TAX COURT OPINION

Case: Mark A. Barfknecht
Docket Number: 611-14L
Judge: Kerrigan
Opinion Type: bench
Filed: 03/18/2016
Pages: 8

CMS UNITED STATES TAX COURT WASHINGTON, DC 20217 MARK A. BARFKNECHT, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. ) ) ) ) 611-14 L. 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 petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Kathleen Kerrigan at Milwaukee, Illinois on February 29, 2016, containing her oral findings of fact and opinion rendered at the conclusion of 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) Kathleen Kerrigan Judge Dated: Washington, D.C. March 18, 2016 SERVED Mar212016 Capital Reporting Company 3 1 Bench Opinion by Judge Kathleen Kerrigan 2 March 1, 2016 3 Mark A. Barfknecht v. Commissioner 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Docket No. 611-14L THE COURT: The Court has decided to render oral Findings of Fact and Opinion in this case, which shall not be relied upon in any other case. This Bench Ópinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code, and Rule 152 of the Tax Court Rules of Practice and Procedure. Unless otherwise indicated, all section 'references are to the Internal Revenue Code in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. This collection due process (CDP) case was commenced in response to a Notice of Determination 18 Concerning Collection Action(s) under section 6320 19 20 21 22 23 24 25 and/or 6330 dated December 11, 2013, upholding proposed collection actions regarding petitioner's unpaid tax liabilities for tax year 1987. Pursuant to section 6330(d), petitioner, Mark A. Barfknecht, asks this Court to review the determination made by the Office of Appeals of the Internal Revenue Service to sustain the proposed collection action for tax 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 year 1987. Trial of this case was conducted on February 29, 2016, in Milwaukee, Wisconsin. The petitioner represented himself, and Richard Charles 5 Grosenick represented respondent. The parties 6 Stipulation of Facts was admitted in evidence along 7 8 9 10 11 12 13 14 15 16 the attached exhibits. We find the following facts: Findings Petitioner resided in Wisconsin when the petition was filed. The underlying deficiencies in this case arose out of petitioner's investment in a partnership. On his 1987 federal income tax return, petitioner deducted losses from Shorthorn Genetic Engineering 1985-C JV (shorthorn). Respondent assessed petitioner's tax liability under the Tax 17 Equity and Fiscal Responsibility Act of 1982 (TEFRA), 18 19 20 21 22 23 24 25 Pub. L. No. 97-248, 96 Stat. 324. On May 12, 1998, respondent sent petitioner a letter notifying him that his losses on his 1987 tax return were from a tax shelter. This tax shelter was similar to a shelter commonly referred to as the Hoyt Partnership. On February 22, 1989, respondent sent petitioner a letter disallowing the losses from the Shorthorn tax shelter. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 Petitioner's losses were attributable to a partnership which received a Notice of Final Partnership Administrative Adjustment (FPAA). The Shorthorn partnership timely filed a petition in this 5 Court in response to the FPAA. 6 7 Shorthorn challenged respondent's disallowance of losses, but conceded its case on 8 October 14, 2011, due to this Court's opinions 9 regarding similar sheep and cattle partnerships. On 10 April 2, 2012 respondent sent petitioner a letter 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 informing him that an examination of Shorthorn had been completed. On February 12, 2013, respondent issued a final notice of intent to levy and notice of right to a hearing. Petitioner timely requested a collection due process hearing. On July 31, 2013, petitioner's power of attorney had a call with the settlement officer. The power of attorney raised the issue that the assessment statute of limitations had expired. The settlement officer said the underlying liability was not at issue, but she would discuss collection alternatives. Neither petitioner nor his power of attorney followed-up with the settlement officer. On December 11, 2013, respondent issued a notice of determination. Petitioner filed a timely 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 petition in which petitioner raised the following issues: (1) that he was not a tax matters partner, and (2) that twelve years is too long to allow respondent to assess. Opinion Where the validity of the underlying tax liability is properly at issue, we review the determination de novo. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). Petitioners have the burden of proof regarding their underlying tax liability. See Rule 142(a). A taxpayer may not challenge an underlying tax liability during a CDP hearing unless the taxpayer did not receive a statutory Notice of 15 Deficiency for the liability or did not otherwise 16 17 18 19 20 21 22 23 24 25 have the opportunity to dispute the liability. Sec. 6330(c) (2)(B); see also Montgomery v. Commissioner, 122 T.C. 1, 9 (2004). Petitioner's liability was attributable to a partnership loss subject to TEFRA. See sec. 6221. The partnership received a Notice of Deficiency and timely filed a response. Therefore, the underlying liability is not an issue. Additionally, petitioner's underlying liability for 1987 was assessed on October 22, 2012. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 Under section 6501(a), generally a tax assessment 2 must be made within three years of the due date of 3 4 5 the return. However, under section 6629(d), respondent cannot assess income tax liabilities of the individual partner until the decision entered in 6, the litigation matter of the partnership becomes 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 final, which is 90 days after the entry of decision in order to allow time for appeal. See Mathia v. Commissioner, T.C. Memo 2009-120, aff'd 669 F.3d 1080 (10th Cir. 2012). Respondent then had one year to assess the tax deficiency. See sec. 6229(d)(2). The final decision for the Shorthorn partnership occurred on October 4, 2011. The assessment was less than one year plus 90 days. See sec. 7481. Where the validity of the underlying tax liability is not properly at issue, we review the determination for abuse of discretion. Sego v. Commissioner, 114, T.C. at 610; Goza v. Commissioner, 114 T.C. at 182. An abuse of discretion occurs if the Appeals Office exercises its discretion "arbitrarily, capriciously, or without sound basis in fact or law." Woodral v. Commissioner, 112 T.C. 19, 23 (1999). Respondent's Administrative Determinations Following a CDP hearing, the settlement 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 officer must determine whether to sustain the proposed collection actions. In making that determination, section 6330(c)(3) requires the settlement officer to consider: (1) whether the requirements of any applicable law or administrative procedure have been met; (2) any issues appropriately raised by the taxpayer; and (3) whether the collection actions balance the need for the efficient collection of taxes and the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary. Lunsford v. Commissioner, 117 T.C. 183, 184 (2001). We note that the settlement officer properly based her determination on the required factors. The settlement officer (1) verified that 16 all legal and procedural requirements had been met, 17 18 19 20 21 22 23 24 25 (2) considered the issues petitioner raised, and (3) determined that the proposed collection actions appropriately balanced the need for the efficient collection of taxes with the legitimate concern of petitioner that the collection actions be no more intrusive than necessary. Petitioner has not advanced arguments or presented evidence allowing us to conclude that the determination to sustain the proposed collection 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 9 action was arbitrary, capricious or without sound basis in fact or otherwise an abuse of discretion. See Giamelli v. Commissioner, 129 T. C. 107, 115 (2007). Petitioner neither provided the settlement officer any collection alternatives nor entered into an installment agreement or an offer in compromise. We therefore conclude that respondent's determination to proceed with the proposed collection actions was not an abuse of discretion. The Notice of Determination dated December 121, 2013, is sustained. This concludes the Court's oral Findings of Fact and Opinion in this case. (Whereupon, at 10:37 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