Thus, the excess of,monthly income over, "allowable" expenses -is the minimum monthly payment a settlement officer o should consider. .See Lites v. Commissioner, T.C. Memo. 2005-206. SO Smith used lower income amounts ,shown onspetitioner's revised Form 433, but still found.petitioner's estimated expenses,to be unreasonable. So Smith first considered petitioner's Heritage Reporting Corporaçion (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 living expenses. SO Smith informed petitioner that the living expenses reported on the two Forms 433 exceeded what was necessary and allowable. SO Smith determined that even if he accepted petitioner's revised 433 living expenses, estimated at $3,741, this would still exceed the $2,698 allowable housing expense for the county petitioner lived. We have found no abuse of discretion where IRS employees used the IRS published standard allowances rather than the taxpayer's actual or estimated expenses. See Marks v. Commissioner, T.C. Memo. 2008-226; Diffee v. Commissioner, T.C. Memo. 2007-304. SO Smith then reviewed the $16,200 of court ordered payments, wh~ich included $13,000-a month for alimony and $3,200 a month for private school tuition. Petitioner argues that he has no control over the court ordered payments, and therefore his disposable income is less than he can live on. A settlement officer may allow an expense for court ordered payments if the payments are reasonable in amount. IRM 5.15.1.10(3). SO Smith acknowledged petitioner's need to pay alimony to Emma. He found, however, the level of support was unreasonable because they consumed most of petitioner's disposable income. He also found that the private school tuition exceeded a 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 reasonable amount. SO Smith concluded that petitioner's estimated court ordered payments were unreasonable and imperiled the collection of legitimate tax obligations. SO Smith also considered and rejected the offers in compromise presented by petitioner. A settlement officer may enter into an offer in compromise when causing the taxpayer to pay the full liability would cause the taxpayer economic hardship or whether compelling policy or equity considerations are sufficient for compromising liability. Sec. 301.7122-1(b) (3) (i) and (ii), Procedure & Administration Regs. SO Smith concluded that based on petitioner's income and reasonable expenses, he would not suffer an economic hardship by having to pay the full liability. We find that SO Smith fully considered petitioners Form 433, revised Form 433 and all other necessary documents for determining whether petitioner would be able to pay the full outstanding tax liability. Even if we might have reached a different conclusion on the reasonableness of some of petitioner's expenses, we cannot say that there was an abuse of discretion by SO Smith. We remind the parties that the Court does not substitute its 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 13 judgment for that of the settlement officer in deciding whether there was an abuse of discretion. We therefore conclude that SO Smith did not abuse his discretion in upholding respondent's proposed levy to collect from petitioner outstanding tax liabilities for the years at issue To reflect the foregoing, decision will be entered for respondent and an appropriate order will be issued sustaining the determinations set forth in the Notice of Determination Concerning Collection Actions(s) Under Section 6320 and/or 6330 for 2006, dated May 22, 2009, the Supplemental Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 for 2006, dated July 28, 2010, and the Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 for 2007, dated July 28, 2010, upon which this case is based, regarding the unpaid liabilities for 2006 and 2007. The order shall also grant summary judgment in respondent's favor for 2006 and 2007. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF F.ACT AND OPINION IN THESE CONSOLIDATED CASES. (Whereupon, at 12:04 p.m., the bench opinion in the above-entitled matter was concluded.) // Heritage Reporting Corporation (202) 628-4888 1