TAX COURT OPINION

Case: W. James & Vally Kubon
Docket Number: 17954-08L
Judge: Goeke
Opinion Type: bench
Filed: 04/12/2011
Pages: 14

UNITED STÁTES TAX COURT WASHINGTON, DC 20217 W. JAMES AND VALLY KUBON, ET AL., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) O R D E R Docket Nos. 179$4-08L, 22Å2-10L. 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 hearing in the above cases before Judge Joseph Robert Goeke at San Francisco, California, on March 18, 2011, containing his oral findings of fact and opinion rendered at the conclusion of the hearing. In accordance with the oåal findings- of fact and opinion, an order and decision will be ent ered for respondent . (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. April 12, 2011 $$RVED APR 2 1 2011 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 Judge Joseph Robert Goeké March 18, 2011 W. James & Vally Kubon v., Commissioner Docket No. 17954-08L Vally Kubon v. Commissiorier Docket No. 2242-10L 3 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. The Court has jurisdiction over the two dockets which have been consolidated for purposes of hearing and opinion in this case, pursuant to Internal Revenue Code section 6330 (d) . Hereinafter, section reférences are to the Internal Revenue Code. The opinion in this case is being rendered pursuant to section 7459(b) and Rule 152 of the Tax Court Rules of Practice & Procedure. Hereinafter, rule references are to the Tax Court RulÅs of Practice & Procedure. These dockets are before us today based upon motions for summary judgment filed by Respondent. The present case is very similar to a previous case involving the same Petitioners, Kubon v. Commissioner, T.C. Memo 2011- 41. That case invoived the 2004 taxable year of the Petitioners, and the Pet tioner had failed to file 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 4 legitimate income ta return for that year. Respondent had prepared a substitute return and sent S the Petitioner a notice of deficiency at the very same address which the Petitioners used throughout the litigation in this case, and the address which Respondent mailed notices of deficiency for the years before the Court in this case, 2000 through 2003. In the earlier case, Petitioner claimed that the notices of deficiency wei÷e not valid, and that they should be able to challenge the underlying tax liability in the subsequent collection due process case. They make similar arguments in the present case, and argue that they did not receive the notices of deficiency. In the earlier case and the present years before the Court, the Petitioners failed to file petitions in the Tax Court contesting the amounts shown in the notices of deficiency which were issued to them by the Respondent . As stated previously, the Petitioners resided in California when they filèd the petitions in these dockets. Respondent has filed motions for summary judgment in both of the dóckets which are presently before the Court. These motions were filed pursuant to Rule 121. We will first address the circumstances surrounding Docket No. 2242-10L. Respondent sent to the Petitioner Vally Kubon ai final notice--notice of intent to 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 levy and notice of your right to a hearing, dated July 14th, 2009. This notice advised the Petitioner that Respondent intended to levy to collect unpaid liabilities for 2002, and offered Petitioner the r ght to a hearing with Respondent's office of appeals. On August 3rd, 2009, the Petitioner timely mailed a orm 12153, request fo a collection due process or equivalent hearing in response to Respondent's proposed levy. The settlement officer scheduled a telephonic conference with the Petitioner in a letter dated October 8th, 2009. The conference was scheduled for November 19th, 2009. The letter also gave Petitioner the option of a face-to-face conference and requested that Petitioner provide information to support an alternative to collection. Petitioner did not participate in the conference of November 19th, 2009, did not contact Respondent to reschedule the conference, and did not provide any additional information which would be necessary for the settlement officer to consider a collection alternative. On December 15th, 2009, a notice of determination concerning collection action under aection 6320 and/or 6330 was sent to the Petitioner for the 2002 year, upholding Respondent's intent to levy, relativet to the underlying income tax liabilities for 2002. Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 l'? 18 19 20 21 22 23 24 25 6 Petitioner then timely petitioned this Court and argued that it was an abuse of discretion for Respondent to fail to provide her a fade-to-face hearing and that she should be given the oppo tunity to challenge the underlying tax liability for 2002. The circumstances surrounding Petitioner's 2002 income tax return are that she failed to filet a return and Respondent subsequently mailed a notice of deficiency for the year 002 to Petitioner's last known address, 560 Hobie Lane, San Jose, California 5127 (we-i-et . This notice was mailed on March 25th, 2008. This is the saníe address Petitioners used throughout the present litigation, and Petitioners do not deny that this is their correct address . The Petitioner in Docket No. 2242-10L, Vally Kubon, did not file a pet ition to the United States Tax Court contesting the notice of deficiency issued for the year .2002 . The circumstances surrounding Docket No. 17954-08 (sic) are similar. Respöndent sent to both the Petitioners in Docket No. 17954-08L a notice of federal tax lien filing and your right to a hearing under IRC section 6320 . This notice was dated April 15th, 2005, and advised the Petitioners that a notice of federal tax lien had been filed with respect to their unþaid liabilities for the tax years 2002 (sic) and 2001. Heritage Peporting 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 On May 5th, 2005, the Petitioners timely mailed to Respondent a form 12153, request for collection due process or equivalent hearing, i response to the final notice of federal tax lien for 200d and 2001. Respondent also sent Petitioners a final notide, notice of intent to levy and notice of your right to hearing, dated November 23rd, 2007, advising Petitioners that Respondent intended. to levy to collect unpaid liabil ties for 2003 and that Petitioners could receive a hearing with Respondent's office of appeals relative to Respondent's proposed levy for 2003. On December 18 h, 2007, Petitioners timely mailed to Respondent a orm 121 3, request for collection due process or equivalent hearing, in response to the proposed levy for 2003. On April 23rd, 2008, a settlement officer mailed a notice of deterdination concerning collection action under section 6320 and/or 6330 to Petitioners for the taxable years 2000, 2001 and 2003. Petitioners asåert in their second amended petition that Respondent failed to provide them with a face- to-face hearing, and that they have not been given the opportunity to challenge the existence of the underlying tax liabilities for the years 2000, 2001, and 2003. In an abundance of caution, Respondent moved that this case be remanded fot further consideration by the appeals office, on OctobAr 28th, 2009. Respondent's motion 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 was granted on November rd, 2009, and the case was remanded to the appeals office. Petitioners, via a letter.dated March 30th, 2010, refused to participate i a meeting with the settlement officer which was offered to them on March 30th, 2010. On August 5th, 2010, the se tlement officer mailed a supplemental notice of determination concerning collection actions under section 63 0 and/or 6330 to Petitioners for the years 2000, 2001, and 2003. Petitioners' p imary position and basically their I only argument in the preåent case is that they did not receive notices of deficiency for 2000, 2001, and 2003, and that they should have been given a face-to-face hearing in which they could have coAtested the underlying liabilities for those years. The redord demonstrates, via the attachments to Responden 's motion for summary judgment, that the Petitioners were mailed notices of deficiency for the taxable years 2000, 001, and 2003 at their only address of record, 560 Hobie Lane, San Jose, California 95127. Petitioners did not petition the United States Tax Court relative to these otices of deficiency. The informatio subaitted by Respondent in support of the motion for summar judgment in Docket No. 17954-08L, supports the fact that a notice of deficiency for 2000 2001, was mailed to the etitioners on January 14th, 2004. Heritage eporting Corporati,on (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 The information submitte -by Respondent, including the declaration and the attadhed exhibits, also supports that a notice of deficiency was mailed to the Petitioners on April 2nd, 2007, for 2003. Petitioners; w thoutlasserting any specific reason why they did not receive theser dwo separate notices of deficiency, simply maintain that Respondent must prove that Petitioners received the notices of deficiency. Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. The Court may grant summary judgment when there is no genuine issue of material fact and a decision may be rendered as a matter of law. Rule 121 b); and Sundstrand Corp. v. Commissioner, 98 T.C. 518,4520 (1992), affd. 17 F.3d 965 (7th Cir. 1994) . Based upon the record made at the hearing and the documentation submitted y Respondent in support of the two motions for summary judgment in this case, we conclude that there are no genuine i s es of material fact regarding the questions raised in Respåndent's motions for summary judgment, and that a decision in this case may be rendered as a matter of law. Section 6331(a provides that if any person liable tor pay any tax neglects~or refuses to do so within 10 days after notice and demand, the Secretary can collect such tax 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 10 by levy upon property belonging sto such person; pursuant to section 6331(d) , the Sec etary is required to give the taxpayer notice of his iiitent to levy, and within that notice, must describe the administrative review available to the taxpayer before proceeding with the levy. Section 6330 (a) . Section 6330 (b) describes the administrative review process, providing that a taxpayer can request a hearing with the appeals office with regard to a levy or . I lien notice. At the sectoion 6330 hearing, the taxpayer may raise certain matters set forth i in section 6330 (c) (2) , including spousal defenses, challenges to appropriateness of collection action, and òffers of collection alternatives. A taxpayer may dispute the underlying tax liability for any period involved in the levy or lien action sought by Respondent if the taxpayer did not receive a notice of deficiency for such táx liability, or did not otherwise have an opportänity to dispute such tax liability. Section 6330 (c) (2) (B) . T Pursuant to se tion 6330 (d) (1) , within 30 days of the issuance of a notice of determination, taxpayers may appeal that determination to this Court . That is the basis on which we have jurisdiction in the present cases . We have stated in previous cases that where the validity of the underlying tax liability is próperly at issue, the Court Heritage Peporting Corporation (202) 628 4888 11 will determine the matte de novo. Sego v. Commissioner, 114 T.C. 604, 610 (2000) However, where the liability of the underlying tax liability is not prope'rl? at issue, the Court will review the Commissioner' s admin strative determination only for abuse of discretion. Sedo v. Commissioner, supra at 610. The issue about which is the proper standard in the present case is focu ed on whether Petitioners should be deemed to have received the notices of deficiency for all the years in question. Respondent asserts in the motions for summary judgment tha Respo dent's efforts to mail the notices of deficiency to Petitiioners' correct address. should be entitled to a presump ion of official regularity, and that delivery where the record reflects próper mailing should be assumed. Bailey v. Commissioner, T.C. Memo 2005- 241. In the present case, Respondent has dutifully provided doaumentation t support that the notices of deficiency were mailed t the Petitioners, and that there is no evidence that the notices of deficiency were returned to the Internal Revenue Ser ice by the post office. Petitioners offer o evi ence to rebut these presumptions of official regularity and elivery. Kubon v Commissioner, T.C. Memo 2005 71 (where these same Petitioners argued that 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 not received th notices of deficiency and the 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 Court determined that their arguments.were specious in light of the evidence submitte by Respondent of delivery to Petitioners' only known address)(. We find that t e setitioners were in fact sent the notices of deficiency fo the years in question at their correct address, and that they are not entitled to challenge the underlying tax liabilities for the years involved in the collection cases currently befo e the Court, and that therefore our review of Respondent's determination should be based upon abuse of discretion. Given the fact that the Petitioners failed to provide any information to support collection alternatives, we find Respondent's decision to issue notices.of determi ation Éor the years in question upholding Respondent's proposed; collection activity for those years to be reasonAble and not to be an abuse of discretion. We also find t at Respondent has correctly analyzed the administrative recòrd in upholding the collection action and also has balanced the need for collection with the inconvenienáe upon the Petitioners. The other issue prese ted by the present case involves Respondent's mo ion for sanctions in Docket No. 17954-08L. Respondent a serts in that motion that sanctions should be upheld against the Petitioners, pursuant to section 6673(a) (1). Heritage Reporti g Corporation ( 02) 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 Section 6673 (a) (1) aut horizes the Court to require 13 a taxpayer to pay to the United States a penalty in the amount not to exceed $25 000 whenever it appears to the Court that the taxpayer' s posit on in the yroceeding , is frivolous or groundless. Sectiòn .6673 (a) (1) (B) . Section 6673 applies to proceedings filed under section 6330 (d) . Pearson v. Commissioner, 115 T.C. 576 (2000) . It is within our disc etion whether to impose the penalty under section 6673 as a sanction. sWe have previously imposed the p nalty n cases where taxpayers have presented arguments in administrative and judicial proceedings despite beinc warn those arguments were frivolous. Burke v. C m ission r 121 T.C. 189, 197 (2005); Rodriquez v. Commissioner, T.C. Memo 2009-92 Petitioners' dhalings with appeals ad with the Internal Revenue Service and wit h this Court have been characterized by a lack of cooperation and continued frivolous and grouridless assŠrti us. See the previous opinion involving tihe Pet itione s, Kubon v. Commissioner, T.C. Memo 2011-41. Even after this case was remanded, Petitioners declined an invitation fòr a face-to-face meeting with appeals to discuss their case. Rather, they continue to argue that they did-not eceive the notices of deficiency, Heritâge R portin Corporation (262) 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 despite the facts that separate riotices were mailed to their only address of record and they offer no argument to rebut Respondent' s assertion that the e is a presumption that proper máiling result d iii them receiving the notices of deficiency. I Petitioners continuous insistence of presenting frivolous arguments wastes both Respondent's and the Court's time and resources . We previoušly determined that Petitioners' actions meritedd anction in T.C Memo 2011- 41. The sanction impose ir th t case under section 6673(a) (1) was $20,000. We find that based upon the record before us, a similar san io i merited, and we grant Respondent's motion for aanctio s in Docket No. 1.7954-08L in the same amount of $20 , O O O We also note that Petitioners have not argued that any subsequent assessmen s of additions to tax associated with failure to pay have result d in them being denied an opportunity for a hearing åssociated with those additions to tax. The recòrd makes ciea that Petitioners have not paid any of the underlying ta lia i ities and Petitioners have offered no basis on which they åhould be entitled to any further hearing associcïteadith (any additions to tax for failure to pay which have been àssessed after the assessment of the amounts associated with he 'notices of deficiency which were issued- to the Petït i ners. Heritage Repo t n Corporation 202) 628 488& 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 15 In accord th this opinion, decisions will be entered for the RespoAdent in tl e two dockets before the Court, and an or der will be visstied imposing sanctions in the amount of $20,000. This concludes the Court's oral findings of fact and opinion in these cases . (Whereupon, at 9:01 a.m., the bench opinion in the above-entitled matte was con luded.) l· | // Heritage Reportinc Corporation (202) 62844888